Symantec 2004 Annual Report Download

Download and view the complete annual report

Please find the complete 2004 Symantec annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 80

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80

Ensuring Information Integrity
SYMANTEC 2004 ANNUAL REPORT

Table of contents

  • Page 1
    Ensuring Information Integrity S Y M A N T E C 2 0 0 4 A N N U A L R E P O R T

  • Page 2

  • Page 3
    ... decisions. We have come to assume that the information we rely on every day is trustworthy; however, that is not necessarily the case. Internet threats, technical failures, and everyday errors undermine the integrity of this information. To effectively use information, we must trust that it is...

  • Page 4
    ... the antivirus industry and became the leaders in protecting home and small business users as well as large enterprise customers. Since then, the threat spectrum has shifted toward much more sophisticated, aggressive, and rapid attacks. According to the Symantec Internet Security Threat Report...

  • Page 5

  • Page 6

  • Page 7
    ... configure, and update systems and applications, ensuring the network is current and consistent. With asset management tools, administrators can discover and track hardware and software assets to understand where systems are installed and what's installed on them. This knowledge is critical so that...

  • Page 8
    ... before applying a patch, just in case the patch is faulty and they need to rapidly recover systems without rebuilding them from scratch. Finally, both administrators and home users can use network security information, such as the existence of pending threats, to change the backup strategy...

  • Page 9

  • Page 10
    ...t Dear Shareholders, Fiscal 2004 was another year of record performance for our company. We launched 72 exciting new products, delivered four new service offerings, significantly enhanced our direct sales force, and continued to aggressively promote our brand. Our global sales team capped off this...

  • Page 11

  • Page 12
    .... The Symantecâ„¢ Client Security solution provides customers with more comprehensive threat protection through integrated security technologies for remote, mobile, and networked client systems. These products offer a tremendous benefit to our partners as they build an expanded set of services to...

  • Page 13
    ... partners, and provide more value to our shareholders. Our relationships with customers and channel partners are clearly driving Symantec's results. By responding to their requirements with a broad portfolio of technologies for securing and managing the complexity of today's IT environments, we help...

  • Page 14
    ... certain other identified charges, such as restructuring, site closures and patent settlements, as well as the tax effect of these items, where applicable. Symantec's management believes these non-GAAP measures are useful to investors because they provide supplemental information that facilitates...

  • Page 15
    ...$0.77 $0.86 2002 $(0.10) $0.65 GAAP non-GAAP EARNINGS (LOSS) PER DILUTED SHARE* $ 2.4 AND 2004 $971 Billion CASH S H O R T- T E R M 2003 $590 2002 $331 DEFERRED REVENUE (Millions) INVESTMENTS *Non-GAAP results are reconciled to GAAP results on page 12. S Y M A N T E C C O R P O R AT...

  • Page 16
    ... Profile SYMANTEC IS THE GLOBAL LEADER IN I N F O R M AT I O N S E C U R I T Y P R O V I D I N G A BROAD RANGE OF SOFTWARE, APPLIANCES, AND SERVICES DESIGNED TO HELP INDIVIDUALS, SMALL AND MID-SIZED BUSINESSES, AND LARGE ENTERPRISES SECURE AND MANAGE THEIR IT INFRASTRUCTURE. SYMANTEC'S NORTON BRAND...

  • Page 17
    ... recent growth rates, particularly in consumer products; whether certain market segments, particularly enterprise security, grow as anticipated; the positioning of Symantec's products in those segments; the competitive environment in the software industry; ability to integrate acquired companies and...

  • Page 18
    ... dates of acquisition. On August 24, 2001, we divested our Web Access Management product line. On December 31, 1999, we divested our Visual Café™ and ACT!™ Product lines. ON Technology Corp. during fiscal 2004; • Riptech, Inc., Recourse Technologies, Inc., SecurityFocus, Inc. and Mountain...

