Symantec Final_Symantec_2005_10Kwrap

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BE FEARLESS LEAD SYMANTEC 2005 ANNUAL REPORT

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  • 1. SYMANTEC 2005 ANNUAL REPORT BE FEARLESS LEAD

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THREE YEAR SUMMARYFiscal Year Ended20052004 2003 (in millions, except per share amounts)Reconciliation of Non-GAAP to GAAP Results*: Revenues$ 2,583 $ 1,870$ 1,407 Non-GAAP Gross Margin $ 2,180 $ 1,584$ 1,186 Cost of revenues: amortization of acquired product rights $(49) $(41)$(29) GAAP Gross Margin $ 2,131 $ 1,543$ 1,157 Non-GAAP Operating Expenses $ 1,292 $ 1,007$ 796 Amortization of other intangibles from acquisitions $ 5 $ 3$ 3 Amortization of deferred stock-based compensation $ 5 Acquired in-process research and development$ 3 $ 4$ 5 Restructuring $ 3 $ 1$11 Patent settlement $ 14 Integration costs $ 3 GAAP Operating Expenses $ 1,311 $ 1,029$ 815 Non-GAAP Net Income $ 634 $ 411$ 280 Cost of revenues$(49) $ (41) $(29) Operating expenses$(20) $(21)$(19) Income tax benet $ 25$ 22 $ 16 Tax charge on cash repatriation $(54) GAAP Net Income $ 536 $371 $ 248 GAAP Net Income per Share Diluted $0.74 $0.54$0.38 Non-GAAP Net Income per Share Diluted $0.87 $0.59$0.43 Other Information: Cash Flow from Operating Activities $ 1,207 $ 903$ 599 Total Assets$ 5,614 $ 4,456$ 3,266 Stockholders Equity$ 3,705 $ 2,426$ 1,764 Total Employees 6,395 5,3004,344*In addition to reporting nancial results in accordance with generally accepted accounting principles, or GAAP, Symantec reports non-GAAP nancial results. Non-GAAP netincome per share exclude amortization of acquisition-related intangibles, amortization of deferred stock-based compensation, in-process research and development,and certain other identied charges, such as restructuring, patent settlement, and integration planning expenses associated with the VERITAS merger, as well as the tax ef-fect of these items, and the one-time tax eect associated with the companys cash repatriation under the American Jobs Creation Act. Symantecs management believes thesenon-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods. Management uses these non-GAAPmeasures to evaluate the Companys nancial results, develop budgets, and manage expenditures. The calculations Symantec uses to produce non-GAAP results are not inaccordance with GAAP, are likely to dier from the methods used by other companies, and should not be regarded as a replacement for corresponding GAAP measures. Investorsare encouraged to review the reconciliation of these non-GAAP nancial measures to the comparable GAAP results, which can be found in our earnings press releases, investorpresentations, and on the investor relations Web site at www.symantec.com/invest. 3. FINANCIAL HIGHLIGHTS ABOUT SYMANTEC SYMANTEC IS THE WORLD38% GROWTH $2.58 BILLION LEADER IN PR OVIDING IN REVENUEIN REVENUESOLUTIONS TO HELP INDIVIDUALS R E V E N U E * (millions) N E T I N C O M E * (millions) $634 AND ENTERPRISES ASSURE $2,583 $536 THE SECURITY, AVAILABILITY,$411 $371$1,870AND INTEGRIT Y OF THEIR $280 $1,407$248 INFORMATION. HEADQUARTERED IN CUPERTINO, CALIFORNIA ,2005200320042005 20032004 NON-GAAP GAAPNON-GAAP GAAP SYMANTEC HAS OPERATIONS IN MORE THAN 40 COUNTRIES.D E F E R R E D R E V E N U E (millions) EARNINGS PER DILUTED SHARE$0.87 MORE INFORMATION IS AVAILABLE$1,330$0.74AT W W W.SYMANTEC.COM.$0.59 $0.54 $971 $0.43$0.38$590200520052003 2004 20032004NON-GAAP GAAP *Non-GAAP results are reconciled to GAAP results on the inside front cover. SYMANTEC 2005 ANNUAL REPORT1 4. BE FOCUSED EXECUTE 5. LETTER TO OUR SHAREHOLDERSDear Shareholders,Fiscal 2005 was another tremendous year foralmost $2.6 billion in fiscal 2005, and producedrecord earnings. Non-GAAP1 earnings per share grew Symantec. We continued to execute our core strategy: ensuring information integrity across47% to $0.87 per share. Our deferred revenue for a broad range of environments. We integrated fivethe fiscal year grew nearly $360 million, an increase acquisitions and grew our business organically of 37%, and we ended the year with $3.2 billion in by launching powerful new products and services. cash and short-term investments. As we move into And, we announced our intent to merge with fiscal 2006, our overall financial health has never VERITAS. We believe combining the leaders of been stronger. security and storage management will positionOur tenacious commitment to customer-driven Symantec to help our customers build a resilientsolutions fueled results that surpassed our expecta- infrastructure, manage complex network environ-tions. During fiscal 2005, we booked almost 1,350 ments, and reduce