Symantec 2014 Annual Report Download - page 93

Our business models present execution and competitive risks.
In recent years, our SaaS offerings have become increasingly critical in our business. Our competitors are rapidly
developing and deploying SaaS offerings for consumers and business customers. Pricing and delivery models are
evolving. Devices and form factors influence how users access services in the cloud. We are devoting significant
resources to develop and deploy our own SaaS strategies. We cannot assure you that our investments in and
development of SaaS offerings will achieve the expected returns for us or that we will be able to compete
successfully in the marketplace. In addition to software development costs, we are incurring costs to build and
maintain infrastructure to support SaaS offerings. These costs may reduce the operating margins we have
previously achieved. Whether we are successful in this business model depends on our execution in a number of
areas, including:
• Continuing to innovate and bring to market compelling cloud-based experiences that generate
increasing traffic and market share; and
• Ensuring that our SaaS offerings meet the reliability expectations of our customers and maintain the
security of their data.
Our business depends on customers renewing their arrangements for maintenance, subscriptions, managed
security services and SaaS offerings.
A large portion of our revenue is derived from arrangements for maintenance, subscriptions, managed security
services and SaaS offerings, yet existing customers have no contractual obligation to purchase additional
solutions after the initial subscription or contract period, and given our limited operating history, we are unable to
accurately predict our customer renewal rates. Our customers’ renewal rates may decline or fluctuate as a result
of a number of factors, including the level of their satisfaction with our solutions or our customer support,
customer budgets and the pricing of our solutions compared with the solutions offered by our competitors, any of
which may cause our revenue to grow more slowly than expected, if at all. Accordingly, we must invest
significant time and resources in providing ongoing value to our customers. If these efforts fail, or if our
customers do not renew for other reasons, or if they renew on terms less favorable to us, our revenue may decline
and our business will suffer.
Our increasing focus on the delivery of products in an appliance form factor creates new business and
financial risks.
Since fiscal 2012, shipments of products to customers in an appliance form factor have represented an
increasingly larger part of our revenues, and we expect this trend to continue. The delivery of solutions in the
form of appliances creates business and financial risks, including the following:
• increased cost of components and contract manufacturing, as we do not own our manufacturing
facilities;
• supply chain issues, including financial problems of contract manufacturers or component suppliers;
• a shortage of adequate component supply or manufacturing capacity that increases our costs and/or
causes a delay in order fulfillment;
• excess inventory levels, which could lead to write-downs or obsolescence charges;
• additional reserves for product returns;
• challenges in managing our channel business;
• tax and trade compliance complications; and
• local field support of customers’ appliances.
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