Symantec Final_Symantec_2005_10Kwrap

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BE FEARLESS LEAD SYMANTEC 2005 ANNUAL REPORT

Transcript of Symantec Final_Symantec_2005_10Kwrap

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BE FEARLESS LEAD

S Y M A N T E C 2 0 0 5 A N N U A L R E P O R T

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*In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Symantec reports non-GAAP financial results. Non-GAAP net

income per share exclude amortization of acquisition-related intangibles, amortization of deferred stock-based compensation, in-process research and development,

and certain other identified 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 effect associated with the company’s cash repatriation under the American Jobs Creation Act. Symantec’s management believes these

non-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods. Management uses these non-GAAP

measures to evaluate the Company’s financial results, develop budgets, and manage expenditures. The calculations Symantec uses to produce non-GAAP results are not in

accordance with GAAP, are likely to differ from the methods used by other companies, and should not be regarded as a replacement for corresponding GAAP measures. Investors

are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which can be found in our earnings press releases, investor

presentations, and on the investor relations Web site at www.symantec.com/invest.

THREE YEAR SUMMARY

Fiscal Year Ended

(in millions, except per share amounts) 2005 2004 2003

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 benefit $ 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 5,300 4,344

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SYMANTEC 2005 ANNUAL REPORT 1

38% GROWTH $2.58 BILLION

IN REVENUE IN REVENUE

ABOUT SYMANTEC

SYMANTEC IS THE WORLD

LEADER IN PROVIDING

SOLUTIONS TO HELP INDIVIDUALS

AND ENTERPRISES ASSURE

THE SECURITY, AVAILABILITY,

AND INTEGRIT Y OF THEIR

INFORMATION. HEADQUARTERED

IN CUPERTINO, CALIFORNIA,

SYMANTEC HAS OPERATIONS

IN MORE THAN 40 COUNTRIES.

MORE INFORMATION IS AVAILABLE

AT WWW.SYMANTEC.COM.

GAAP NON-GAAP GAAP NON-GAAP

GAAP NON-GAAP

R E V E N U E * (millions) N E T I N C O M E * (millions)

E A R N I N G S P E R D I L U T E D S H A R E D E F E R R E D R E V E N U E (millions)

$1,407

$1,870

$2,583

2003 2004 2005

$248

$536

$411

$280

$371

$634

2003 2004 2005

2003 2004 2005

$0.38

$0.74

$0.59

$0.43

$0.54

$0.87

2003 2004 2005

$971

$590

$1,330

*Non-GAAP results are reconciled to GAAP results on the inside front cover.

FINANCIAL HIGHLIGHTS

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BE FOCUSED EXECUTE

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almost $2.6 billion in fiscal 2005, and produced record earnings. Non-GAAP1 earnings per share grew 47% to $0.87 per share. Our deferred revenue for the fiscal year grew nearly $360 million, an increase of 37%, and we ended the year with $3.2 billion in cash and short-term investments. As we move into fiscal 2006, our overall financial health has never been stronger.

Our tenacious commitment to customer-driven solutions fueled results that surpassed our expecta-tions. During fiscal 2005, we booked almost 1,350 enterprise deals greater than $100,000—that’s 64% more than we booked in fiscal 2004. The number of million-dollar deals increased 85%. Our strategy of providing customers with a breadth and depth of integrated security and availability products has been instrumental to these successes.

Boosting Consumer Confidence in a World of Increasing Risk The Consumer segment was the star performer again this year, growing 51% to $1.3 billion in

or gaps in programming code, that attackers can exploit. That’s an astounding 58 new vulnerabilities every week. The majority of them were of moderate or high severity and almost half of them occurred in Web applications. With our breadth of offerings and track record of success, we believe no company is better positioned than Symantec to protect enterprises and individuals against these threats.

Another Year of Record Financial PerformanceOur global sales team produced another year of remarkable results generating double-digit revenue growth in all major geographies. Following a very strong fiscal 2004, Symantec grew revenue 38% to

L E T T E R T O O U R S H A R E H O L D E R S

Dear Shareholders,

Fiscal 2005 was another tremendous year for Symantec. We continued to execute our core strategy: ensuring information integrity across a broad range of environments. We integrated five acquisitions and grew our business organically by launching powerful new products and services. And, we announced our intent to merge with VERITAS. We believe combining the leaders of security and storage management will position Symantec to help our customers build a resilient infrastructure, manage complex network environ-ments, and reduce risk.

Evolving Security Threat Environment Today’s evolving security threat environment is as dangerous as it has ever been. Symantec’s Internet Security Threat Report—the most comprehensive gauge of the cyberthreat landscape—found that malicious code that exposed confidential informa-tion made up 54% of the samples in the past six months, up 10% from the previous six months. We documented about 1,400 new vulnerabilities,

revenue. We shipped almost 26 million packaged products in addition to the tens of millions of electronic transactions we conducted with customers around the world.

