News Release
Symantec Reports Record Revenue And Earnings, Raises Fiscal Year Guidance
Consumer Performance Exceeds Expectations Following Numerous Threat Outbreaks During the Quarter
CUPERTINO, Calif. – Oct. 23, 2003 – Symantec Corp. (Nasdaq: SYMC), the world leader in Internet security, today reported
results for the fiscal second quarter 2004 ended Oct. 3, 2003. Symantec posted revenue for the quarter of $429 million,
a 32 percent increase compared to $325 million for the same quarter last year, driven by strong enterprise security
growth and higher than expected results in the consumer segment.
GAAP Results: Net income for the fiscal second quarter was $83 million, compared to $52 million for the same quarter
last year. Earnings per share was $0.49, compared to earnings per share of $0.33 for the year-ago quarter.
Non-GAAP Results: Non-GAAP net income for the fiscal second quarter was $91 million, compared to $60 million for the
same quarter last year. Non-GAAP earnings per share was $0.53, compared to earnings per share of $0.38 for the year-ago
quarter. Non-GAAP results and related reconciliation, as outlined in the attached consolidated statements, exclude
expenses from the amortization of other intangibles from acquisitions and acquired in-process research and development
as well as related income tax benefits. See “Use of Non-GAAP Financial Information” below.
“It was a stellar quarter across the board with strong performances in all regions,” said John W. Thompson, Symantec
chairman and CEO. “Our integrated approach for enterprises and consumers continues to gain momentum and set the bar for
the rest of the industry.”
Revenue Components
For the quarter, Symantec’s worldwide enterprise business, including enterprise security, enterprise administration, and
services, represented 55 percent of total revenue. Symantec’s enterprise security business represented 41 percent of
total revenue and grew 25 percent year-over-year; the enterprise administration business represented 12 percent of
revenues and declined 8 percent in line with expectations; and the services business grew 53 percent and represented 2
percent of total revenue. Symantec’s consumer business grew 56 percent and represented 45 percent of total revenue.
International revenues represented 50 percent of total revenue in the second quarter and grew 39 percent over the same
quarter last year. Canada led the increase for the quarter with 49 percent growth, followed by the Europe, Middle East
and Africa region with 46 percent growth. Japan recorded 27 percent year-over-year growth, Asia Pacific recorded 24
percent growth and Latin America had 9 percent growth. The United States grew at 26 percent.
Business Outlook
Forward-looking guidance for the fiscal third quarter ending Jan. 2, 2004, is as follows:
- Revenue is expected to be in the range of $440 to $460 million.
- GAAP earnings per share is expected to be $0.52 at the midpoint of the revenue guidance.
- Non-GAAP earnings per share is expected to be $0.56 at the midpoint of the revenue guidance.
Forward-looking guidance for the fiscal year, ending April 2, 2004, updated to reflect the fiscal year-to-date actual
performance and estimated results for the fiscal third and fourth quarters is as follows:
- Revenue is expected to be approximately $1.73 billion.
- GAAP earnings per share is expected to be $1.90 at the stated revenue forecast, up 15 cents from previous guidance.
- Non-GAAP earnings per share is expected to be $2.10 at the stated revenue forecast, up 14 cents from previous
guidance.
Non-GAAP earnings per share excludes the pre-tax amortization of other intangibles from acquisitions, acquired
in-process research and development, and other items such as patent settlement and restructuring charges of
approximately $11 million and $58 million for the quarter ending Jan. 2, 2004, and the fiscal year ending April 2, 2004,
respectively.
Quarterly Highlights
- Symantec signed 129 contracts worldwide worth more than $100,000 each, including 36 worth more than $300,000 each and
6 worth more than $1 million each, during the quarter.
- Symantec signed new or extended agreements with customers including Nextel; Cinergy, one of the nation's largest
utility companies; Digex, Incorporated, a leading provider of enterprise hosting services; Rinker Materials, one of the
nation's leaders in building and construction materials; Qualex, Inc., the largest wholesale and on-site photofinishing
company in the world; Storage Technologies Corp., a worldwide data storage company; Sykes Enterprises, a global leader
in providing outsourced customer management solutions and services; and CenturyTel, Inc., the nation's eighth largest
local telephone exchange company.