  • Page 19
    ...(a) On August 6, 2003, we purchased a security technology patent as part of a settlement in Hilgraeve, Inc. v. Symantec Corporation. (b) Per share amounts reflect the two-for-one stock splits effected as a stock dividend, which occurred on November 19, 2003. (c) The three months ended June 30, 2003...

  • Page 20
    ... providing a broad range of software, appliances and services designed to help individuals, small and mid-sized businesses, and large enterprises secure and manage their IT infrastructure. Symantec's Norton brand of products is the worldwide leader in consumer security and problem-solving solutions...

  • Page 21
    ... offices around the world through a multi-tiered distribution network. Our products are available to customers through channels that include: distributors, retailers, direct marketers, Internet-based resellers, original equipment manufacturers, educational institutions and Internet service providers...

  • Page 22
    ... a customer, and how to protect against these threats. needs and buying behaviors. For our consumer products, we typically offer two types of rebate programs within most countries: volume incentive rebates to channel partners and promotional rebates to end-users. The distributor or reseller earns...

  • Page 23
    ... contracts to enterprise customers worldwide. Our standard annual support contracts provide 1) unlimited hot-line service delivered by telephone, fax, e-mail and over the Internet; 2) immediate patches for severe problems; 3) periodic software updates; 4) access to our technical knowledge base and...

  • Page 24
    ...software business. In addition, in August 2003, we purchased a security technology patent as part of a legal settlement in Hilgraeve, Inc. v. Symantec Corporation. DIVESTITURES We invest in companies with emerging technologies and companies that promote the sale and use of our products and services...

  • Page 25
    ... part on providing simplified, solution-oriented offerings that address multiple aspects of enterprise security. Some of the companies that offer competing products to our Consumer Products offerings include Check Point Software, Internet Security Systems, Kroll, McAfee (formerly Network Associates...

  • Page 26
    ... and printing of documentation materials and retail boxes. Employees As of March 31, 2004, we employed approximately 5,300 people worldwide, including approximately 2,800 in sales, marketing and related staff activities (with approximately 800 employees in our direct sales force), 1,300 in product...

  • Page 27
    ... charges, such as restructuring and patent settlement, as well as the tax effect of these items, where applicable. Symantec's management believes these nonGAAP measures are useful to investors because they provide feet are subleased to third parties. We are currently building a facility in Culver...

  • Page 28
    ... from the date of purchase. Our estimated reserves for such end-user product returns, which are recorded as an offset to revenue, are based primarily on historical trends. We also consider other factors such as the timing of upgrades and new versions of products, current market conditions, economic...

  • Page 29
    ... changes in the economic and industry environment could make our return estimates differ from actual results. Reserves for Rebates We estimate and record reserves as an offset to revenue for channel and end-user rebates, related primarily to products within our Consumer Products, Enterprise Security...

  • Page 30
    ... consumer products, including Norton Internet Security, Norton AntiVirus, Norton Personal Firewall, Norton â„¢ AntiSpam and Norton SystemWorks, which includes Norton â„¢ â„¢ Password Manager. These new products provide protection from viruses, intrusion attempts and piracy threats, and offer...

  • Page 31
    ...full life cycle of their computing systems over corporate networks, for an estimated $109 million in cash. On May 19, 2004, we entered into an agreement to acquire Brightmail, Inc., a developer of e-mail services and software for application service providers, Internet service providers, portals and...

  • Page 32
    ... AntiVirus and Norton Internet Security products in the amount of $124 million and $52 million, respectively. Security products, respectively. These increases were offset slightly by a decrease in sales of our other consumer products. Enterprise Security Year Ended March 31, ($ in thousands) 2004...

  • Page 33
    ... 2002 due primarily to sales growth of $122 million and $27 million in the EMEA region and Japan, respectively. In addition, the end of fiscal 2002, whereby consumers are able to download software updates from the Internet. Strength in major foreign currencies during fiscal 2004, as compared to...