risk.enterprise deals greater than $100,000thats 64% Evolving Security Threat Environment more than we booked in fiscal 2004. The number Todays evolving security threat environment is as of million-dollar deals increased 85%. Our strategy dangerous as it has ever been. Symantecs Internet of providing customers with a breadth and depth Security Threat Reportthe most comprehensiveof integrated security and availability products has gauge of the cyberthreat landscapefound thatbeen instrumental to these successes. malicious code that exposed confidential informa-Boosting Consumer Confidence in a World tion made up 54% of the samples in the past sixof Increasing Risk months, up 10% from the previous six months.The Consumer segment was the star performer We documented about 1,400 new vulnerabilities,again this year, growing 51% to $1.3 billion inOur global sales team produced another year of remarkable results generating double-digit revenue growth in all major geographies.or gaps in programming code, that attackers canrevenue. We shipped almost 26 million packaged exploit. Thats an astounding 58 new vulnerabilities products in addition to the tens of millions of every week. The majority of them were of moderateelectronic transactions we conducted with customers or high severity and almost half of them occurredaround the world. in Web applications. With our breadth of offeringsOver the past 20 years, Symantec has built an extensive and track record of success, we believe no companynetwork of channel partners providing us with is better positioned than Symantec to protectthe broadest customer reach of any company in the enterprises and individuals against these threats.industry. Sales of our integrated product suite, Norton Another Year of Record Financial Performance Internet Security, grew nearly 100%evidence thatOur global sales team produced another year of consumers are gravitating towards integrated, multi- remarkable results generating double-digit revenue function security solutions. There is no doubt that growth in all major geographies. Following a verythe Norton brand provides our customershundreds strong fiscal 2004, Symantec grew revenue 38% to of millions of PC users worldwideconfidence so Non-GAAP results are reconciled to GAAP results on the inside front cover. 1 SYMANTEC 2005 ANNUAL REPORT 3 6. they can live, learn, create, and play in a connected acquisitions of LIRIC and @Stake. We expanded ourworld. We are more committed than ever to Managed Security Service to support even morestrengthening our Norton brand with consumers security devices. Recently we launched the Symantecaround the world. Systems Continuity Service, which identifies secu-rity, network, and storage risks. Our consultantsHelping Enterprises Build a Resilient provide detailed action plans and policy recommen-Infrastructuredations helping customers to rapidly recover fromOur presence in the corporate world is equally strongunforeseen systems attacks while maintainingour enterprise revenue grew 27% to $1.3 billion incontinuous availability.fiscal 2005. Enterprise customers chose SymantecThe Next Step: Solving Business Problemsproducts and services to secure and manage theirIT infrastructures and ensure compliance with In todays digitally connected world, there are fewevolving regulatory requirements. challenges more significant than protecting andWe must deliver security and availability solutions thataddress complexity, cost, and compliance issues acrossour customers entire network environment. Our enterprise security segment remains the efficiently managing information. Informationlargest enterprise group, growing 26% during theis nothing less than the lifeblood of customersyear. Enterprise antivirus solutions continuedoperationseven the global economy. Informationto be the most significant contributor to the mix.is under increasing attack and its integrity is beingThrough last years acquisition of Brightmail, we compromisednot just from worms, viruses, andadded market-leading antispam solutions to ourhackers, but also from an array of new cyberthreatsintegrated security offerings and we recently added including spam, spyware, and phishing. We mustantispyware technology to our offerings. In addition, protect information differently. It is not enough toour unique products, such as Symantec Enterprisemake information secure, we also need to ensureSecurity Manager, are gaining momentum as companies that information is always available. Information is in highly regulated industries, like financial services the currency of our age, and as such, it is invaluable.and health care, turn to Symantec for help in meeting Unlike a disk, server, or