Symantec 2001 Annual Report Download - page 30

We must effectively adapt to changes in the dynamic technological
environment. We are increasingly focused on the Internet security
market, which, in turn is dependent on further acceptance and
increased use of the Internet. The following critical issues concerning
the use of the Internet remain unresolved and may affect the market
for our products and the use of the Internet as a medium to distribute
or support our software products and the functionality of some of our
products:
•security;
•reliability;
•cost;
•ease of use;
•accessibility;
•quality of service; and
•potential tax or other government regulations.
In addition, new technologies, such as non PC-based Internet access
devices and handheld organizers are gaining acceptance. We must
adapt to these changing technological demands. If we are unable to
timely assimilate changes brought about by the Internet and non
PC-based environments, our future net revenues and operating results
could be adversely affected.
The results of our research and development efforts are uncertain.
We believe that we will need to incur significant research and development
expenditures to remain competitive. The products we are currently
developing or may develop in the future may not be technologically suc-
cessful. In addition, the length of our product development cycle has
generally been greater than we originally expected and we are likely to
experience delays in future product development. If our resulting prod-
ucts are not technologically successful, they may not achieve market
acceptance or compete effectively with products of our competitors.
We are dependent upon certain distribution channels. A large
portion of our sales is made through the retail distribution channel,
which is subject to events that cause unpredictability in consumer
demand. This increases the risk that we may not plan effectively for
the future, which could result in adverse operating results in future
periods. Our retail distribution customers also carry our competitors’
products. These retail distributors may have limited capital to invest
in inventory. Their decisions to purchase our products are partly a
function of pricing, terms and special promotions offered by our com-
petitors and other factors that we do not control and cannot predict.
Our agreements with retail distributors are generally nonexclusive and
may be terminated by them or by us without cause. We would be
adversely affected if companies in our chain of distributors chose to
increase purchases from our competition relative to the amount they
purchase from us.
Some distributors and resellers have experienced financial difficulties in
the past. Distributors that account for a significant portion of our sales
may experience financial difficulties in the future. If these distributors
do experience financial difficulties and we are unable to move their
inventories to other distributors, we may experience reduced sales or
increased write-offs, which would adversely affect our operating results.
Product returns may negatively affect our net revenues. Product
returns can occur when we introduce upgrades and new versions of
products or when distributors or retailers have excess inventories,
subject to various contractual limitations. Our return policy allows
distributors, subject to these contractual limitations, to return pur-
chased products in exchange for new products or for credit towards
future purchases. End-users may return our products through dealers
and distributors for a full refund within a reasonably short period
from the date of purchase.We estimate and maintain reserves for such
product returns which to date have been materially consistent with our
actual experience. Future returns could, however, exceed the reserves
we have established, which could have a material adverse effect on our
operating results.
We depend on internal communications systems that may be
disrupted. Our order management and product shipping centers are
geographically dispersed. A business disruption could occur as a result
of natural disasters, intermittent power shortages in the State of
California, or the interruption in service by communications carriers. If
our communications between these centers are disrupted, particularly
at the end of a fiscal quarter, we may suffer an unexpected shortfall in
net revenues and a resulting adverse impact on our operating results.
Communications and Internet connectivity disruptions may also cause
delays in customer access to our Internet-based services or product sales.
We are exposed to general economic and market conditions and the
current economic downturn may adversely affect future revenue.
Our business is subject to the effects of general economic conditions
and, in particular, market conditions in the software and computer
industries. Our operating results could be adversely affected as a result
of recent unfavorable global economic conditions and reduced spend-
ing. If these economic conditions do not improve, or if we experience a
worsening in global economic conditions, we may experience material
adverse impacts on our business, operating results and financial condition.
We are subject to litigation that could adversely affect our financial
results. From time to time, we may be subject to claims that we have
infringed the intellectual property rights of others, or other product
liability claims, or other claims incidental to our business. We are cur-
rently involved in a number of lawsuits. We intend to defend all of
these lawsuits vigorously. However, it is possible that we could suffer an
unfavorable outcome in one or more of these cases. Depending on the
amount and timing of any unfavorable resolutions of these lawsuits,
our future results of operations or cash flows could be materially
adversely affected in a particular period.
Although infringement claims may ultimately prove to be without
merit, they are expensive to defend and may consume our resources or
divert our attention from day-to-day operations. If a third party alleges
that we have infringed their intellectual property rights, we may
choose to litigate the claim and/or seek an appropriate license from the
third party. If we engage in litigation and the third party is found to
have a valid patent claim against us and a license is not available on
reasonable terms, our business, operating results and financial condi-
tion may be materially adversely affected.
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