Symantec 2004 Annual Report Download - page 42

«40»SYMANTEC CORPORATION
of security threats to consumer systems, including the recently
well publicized, Beagle, Welchia, Blaster, Sobig, MyDoom, NetSky
and Sasser viruses. The impact of these factors may diminish over
time, and it is possible that our growth rates in sales of security
protection products may decline.
We have grown, and may continue to grow, through acquisitions
that give rise to risks that could adversely affect our future
operating results. We completed four acquisitions each during
fiscal 2004 and fiscal 2003, and announced an agreement to
complete an acquisition in the first quarter of fiscal 2005 and
we will likely pursue future acquisitions. Integrating acquired
businesses has been and will continue to be a complex, time
consuming and expensive process. To integrate acquired businesses,
we must implement our technology systems in the acquired
operations and assimilate and manage the personnel of the
acquired operations. Our success in completing the integration of
acquired businesses may impact the market acceptance of such
acquisitions, and our willingness to acquire additional businesses
in the future. Further, the difficulties of integrating acquired
businesses could disrupt our ongoing business, distract our man-
agement focus from other opportunities and challenges, and
increase our expenses and working capital requirements. We may
face difficulties in entering markets in which we have no or limited
direct prior experience and where competitors in such markets
have stronger market positions. Our acquisitions may cause us to
recognize substantial amounts of goodwill and other intangible
assets that will be subject to impairment testing and amortization,
and we may assume liabilities. In addition, acquisitions may result
in substantial restructuring and other related expenses and write-offs
of acquired in-process research and development costs. Further,
we may need to issue equity or incur additional debt to finance
future acquisitions, which could be dilutive to our existing stock-
holders or could increase our leverage. Any of these and other
factors could harm our ability to achieve anticipated levels of
profitability from acquired operations or to realize other anticipated
benefits of an acquisition. Mergers and acquisitions of high
technology companies are inherently risky, and no assurance can
be given that our previous or future acquisitions will be successful
and will not materially adversely affect our business, operating
results or financial condition.
Introduction and integration of new products and technologies
may adversely affect our financial results. We have recently
introduced new products, such as Symantec™Enterprise Security
Architecture, or SESA™ ,newly acquired products and products
incorporating newly acquired technology, including technologies
acquired in the following transactions:
•On February 13, 2004, we completed the acquisition of
ON Technology Corp., a provider of solutions which enable
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 corporations and individual users.
•On October 15, 2003 we acquired SafeWeb, Inc., a provider
of SSL VPN appliances.
•On July 17, 2003, we completed the acquisition of Nexland,
Inc., a technology driven Internet security company whose
Internet Protocol based networking appliances are installed
at enterprise branches and telecommuter offices worldwide.
These technologies may not achieve market acceptance and/or
may not be able to compete with products either currently in
the market or introduced in the future. If these technologies do
not achieve market success, our financial results, and the trading
price of our common stock could be adversely affected.
Our efforts to develop and sell appliances and integrated
solutions may not be successful and our future net revenues
and operating results could be adversely affected. We
have been in the appliance business for a short period of time.
Because of our limited experience with the manufacturing of
appliances, and because our appliances generate lower gross
margins than our software products, our efforts to develop
and sell appliances may not be as successful as we anticipate.
In addition, our strategy for future growth includes integrating
our various security technologies, management, customer service
and support into a single enterprise security solution. We have
begun implementing this strategy by selling integrated solutions,
such as Symantec Gateway Security and Symantec Client Security.
Our integrated solutions may not achieve market acceptance and
may not be able to compete with solutions either currently in
the market or introduced in the future. If we are unable to achieve
market acceptance or compete effectively with solutions of our
competitors, our future net revenues and operating results could
be adversely affected.
Economic conditions, and conditions affecting the network
security market in particular, may have a negative impact
on our revenues and margins. The market for our products
depends on various economic conditions including those affecting
the network security, Internet infrastructure and other related
markets. Consumer demand for our products depends, in part, on
global economic conditions. On the enterprise side, any slowdown
in corporate earnings or tightening of corporate budgets may
cause potential customers to delay or cancel security projects,
reduce their overall or security-specific information technology
budgets, or reduce or cancel orders for our products. Further,
2004 Annual Report