laptop, information isevolving regulatory compliance requirements.not replaceable. In the past 18 months, our Enterprise AdministrationTodays dynamic businesses are challenged to findteam integrated the advanced technology capabilitiesways to secure the gathering, dissemination, andwe acquired from PowerQuest and ON Technology tostorage of information, optimize its performancecreate the LiveState Recovery platform, which helpsand make it availablewith less money, fewercompanies get their systems back up and running people, and fewer resources. Companies must doafter a disaster. This successful integration further this while finding ways to standardize and balancestrengthens our proven track record of taking new the complexity associated with managing the flowtechnologies and teams and weaving them into theof information and regulatory compliance.fabric of Symantec to create even more compellingFrom our beginnings in the content security businesscustomer offerings. The Enterprise Administrationto our introduction of the industrys first integratedsegment grew 29% in fiscal 2005.security appliance, we have provided customersOur Services segment posted growth of 35% duringwith innovative and effective solutions to real-worldthe year, propelled by contributions from our security challenges. SYMANTEC 2005 ANNUAL REPORT 4 7. BE FORWARD INNOVATE 8. Looking forward, data security and availability must The combination of Symantec and VERITAS creates be intertwined. Together, security and availabilitya software company of significant scale and global solutions need to address the complexity, cost, andreach. Independently, each company is a category compliance issues that customers face. Solutionsleader. Together the combined company will must deliver integrated infrastructure management, be uniquely positioned to not only extend those not just integrated security. Importantly, these leadership positions, but also to define new solutions must be available across a wide range of markets and bring together security and storage network environments.in new and compelling ways.Today, we offer systems and disaster recovery andImmediately following the completion of the merger, patch management solutions predominately inour customers can expect to see product solutions the Windows environment. However, in order toand general product interoperability in three areas: better serve large enterprise customers, we areresilient infrastructure, email management, and working to provide a truly integrated infrastructure regulatory compliance. Within six to 12 months, well management solution across all platforms.have a common user interface and common licensing.Then, well get into deeper integration, with new A Merger of Leadersfunctionality based on combined features and a It was out of this desire to fulfill customer needscommon architecture. To be sure, the combined that the merger with VERITAS was born. Thiscompany will draw from the best practices of merger marries the market leaders in security andboth Symantec and VERITAS. storage. Symantec provides the broadest securityBuilding a Global Leader solutions and the addition of VERITAS brings a wide range of availability offerings. The combined While significant challenges lie ahead, we believe company will help customers bounce back from that by building on the combined strengths of disruptions when they occur and continuously Symantec and VERITAS, no other company is more optimize performance.strongly positioned. And, no team is more excitedabout the prospects and possibilities. We believe we have the depth and breath in oursolution portfolio and the talent on our team toengage with customers and win. The successes of thepast 12 months, and the excitement we see as ourteam plans for the coming year and beyond, gives usconfidence we can execute on our plans and succeed. On behalf of the board, we want to acknowledge thetremendous efforts of our employees and partnersaround the world and thank our customers foranother stellar year of growth. And, we would liketo thank our investors for their continued faith andconfidence in our ability to lead Symantec into a newera. We look forward to 2006 with immense optimism.Sincerely,John W. ThompsonChairman of the Board andChief Executive Officer SYMANTEC 2005 ANNUAL REPORT 3 9. FINANCIAL INFORMATION10-K FORM FORWARD-LOOKING STATEMENT This annual report may be deemed to contain forward-looking statements, including statements regarding our market opportunity, forecasts of market growth, future revenue, benefits of the merger with VERITAS, expectations that the merger will be accretive to Symantecs results, market trends such as convergence into integrated