  • Page 34
    ... manuals and CDs, packaging costs, fee-based technical support costs, amortization of acquired product rights, payments to original equipment manufacturers under revenue sharing arrangements, costs of services, royalties paid to third parties under technology licensing agreements, and manufacturing...

  • Page 35
    ... due to the growth of the company, including business acquisitions during fiscal 2004. In addition, we spent more on outside services, advertising and promotion activities during fiscal 2004, as compared to fiscal 2003, as our variable marketing expenses have increased GENERAL AND ADMINISTRATIVE...

  • Page 36
    ... into our intrusion detection products within our Enterprise Security segment. development related to its next-generation CCM/iCommand and iPatch products, which enable organizations and service providers to manage the full life cycle of their computing systems over corporate networks. We are...

  • Page 37
    ..., we purchased a security technology patent as part of a settlement in Hilgraeve, Inc. versus Symantec Corporation. As part of the settlement, we also received licenses to the remaining patents in Hilgraeve's portfolio. The total cost of purchasing the patent and licensing additional patents was $63...

  • Page 38
    ... buy-out payments related to the divestiture of our ACT! product line as Interact exercised its option to purchase the licensed technology from us for $60 million less all royalties paid to us to date. Year Ended March 31, ($ in thousands) 2004 2003 2002 % Change Fiscal 2003 to 2004 % Change...

  • Page 39
    ... not be realized. We will assess the need for an additional valuation allowance on a quarterly basis. Year Ended March 31, 2004 2003 2002 Net cash provided by (used in): Operating activities Investing activities Financing activities Effect of exchange rate changes on cash and cash equivalents Net...

  • Page 40
    ... to $700 million of Symantec common stock, not to exceed 60.0 million shares, with no expiration date. On January 20, 2004, During the past three fiscal years, our financing activities have included cash proceeds from the sale of our common stock through employee benefit plans, cash payments for...

  • Page 41
    ... currency exchange rates; • the market's transition between new releases of operating systems; • the introduction of competitive products; • seasonality in the end-of-period buying patterns of foreign and domestic software customers; and • the timing of announcements and releases of new or...

  • Page 42
    ... as Symantec Enterprise Security ™ organizations and service providers to manage the full life cycle of their computing systems over corporate networks. • On December 5, 2003, we completed the acquisition of PowerQuest Inc., a global provider of automated deployment and recovery solutions for...

  • Page 43
    ... security, remote access or virus protection tools in new operating systems and hardware packages could adversely affect our sales. In particular, Microsoft has added security and remote access features to new versions of its operating system products that provide some of the same functions offered...

  • Page 44
    ... management, sales, marketing and technical personnel. To accomplish this, we believe that we must provide personnel with a competitive compensation package, including stock options. Increases in shares available for issuance under our stock options plans require stockholder approval in many cases...

  • Page 45
    ..., failures or bugs in products released by us could result in negative publicity, product returns, loss of or delay in market acceptance of our products or claims by customers or others. In addition, if an actual or perceived breach of network security occurs in one of our end customer's security...

  • Page 46
    ... of the Internet, computer systems and/or networks could adversely impact our ability to rapidly and efficiently provide anti-virus and other product updates to our customers. Our software products and Web site may be subject to intentional disruption, which could adversely impact our reputation and...

  • Page 47
    ... connectivity disruptions, and/or increased volumes of electronic distribution transactions may also cause delays in customer access to our Internet-based services or product sales. We hold minority interests in non-public companies and if these companies face financial difficulties in their...

  • Page 48
    ... instruments purchased with an original maturity of 90 days or less to be cash equivalents. All of our cash equivalents and short-term investments are classified as available-for-sale securities as of the balance sheet dates. Our available-for-sale securities are reported at fair market value and...

  • Page 49
    ...les or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Our chief executive officer and our chief financial officer have concluded, based on the evaluation of the effectiveness...

  • Page 50
    ... Financial Statements Symantec Corporation Consolidated Balance Sheets March 31, (In thousands, except par value) 2004 2003 Assets Current assets: Cash, cash equivalents and short-term investments Trade accounts receivable, net Inventories Current deferred income taxes Other current assets Total...

