Symantec 2004 Annual Report Download - page 43

SYMANTEC CORPORATION «41»
if economic conditions deteriorate, customers may experience
financial difficulty, cease operations or fail to budget for the
purchase of our products. This, in turn, may lead to longer sales
cycles, price pressures and collection issues, causing us to realize
lower revenues and margins. In addition, many parts of the world
are experiencing economic instability, and we cannot predict
how these conditions may affect our customers or business.
Our international operations involve risks, and may be subject
to political or other non-economic barriers in certain countries.
In light of recent terrorist activity and political and military instability
internationally, governments could enact additional regulations or
restrictions on the use, import or export of encryption technologies.
Further, our failure to obtain any required export approval of
our technologies, particularly our encryption technologies, could
impede our international sales. The additional regulation of
encryption technologies could delay or prevent the acceptance
and use of encryption products and public networks for secure
communications. This might decrease demand for our products
and services.
We are exposed to fluctuations in foreign currency exchange
rates, which could adversely affect our financial results.
A significant portion of our manufacturing costs and operating
expenses result from transactions outside of the United States,
often in foreign currencies. International sales comprised approxi-
mately 52%, 49% and 47% of our total sales in fiscal 2004, 2003
and 2002, respectively. Although our fiscal 2004 operating results
have been positively affected by changes in foreign currency
rates, our future operating results will continue to be subject to
fluctuations in foreign currency rates, and we may be negatively
affected by fluctuations in foreign currency rates in the future,
especially if international sales continue to grow as a percentage
of our total sales.
Our markets are competitive and our financial results and
financial condition could be adversely affected if we are
unable to anticipate or react to this competition. Our markets
are competitive. If we are unable to anticipate or react to this
competition, our operating results could be adversely affected by
reducing our sales or the prices we can charge for our products.
Many of our competitors have significantly lowered, and may
continue to lower, the price of their products and we may have
to do the same to remain competitive. Our ability to remain
competitive depends, in part, on our ability to enhance our products
or develop new products that are compatible with new hardware
and operating systems. We have no control over, and limited
insight into, development efforts by third parties with respect to
new hardware and operating systems, and we may not respond
effectively or timely to such changes in the market. In addition,
we have limited resources and we must make strategic decisions
as to the best allocation of our resources to position ourselves
for changes in our markets. We may from time to time allocate
resources to projects or markets that do not develop as rapidly
or fully as we expect. We may also fail to allocate resources to
third party products, to markets or to business models that are
ultimately more successful than we anticipate.
Operating system providers and network equipment and
computer hardware manufacturers are becoming substantial
competitors in the market for security solutions, which
could adversely affect our financial results. Large operating
system providers and network equipment and computer hardware
manufacturers with significantly greater financial, marketing or
technological resources than we have may leverage their strengths
at the computing platform, security layer and network tier levels
to compete more aggressively in the market for security solutions.
Our failure to adapt effectively to the continued development,
acquisition, or licensing of security solutions technology or product
rights by one or more of these competitors could negatively impact
our competitive position in the market for security solutions.
For example, the continued inclusion of 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 in our products. This competition may decrease
or delay the demand for certain of our products, including those
currently under development. Furthermore, as hardware vendors
incorporate security functions in their network equipment or
integrate security within their network and system management
products, the demand for some of our products may decrease,
including those currently under development.
The trend toward consolidation in the software industry
could impede our ability to compete effectively. Consolidation
is underway among companies in the software industry as firms
seek to offer more extensive suites and broader arrays of software
products, as well as integrated software and hardware solutions.
Changes resulting from this consolidation may negatively impact
our competitive position. In addition, to the extent that we seek
to expand our product lines, managerial and technical personnel
skills and capacity through acquisitions, the trend toward consolidation
may result in our encountering competition, and paying higher
prices, for acquired businesses.
2004 Annual Report