- Symantec also signed new or extended agreements with public sector and education customers including Temple
University; the State of Tennessee; the U.S. Department of the Interior; the U.S. Environmental Protection Agency; the
U.S. Department of State; the U.S. Army; and the Internal Revenue Service.
- Around the world, Symantec signed contracts with customers including South Korea-based Samsung Electronics; Jainam
Technologies, a leading IT solutions company in India; and ANZ Bank, one of Australia's largest financial institutions.
- Symantec introduced its new line of firewall appliances, the Symantec Gateway Security 5400 Series. The 5400 series
offers a unique combination of superior price performance, integrated protection, and flexible licensing. The appliance
provides comprehensive gateway level protection by integrating full inspection firewall, intrusion prevention, intrusion
detection, antivirus, content filtering, virtual private networking (VPN), and anti-spam technology into a single
device.
- During the quarter, Symantec updated the world’s premier global early warning system with the launch of Symantec Deep
Sight Threat Management System 5.0.
The early warning security system gathers firewall, intrusion detection and now antivirus data from more than 20,000
partners worldwide to provide proactive alerts on active attacks to customers. The system now includes an optional
custom reports add-on, enabling organisations to mine the global event database by time, country, and industry to better
analyse security events.
- Symantec also announced the Symantec AntiVirus for Handhelds product line to protect consumers and enterprise users.
Symantec AntiVirus for Handhelds – Corporate Edition integrates with existing enterprise infrastructures and improves
management by providing a centralized view of virus protection information.
- In addition, Symantec launched its 2004 line of consumer security products including Norton Internet Security, Norton
AntiVirus, Norton Personal Firewall, Norton AntiSpam and Norton SystemWorks, which includes Norton Password Manager. The
new products provide protection from viruses, intrusion attempts, and privacy threats and now offer expanded protection
from emerging threats including spyware, adware, keystroke logging programs, and spam.
About Symantec
Symantec, the world leader in Internet security technology, provides a broad range of content and network security
software and appliance solutions to individuals, enterprises and service providers. The company is a leading provider of
client, gateway and server security solutions for virus protection, firewall and virtual private network, vulnerability
management, intrusion detection, Internet content and e-mail filtering, remote management technologies and security
services to enterprises and service providers around the world. Symantec’s Norton brand of consumer security products is
a leader in worldwide retail sales and industry awards. Headquartered in Cupertino, Calif., Symantec has worldwide
operations in 36 countries. For more information, please visit www.symantec.com.
NOTE TO EDITORS: If you would like additional information on Symantec Corporation and its products, please view the
Symantec Press Center at http://www.symantec.com/PressCenter/ on Symantec's Web site. All prices noted are in US dollars
and are valid only in the United States.
Symantec and the Symantec logo are trademarks or registered trademarks, in the United States and certain other
countries, of Symantec Corporation. Additional company and product names may be trademarks or registered trademarks of
the individual companies and are respectfully acknowledged.
FORWARD LOOKING STATEMENT: This press release contains forward-looking statements, including forecasts of future revenue
and earnings per share, expected activities, and other financial and business results 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 press release. Such risk factors include,
among others: the sustainability of recent growth rates, particularly in consumer products; the anticipation of the
growth of certain market segments, particularly enterprise security; the positioning of Symantec's products in those
segments; the competitive environment in the software industry; general market conditions, fluctuations in currency
exchange rates, changes to operating systems and product strategy by vendors of operating systems; and whether Symantec
can successfully develop new products and the degree to which these gain market acceptance. Actual results may differ
materially from those contained in the forward-looking statements in this press release. Additional information
concerning these and other risk factors is contained in the Risk Factors sections of Symantec’s previously filed Form
10-K and 10-Q. Symantec assumes no obligation to update any forward-looking information contained in this press release
except as otherwise required by law.
USE OF NON-GAAP FINANCIAL INFORMATION: 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 and earnings per share
exclude acquisition related charges, such as amortization of other intangibles and in-process research and development,
and certain other identified charges, such as restructuring and patent settlement, as well as the tax effect of these
items. 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 its
financial results, develop budgets and manage expenditures. The method Symantec uses to produce non-GAAP results is not
computed according to GAAP, is 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 is attached to this release and can be found on the investor
relations Web site at www.symantec.com/invest/center.html.