  • Page 51
    ...intangibles from acquisitions Acquired in-process research and development Restructuring, site closures and other Patent settlement Litigation judgment Total operating expenses Operating income Interest income Interest expense Income, net of expense, from sale of technologies and product lines Other...

  • Page 52
    ...sale securities, net of tax Translation adjustment, net of tax of $13,657 Total comprehensive income Sale of common stock under employee stock benefit plans Stock dividend Repurchases of common stock... Accounting Policies and Notes to Consolidated Financial Statements are an integral part of ...

  • Page 53
    ... from acquisitions Impairment of equity investments Write-off of equipment and leasehold improvements Write-off of acquired in-process research and development Deferred income taxes Gain on divestiture of the Web Access Management product line Income tax benefit from stock options Net change in...

  • Page 54
    ... trends by product and by type of promotional program and the value of the rebate. We estimate and record reserves for channel and end-user rebates, and we account for these reserves as an offset to revenue. We enter into perpetual software license agreements through direct sales to customers and...

  • Page 55
    ... or upon written acceptance from customers, if applicable. We recognize education services revenue as services are performed. In arrangements that include multiple elements, including perpetual software licenses and maintenance and/or services and packaged products with content updates, we allocate...

  • Page 56
    ..., an interpretation of APB No. 25. Our stock plans are described in Note 12. Under APB No. 25, because the exercise price of our employee stock options generally equals the market price of the underlying stock on the date of grant, no compensation expense is recognized in our consolidated...

  • Page 57
    ...the Black-Scholes option-pricing model assuming no expected dividends and the following weighted average assumptions: (In thousands) Employee Stock Options 2004 2003 2002 Employee Stock Purchase Plans 2004 2003 2002 Expected life (years) Expected volatility Risk free interest rate 5.14 0.69 3.00...

  • Page 58
    ... otherwise became effective for Symantec beginning the second quarter of fiscal 2004 and the adoption of this statement did not have a material on the particular case being evaluated; • communication between us and our external attorneys on the expected duration of the lawsuit and the estimated...

  • Page 59
    ... provide a unified solution that will help customers create a secure enterprise infrastructure. ON Technology's software distribution and configuration management capabilities will be a critical component to the end-to-end system Symantec is establishing to help customers build, manage and protect...

  • Page 60
    ... complexity of deploying, managing and maintaining secure access to remote users. Nexland On July 17, 2003, we acquired Nexland, an Internet security company whose Internet Protocol based networking appliances are installed at enterprise branches and telecommuter offices worldwide, for $21 million...

  • Page 61
    ... Access Management Product Line On August 24, 2001, we sold assets and transferred liabilities and employees related to our Web Access Management product line to PassGo Technologies, Ltd. We also entered into an exclusive license and option agreement with PassGo whereby they licensed our Web Access...

  • Page 62
    ... consideration for the license, Interact was INCOME, NET OF EXPENSE, FROM SALE OF TECHNOLOGIES AND PRODUCT LINES (In thousands) Year Ended March 31, 2004 2003 2002 ACT! product line Web Access Management product line Income, net of expense, from sale of technologies and product lines $9,750 (203...

  • Page 63
    ...Enterprise Security Enterprise Administration Consumer Services Products Total Balance, as of March 31, 2003 Goodwill acquired during fiscal 2004...31, 2004 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Other Intangible Assets: Customer base Tradename Marketing related ...

  • Page 64
    ...2003, we purchased a security technology patent as part of a settlement in Hilgraeve, Inc. v. Symantec Corporation. As part of the settlement, we also received licenses to the remaining patents in Hilgraeve's portfolio. The total cost of purchasing the patent and licensing additional patents was $63...

  • Page 65
    ...a two-forone stock split of Symantec's common stock effected in the form of a stock dividend. Shareowners of record at the close of business on November 5, 2003 were issued one additional share of common stock for each share owned as of that date. The stock split increased the number of total shares...