Over the past 20 years, Symantec has built an extensive network of channel partners providing us with the broadest customer reach of any company in the industry. Sales of our integrated product suite, Norton Internet Security,™ grew nearly 100%—evidence that consumers are gravitating towards integrated, multi-function security solutions. There is no doubt that the Norton brand provides our customers—hundreds of millions of PC users worldwide—confidence so

1 Non-GAAP results are reconciled to GAAP results on the inside front cover.

Our global sales team produced another year of remarkable results generating double-digit revenue growth in all major geographies.

SYMANTEC 2005 ANNUAL REPORT 3

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they can live, learn, create, and play in a connected world. We are more committed than ever to strengthening our Norton brand with consumers around the world.

Helping Enterprises Build a Resilient InfrastructureOur presence in the corporate world is equally strong—our enterprise revenue grew 27% to $1.3 billion in fiscal 2005. Enterprise customers chose Symantec products and services to secure and manage their IT infrastructures and ensure compliance with evolving regulatory requirements.

acquisitions of LIRIC and @Stake. We expanded our Managed Security Service to support even more security devices. Recently we launched the Symantec Systems Continuity Service, which identifies secu-rity, network, and storage risks. Our consultants provide detailed action plans and policy recommen-dations helping customers to rapidly recover from unforeseen systems attacks while maintaining continuous availability.

The Next Step: Solving Business ProblemsIn today’s digitally connected world, there are few challenges more significant than protecting and

Our enterprise security segment remains the largest enterprise group, growing 26% during the year. Enterprise antivirus solutions continued to be the most significant contributor to the mix. Through last year’s acquisition of Brightmail, we added market-leading antispam solutions to our integrated security offerings and we recently added antispyware technology to our offerings. In addition, our unique products, such as Symantec Enterprise Security Manager,™ are gaining momentum as companies in highly regulated industries, like financial services and health care, turn to Symantec for help in meeting evolving regulatory compliance requirements.

In the past 18 months, our Enterprise Administration team integrated the advanced technology capabilities we acquired from PowerQuest and ON Technology to create the LiveState™ Recovery platform, which helps companies get their systems back up and running after a disaster. This successful integration further strengthens our proven track record of taking new technologies and teams and weaving them into the fabric of Symantec to create even more compelling customer offerings. The Enterprise Administration segment grew 29% in fiscal 2005.

Our Services segment posted growth of 35% during the year, propelled by contributions from our

efficiently managing information. Information is nothing less than the lifeblood of customers’ operations—even the global economy. Information is under increasing attack and its integrity is being compromised—not just from worms, viruses, and hackers, but also from an array of new cyberthreats including spam, spyware, and phishing. We must protect information differently. It is not enough to make information secure, we also need to ensure that information is always available. Information is the currency of our age, and as such, it is invaluable. Unlike a disk, server, or laptop, information is not replaceable.

Today’s dynamic businesses are challenged to find ways to secure the gathering, dissemination, and storage of information, optimize its performance and make it available—with less money, fewer people, and fewer resources. Companies must do this while finding ways to standardize and balance the complexity associated with managing the flow of information and regulatory compliance.

From our beginnings in the content security business to our introduction of the industry’s first integrated security appliance, we have provided customers with innovative and effective solutions to real-world security challenges.

We must deliver security and availability solutions that address complexity, cost, and compliance issues across our customers’ entire network environment.

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BE FORWARD INNOVATE

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Looking forward, data security and availability must be intertwined. Together, security and availability solutions need to address the complexity, cost, and compliance issues that customers’ face. Solutions must deliver integrated infrastructure management, not just integrated security. Importantly, these solutions must be available across a wide range of network environments.

Today, we offer systems and disaster recovery and patch management solutions predominately in the Windows environment. However, in order to better serve large enterprise customers, we are working to provide a truly integrated infrastructure management solution across all platforms.

A Merger of Leaders It was out of this desire to fulfill customer needs that the merger with VERITAS was born. This merger marries the market leaders in security and storage. Symantec provides the broadest security solutions and the addition of VERITAS brings a wide range of availability offerings. The combined company will help customers bounce back from disruptions when they occur and continuously optimize performance.

The combination of Symantec and VERITAS creates a software company of significant scale and global reach. Independently, each company is a category leader. Together the combined company will be uniquely positioned to not only extend those leadership positions, but also to define new markets and bring together security and storage in new and compelling ways.

Immediately following the completion of the merger, our customers can expect to see product solutions and general product interoperability in three areas: resilient infrastructure, email management, and regulatory compliance. Within six to 12 months, we’ll have a common user interface and common licensing. Then, we’ll get into deeper integration, with new functionality based on combined features and a common architecture. To be sure, the combined company will draw from the best practices of both Symantec and VERITAS.

