Symantec 2007 Annual Report Download - page 44

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RESULTS OF OPERATIONS
Total Net Revenues
2007 2006 2005
Year Ended March 31,
($ in thousands)
Net revenues .................................. $5,199,366 $4,143,392 $2,582,849
Period over period increase ....................... 1,055,974 1,560,543
25% 60%
We were required under purchase accounting rules to reduce the amount of Veritas’ deferred revenue that we
recorded in connection with our July 2005 acquisition of Veritas to an amount equal to the fair value of our
contractual obligation related to that deferred revenue. A portion of the increase in revenue related to storage and
availability products and services in fiscal 2007 is due to the fact that the amount of revenue recognized in fiscal
2006 was lower as a result of the purchase accounting adjustment relating to deferred revenue. A majority of the
increase in such revenue in fiscal 2006 is due to the fact that we had no such comparable revenue in fiscal 2005 for
those storage and availability products and services obtained through our acquisition of Veritas. Unless otherwise
specified, “storage and availability products and services” include products and services obtained through our
acquisition of Veritas, and complementary products and services obtained or developed subsequent to such
acquisition.
Several factors have contributed to increased deferred revenue and lower current period revenue in fiscal 2007.
In fiscal 2007, we began negotiating more transactions that commit customers to multi-year periods, offer more
flexibility in contractual terms and in product deployments, and provide more services in combination with license
and maintenance sales. In the December 2006 quarter, we combined our buying programs for all of our enterprise
offerings to provide our customers and partners a single vendor relationship and simplify the way we do business.
Previously, our storage and availability products and services were sold under Veritas’ pre-merger buying programs,
while our security products and services were sold under our historical buying programs. These factors have
resulted in, and will continue to result in, lower near-term recognized revenue growth rates. For example, an
increase in multi-year contracts results in a higher level of revenue attributable to content and/or maintenance
included in those transactions, which resulted in a larger portion of our revenues being recognized ratably over the
term of the arrangement and a smaller portion being recognized in the current period. More flexibility in contractual
terms, such as installment payments, increases our deferred revenue as such flexibility may result in ratable
recognition or recognition on a due and payable basis.
Our customers have also requested increased flexibility in product deployments in site license arrangements.
This may result in an increase in deferred revenue and classification of all revenues associated with the specific
contract as Content, subscriptions, and maintenance revenue, which is recognized over time, as VSOE may not exist
in certain types of flexible deployment contracts. As a result of our initiative to offer customers a more
comprehensive solution to protect and manage a global IT infrastructure, we expect to see an increasing amount
of services sold in conjunction with license and maintenance contracts. Inclusion of such services often results in
increased deferred revenue and increased classification of revenues as Content, subscriptions, and maintenance
revenue, as VSOE may not exist for some of the services provided. The combination of buying programs resulted in
a change in the VSOE for some of our storage and availability products and services. This change, coupled with
increased maintenance renewals sold with a license component, resulted in a larger portion of revenues associated
with contracts being classified as Content, subscriptions, and maintenance revenue, which is subject to deferral,
instead of Licenses revenue, which is generally recognized immediately.
Net revenues increased in fiscal 2007 as compared to fiscal 2006 primarily due to the inclusion of the storage
and availability products and services that were obtained through our acquisition of Veritas for the full twelve
months in the 2007 period compared to nine months in the 2006 period. These products and services contributed
$518 million of net revenues in the June 2006 quarter for which there was no comparable revenue in the June 2005
quarter. In addition, the purchase accounting adjustment contributed $271 million (cumulatively) in the September
2006, December 2006, and March 2007 quarters as compared to the comparable quarters of the prior year. The
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