  • Page 66
    ..., each right (other than rights held by the Acquiring Person) will entitle the holder to purchase, at a price equal to the exercise price of the right, a number of shares of our common stock having a then-current value of twice the exercise price of the right. If, after the rights become exercisable...

  • Page 67
    ...common stock at a price per share that is the lesser of 85% of the fair market value as of the beginning of the two-year offering period or the end of the six-month purchase period. Under the Employee Stock Purchase Plan 1.4 million, 2.2 million and 1.9 million shares were issued during fiscal 2004...

  • Page 68
    ... agreement dated April 11, 1999 between our current CEO and Symantec, the Board of Directors approved the issuance of a non-qualified stock option to acquire 800,000 shares of common stock to the CEO. The option was granted at 100% of the fair market value on the date of grant, has a term life...

  • Page 69
    ... if not exercised by specific dates through March 2014. Prices for options exercised during the three years ended March 31, 2004 ranged from $1.41 to $33.63. Shares Authorizations and Reserves In August 2003, our stockholders approved an increase to our authorized common shares from 300 million to...

  • Page 70
    ... the United States and Europe. The costs resulted from relocating certain development, sales and finance activities, realigning certain worldwide marketing efforts and outsourcing our North American and European consumer support functions. As a result, we terminated 424 employees. The fiscal 2003...

  • Page 71
    ... with the excess facilities and fixed assets associated with relocating certain sites in the United States and Europe. We moved our operations in Newport News, Virginia to a larger facility and we relocated our North American support group from Eugene, Oregon to an expanded facility in Spring...

  • Page 72
    ... LLC filed a lawsuit on behalf of itself and purportedly on behalf of the general public and a class including purchasers of Norton AntiVirus 2004 and/or Norton Internet Security 2004 in the California Superior Court, San Francisco County. The complaint alleges violations of California Business and...

  • Page 73
    ...of a class of certain purchasers of software products. An amended complaint filed in May 2003 added Greg Johnson as plaintiff and Adobe Systems and another retailer as defendants. The complaint alleged that our refund policies violated consumer warranty and unfair business practice laws. The lawsuit...

  • Page 74
    ... Products, Services and Other. Our Consumer Products segment focuses on delivering our Internet security and problem-solving products to individual users, home offices and small businesses. Our Enterprise Security segment provides security solutions for all tiers of a network: at the gateways...

  • Page 75
    ...cations on the Consolidated Balance Sheet as of March 31, 2003 is as follows: Year Ended March 31, 2003 (In thousands) As Originally Reported As Reclassified in 2004 Form 10-K Current deferred revenue Total current liabilities Long-term deferred revenue $589,629 894,624 - $530,378 835,373 59...

  • Page 76
    ... at prices ranging from $44.89 to $49.20 per share, for an aggregate amount of $60 million. On May 19, 2004, we entered into an agreement to acquire Brightmail, Inc., a developer of e-mail services and software for application service providers, Internet service providers, portals and enterprises...

  • Page 77
    ...in all material respects, the financial position of Symantec Corporation and subsidiaries as of March 31, 2004 and 2003, and the results of their operations and their cash ï¬,ows for each of the years in the two-year period ended March 31, 2004, in conformity with U.S. generally accepted accounting...

  • Page 78
    ... LLP's report (dated April 26, 2004, except as to Notes 17 and 19 which are as of June 10, 2004), present fairly, in all material respects, the consolidated results of operations and cash ï¬,ows of Symantec Corporation for the year ended March 31, 2002, in conformity with U.S. generally accepted...

  • Page 79
    ...President, Enterprise Administration Products Steven B. Messick Vice President, Sales and Marketing, Americas John B. Sorci, Jr. Vice President, Worldwide Operations Vincent W. Steckler Vice President, Sales and Marketing, Asia Pacific and Japan Stock Exchange Listing Symantec's common stock trades...

  • Page 80