Symantec 2004 Annual Report Download - page 46

«44»SYMANTEC CORPORATION
We have outsourced the majority of our worldwide consumer
support functions. As such, we are highly dependent on the
on-going business success of the companies with whom we
have contracted to provide these services. If these companies
experience financial difficulties, do not maintain sufficiently
skilled workers and resources to satisfy our contracts or otherwise
fail to perform at a sufficient level under these contracts, the
level of support services to our customers may be significantly
disrupted, which could materially harm our relationships with
these customers.
Our inability to timely distribute our products and services
over the Internet, including security patches and updated
virus definitions via our LiveUpdate feature, could adversely
affect our business. Our ability to maintain and increase the
speed with which we provide services to consumers and to
increase the scope of these services is limited by and dependent
upon the speed and reliability of the Internet. As we incorporate
the LiveUpdate technology into more of our products, we are
increasingly reliant on the Internet as a means to distribute our
security patches and updated virus definitions to our customers.
Accordingly, if we, or our customers, are unable to utilize the
Internet due to a failure of technology, infrastructure or other reasons,
our ability to provide services may suffer, which could lead to a
decrease in revenues. In addition, the infrastructure required to
support the increase in on-line sales may be insufficient, if our on-
lines sales increase at a rate significantly greater than anticipated.
Terrorist activity could target the Internet, computer systems
and networks, and security providers, which could adversely
affect our ability to generate revenue. Any significant interruption
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 future sales. Although we believe we
have sufficient controls in place to prevent intentional disruptions,
we expect to be an ongoing target of attacks specifically
designed to impede the performance of our products. Similarly,
experienced computer programmers, or hackers, may attempt
to penetrate our network security or the security of our Web site
and misappropriate proprietary information or cause interruptions
of our services. Uninterrupted online availability of our Web site is
becoming increasingly important, as online subscription renewals
comprise a larger portion of our revenues. Our activities could be
adversely affected, and our reputation and future sales harmed,
if these intentionally disruptive efforts are successful.
We are subject to litigation that could adversely affect
our financial results. From time to time, we are subjected to
product liability claims, including claims that we have infringed
the intellectual property rights of others, as well as other legal
claims incidental to our business. We are currently involved in a
number of lawsuits, all of which we intend to defend vigorously.
However, it is possible that we could suffer an unfavorable out-
come 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 condition may be materially
adversely affected. For example, in the June 2003 quarter, we paid
$63 million in relation to the Hilgraeve technology patent settlement,
of which $14 million was charged to operating expenses in the
June 2003 quarter, and the remainder was capitalized and will be
amortized to cost of revenues through June 2011.
Piracy of our software may have a significant adverse impact
on our net revenues. Although we are unable to quantify the
extent of piracy of our software products, software piracy may
depress our net revenues. While this would adversely affect revenue
domestically, lost revenue is believed to be even more significant
outside of the United States, particularly in countries where laws
are less protective of intellectual property rights. We engage in
efforts to educate consumers on the benefits of licensing genuine
products and to educate lawmakers on the advantages of a business
climate where intellectual property rights are protected, and we
cooperate with the Business Software Alliance in their efforts to
combat piracy. However, these efforts may not affect the piracy
of our products.
2004 Annual Report