infrastructure management, and other matters that involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from results expressed or implied by this annual report. Such risk factors include, among others: the sustainability of recent growth rates, particularly in consumer products; difficulties encountered in integrating merged businesses; whether certain market segments grow as anticipated; the positioning of Symantecs products in those segments; general market conditions; the competitive environment in the software industry, including consolidation and new market entrants, and competitive responses to the merger with VERITAS; and whether the companies can successfully develop new products and the degree to which these products gain market acceptance. Additional information concerning these and other risk factors is contained in the Business Risk Factors section of Symantecs previously filed Form 10-K, for the year ended April 1, 2005. Symantec assumes no obligation to update any forward-looking information contained in this annual report.SYMANTEC 2005 ANNUAL REPORT SYMANTEC 2005 ANNUAL REPORT 77 10. Thomas W. KendraSenior Vice President,Worldwide Sales Stephen C. MarkowskiVice President,Finance and Chief Accounting Officer CORPORATE INFORMATION Enrique T. SalemSenior Vice President,Security Products and Solutions James R. SocasSenior Vice President,Corporate Business DevelopmentBOARD OF DIRECTORSJohn G. SchwarzArthur W. WongPresidentMichael Brown Vice President,Gregory E. MyersFormer Chairman and Response and Managed Security ServicesSenior Vice President,Chief Executive OfficerFinance and Chief Financial OfficerQuantum CorporationINVESTOR INFORMATIONMark F. BregmanWilliam T. Coleman IIIAnnual MeetingSenior Vice President,Founder, Chairman andThe annual meeting of shareholders willChief Technology OfficerChief Executive Officerbe held on Friday, September 16, 2005 atCassatt Corporation8 a.m. at Symantecs worldwide headquarters:John F. Brigden20330 Stevens Creek Blvd.Senior Vice President,David L. MahoneyCupertino, CA 95014General CounselFormer Co-Chief Executive Officer(408) 517 8000McKesson HBOC, Inc. andJanice D. ChaffinChief Executive OfficerStock Exchange ListingSenior Vice President,iMckesson LLCSymantecs common stock trades on theChief Marketing OfficerNasdaq under the symbol SYMC.Robert S. MillerArthur F. CourvilleChairman and Chief Executive OfficerTransfer AgentSenior Vice President,Delphi CorporationEquiServe Trust CompanyCorporate Legal Affairs and SecretaryP.O. Box 43023George ReyesDonald E. FrischmannProvidence, RI 02940-3023Chief Financial OfficerSenior Vice President,www.equiserve.comGoogleCommunications and Brand Management (781) 575 2879David J. RouxEdwin GillisInvestor RelationsCo-Founder and Managing DirectorSenior Vice President,Investor inquires may be directed to:Silver Lake PartnersAdministration and IntegrationHelyn CorcosDaniel H. SchulmanInvestor Relations Design: 1185 Design Executive portrait: Stuart Schwartz Printing: Watermark Graphics/Consolidated GraphicsRebecca A. RanningerChief Executive Officer 20330 Stevens Creek Blvd.Senior Vice President,Virgin Mobile USA Cupertino, CA 95014Human Resources(408) 517 8324Paul [email protected] Chief Financial Officer andOTHER SENIOR EXECUTIVES www.symantec.com/investVice ChairmanBechtel Group, Inc. Jeremy Burton Annual Report on Form 10-KSenior Vice President,A copy of Symantecs Form 10-K, includingGary L. Bloom Data Management exhibits, for the period ended April 1, 2005,Vice Chairman and Presidentas filed with the Securities and ExchangeSymantec CorporationDieter GiesbrechtCommission, is available without chargeSenior Vice President,upon request or can be accessed at:John W. ThompsonApplication and Infrastructure Managementwww.symantec.com/investChairman and Chief Executive OfficerSymantec CorporationAjei GopalOutside CounselSenior Vice President,Fenwick & West LLPSolutions, Alliances, and OperationsEXECUTIVE OFFICERS801 California StreetMountain View, CA 94041Kristof HagermanJohn W. Thompson(650) 988 8500Senior Vice President,Chairman and Chief Executive OfficerStorage and Server ManagementIndependent AuditorsGary L. BloomKPMG LLPGregory W. HughesVice Chairman and President500 East Middlefield RoadSenior Vice President,Mountain View, CA 94043Worldwide Services and Support Symantec, the Symantec logo, and VERITAS are registered trademarks of Symantec Corporation or its affiliates in the U.S. and other countries. LiveState, Norton Internet Security,and Symantec Enterprise Security Manager are trademarks of Symantec Corporation. Other brands and products are trademarks of their respective holder/s. 2005 Symantec Corporation. All rights reserved. 10427577