Building a Global Leader While significant challenges lie ahead, we believe that by building on the combined strengths of Symantec and VERITAS, no other company is more strongly positioned. And, no team is more excited about the prospects and possibilities.

We believe we have the depth and breath in our solution portfolio and the talent on our team to engage with customers and win. The successes of the past 12 months, and the excitement we see as our team plans for the coming year and beyond, gives us confidence we can execute on our plans and succeed.

On behalf of the board, we want to acknowledge the tremendous efforts of our employees and partners around the world and thank our customers for another stellar year of growth. And, we would like to thank our investors for their continued faith and confidence in our ability to lead Symantec into a new era. We look forward to 2006 with immense optimism.

Sincerely,

John W. ThompsonChairman of the Board and Chief Executive Officer

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F O R W A R D - L O O K I N G S T A T E M E N TThis 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 Symantec’s 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 Symantec’s 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 Symantec’s 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.

F I N A N C I A L I N F O R M A T I O N

10-K FORM

SYMANTEC 2005 ANNUAL REPORT 77 SYMANTEC 2005 ANNUAL REPORT

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BOARD OF DIRECTORS

Michael BrownFormer Chairman and Chief Executive Officer Quantum Corporation

William T. Coleman IIIFounder, Chairman and Chief Executive OfficerCassatt Corporation

David L. MahoneyFormer Co-Chief Executive Officer McKesson HBOC, Inc. and Chief Executive OfficeriMckesson LLC

Robert S. MillerChairman and Chief Executive Officer Delphi Corporation

George ReyesChief Financial Officer Google

David J. Roux Co-Founder and Managing DirectorSilver Lake Partners

Daniel H. SchulmanChief Executive Officer Virgin Mobile USA

Paul UnruhFormer Chief Financial Officer and Vice ChairmanBechtel Group, Inc.

Gary L. BloomVice Chairman and President Symantec Corporation

John W. ThompsonChairman and Chief Executive Officer Symantec Corporation

EXECUTIVE OFFICERS

John W. ThompsonChairman and Chief Executive Officer

Gary L. BloomVice Chairman and President

John G. SchwarzPresident

Gregory E. MyersSenior Vice President, Finance and Chief Financial Officer

Mark F. BregmanSenior Vice President, Chief Technology Officer

John F. BrigdenSenior Vice President, General Counsel

Janice D. ChaffinSenior Vice President, Chief Marketing Officer

Arthur F. CourvilleSenior Vice President, Corporate Legal Affairs and Secretary

Donald E. FrischmannSenior Vice President, Communications and Brand Management

Edwin GillisSenior Vice President, Administration and Integration

Rebecca A. RanningerSenior Vice President, Human Resources

OTHER SENIOR EXECUTIVES

Jeremy BurtonSenior Vice President, Data Management

Dieter GiesbrechtSenior Vice President, Application and Infrastructure Management

Ajei GopalSenior Vice President, Solutions, Alliances, and Operations

Kristof HagermanSenior Vice President, Storage and Server Management

Gregory W. HughesSenior Vice President, Worldwide Services and Support

Thomas W. KendraSenior Vice President, Worldwide Sales

Stephen C. MarkowskiVice President, Finance and Chief Accounting Officer

Enrique T. SalemSenior Vice President, Security Products and Solutions

James R. SocasSenior Vice President, Corporate Business Development

Arthur W. WongVice President, Response and Managed Security Services

INVESTOR INFORMATION

Annual MeetingThe annual meeting of shareholders will be held on Friday, September 16, 2005 at 8 a.m. at Symantec’s worldwide headquarters:20330 Stevens Creek Blvd.Cupertino, CA 95014(408) 517 8000

Stock Exchange ListingSymantec’s common stock trades on the Nasdaq under the symbol SYMC.

Transfer AgentEquiServe Trust CompanyP.O. Box 43023Providence, RI 02940-3023www.equiserve.com(781) 575 2879

Investor RelationsInvestor inquires may be directed to:Helyn CorcosInvestor Relations20330 Stevens Creek Blvd.Cupertino, CA 95014(408) 517 [email protected]/invest

Annual Report on Form 10-K A copy of Symantec’s Form 10-K, including exhibits, for the period ended April 1, 2005, as filed with the Securities and Exchange Commission, is available without charge upon request or can be accessed at: www.symantec.com/invest

Outside CounselFenwick & West LLP801 California StreetMountain View, CA 94041(650) 988 8500

Independent AuditorsKPMG LLP500 East Middlefield RoadMountain View, CA 94043

CORPORATE INFORMATION

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. 10427577Des

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