Symantec 2004 Annual Report Download - page 41

SYMANTEC CORPORATION «39»
We have certain royalty commitments associated with the
shipment and licensing of certain products. Royalty expense
is generally based on a dollar amount per unit shipped or
a percentage of underlying revenue and has not been included
in the table above. Certain royalty commitments have minimum
commitment obligations; however, as of March 31, 2004 all such
obligations are immaterial.
On May 21, 2004, we entered into an agreement to purchase
Brightmail, Inc. for an estimated $370 million. The completion
of this acquisition is subject to customary closing conditions,
and is expected to close in July 2004. We expect to integrate
this technology into our Enterprise Security segment.
We believe that existing cash, cash equivalents and short-term
investments, as well as cash generated from operating results
will be sufficient to fund operations for at least the next year.
Newly Adopted and Recently Issued Accounting
Pronouncements
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. Under SFAS No. 143, the fair value of
a liability for an asset retirement obligation must be recognized
in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset.
SFAS No. 143 became effective for Symantec beginning in the
first quarter of fiscal 2004 and the adoption of this statement did
not have a material impact on our financial position or results
of operations.
In December 2003, the FASB revised Interpretation No. 46,
Consolidation of Variable Interest Entities, an Interpretation of
ARB No. 51 (FIN 46R), which addresses how a business enterprise
should evaluate whether it has a controlling interest in an entity
through means other than voting rights and accordingly should
consolidate the entity. FIN 46R replaces FASB Interpretation No. 46,
which was issued in January 2003. Before concluding that it is
appropriate to apply the voting interest consolidation model to
an entity, an enterprise must first determine that the entity is not
a variable interest entity or a special purpose entity. FIN 46R
became effective for Symantec during fiscal 2004 and the adoption
of this statement did not have a material impact on our financial
position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity, which provides guidance for classification and measurement
of certain financial instruments with characteristics of both liabilities
and equity. SFAS No. 150 became effective for financial instruments
entered into or modified after May 31, 2003, and otherwise became
effective for Symantec beginning the second quarter of fiscal
2004 and the adoption of this statement did not have a material
impact on our financial position or results of operations.
Business Risk Factors
Fluctuations in our quarterly operating results have affected
our stock price in the past and could affect our stock price
in the future. Our quarterly operating results have fluctuated in
the past, and are likely to vary significantly in the future, based
on a number of factors related to our industry and the markets for
our products. If our quarterly operating results or our predictions
of future operating results fail to meet the expectations of analysts
and investors, our stock price could be negatively affected.
Factors that are likely to cause our operating results to
fluctuate include:
•reduced demand for any given product;
•uncertainty about and customer confidence in current
economic conditions;
•unfavorable fluctuations in foreign 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
enhanced versions of our products and product upgrades.
In addition, during fiscal 2004, 2003 and 2002, our operating
results were materially affected by non-standard charges, including
the following:
•acquired in-process research and development;
•restructuring, site closures and other charges;
•litigation settlements; and
•asset impairment charges
Any volatility in our quarterly operating results may make it more
difficult for us to raise capital in the future or pursue acquisitions
that involve issuances of our common stock or securities convertible
or exercisable into our common stock.
There is uncertainty as to whether or not we will be able to
sustain the growth rates in sales of our products, particularly
in consumer security products. Over the last nine quarters, we
experienced a higher than expected rate of growth in sales of our
consumer security protection products, and we expect that we
will not be able to sustain this high growth rate on a consistent
basis. We believe that consumer security protection sales have
been spurred by a number of factors over this period of time,
including increased broadband usage and increased awareness
2004 Annual Report