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SYMANTEC CORPORATION
GAAP Consolidated Statements of Operations
Three Months Ended Six Months Ended
September 30, September 30,
(In thousands, except per share data; unaudited) 2003 2002 2003
2002
Net revenues $ 428,665 $ 325,231 $ 819,789 $ 641,272
Cost of revenues 74,810 61,159 142,388 116,611
Gross margin 353,855 264,072 677,401 524,661
Operating expenses:
Research and development 59,596 47,344 120,201 92,832
Sales and marketing 155,705 124,896 297,542 240,064
General and administrative 21,174 17,254 47,546 32,608
Amortization of other intangibles from acquisitions 756 665 1,547
1,201
Acquired in-process research and development 1,000 4,700 1,000
4,700
Restructuring, site closures and other 2 (1,179) 570 4,874
Patent Settlement -- -- 13,917 --
Total operating expenses 238,233 193,680 482,323 376,279
Operating income 115,622 70,392 195,078 148,382
Interest income 8,807 9,723 18,904 19,369
Interest expense (5,291) (5,292) (10,582) (10,583)
Income, net of expense, from sale of technologies
and product lines 2,158 2,444 4,326 4,680
Other income (expense), net 673 (134) (38) (1,125)
Income before income taxes 121,969 77,133 207,688 160,723
Provision for income taxes 38,536 25,139 65,474 52,160
Net income $ 83,433 $ 51,994 $ 142,214 $ 108,563
Net income per share – diluted* $ 0.49 $ 0.33 $ 0.85 $ 0.69
Shares used to compute net income
per share – diluted* 178,415 168,489 176,786 168,743
* For the three and six months ended September 30, 2003 and 2002, diluted net income per share is calculated using the
if-converted method. Under this method, the numerator excludes the interest expense from the 3% convertible subordinated
notes, net of income tax, of $3.6M and $7.2M for the three and six months ended September 30, 2003 and 2002,
respectively, and the denominator includes shares issuable from the assumed conversion of the 3% convertible
subordinated notes.
SYMANTEC CORPORATION
Non-GAAP Consolidated Statements of Income
Non-GAAP amounts exclude all acquisition related amortization, in-process research and development, restructuring
charges, and patent settlement.
Three Months Ended Six Months Ended
September 30, September 30,
(In thousands, except per share data; unaudited) 2003 2002 2003
2002
Net revenues $ 428,665 $ 325,231 $ 819,789 $ 641,272
Cost of revenues 64,570 54,478 123,383 103,601
Gross margin 364,095 270,753 696,406 537,671
Operating expenses:
Research and development 59,596 47,344 120,201 92,832
Sales and marketing 155,705 124,896 297,542 240,064
General and administrative 21,174 17,254 47,546 32,608
Total operating expenses 236,475 189,494 465,289 365,504
Operating income 127,620 81,259 231,117 172,167
Interest income 8,807 9,723 18,904 19,369
Interest expense (5,291) (5,292) (10,582) (10,583)
Income, net of expense, from sale of technologies
and product lines 2,158 2,444 4,326 4,680
Other income (expense), net 673 (134) (38) (1,125)
Income before income taxes 133,967 88,000 243,727 184,508
Provision for income taxes 42,869 28,160 77,992 59,043
Net income $ 91,098 $ 59,840 $ 165,735 $ 125,465
Net income per share – diluted* $ 0.53 $ 0.38 $ 0.98 $ 0.79
Shares used to compute net income per share – diluted* 178,415 168,489 176,786
168,743
* For the three and six months ended September 30, 2003 and 2002, diluted net income per share is calculated using the
if-converted method. Under this method, the numerator excludes the interest expense from the 3% convertible subordinated
notes, net of income tax, of $3.6M and $7.2M for the three and six months ended September 30, 2003 and 2002,
respectively, and the denominator includes shares issuable from the assumed conversion of the 3% convertible
subordinated notes.
Reconciliation of Non-GAAP Consolidated Statements of Income to the GAAP Consolidated Statements of Income
Three Months Ended Six Months Ended
September 30, September 30,
(In thousands, except per share data; unaudited) 2003 2002 2003
2002
Non-GAAP net income $ 91,098 $ 59,840 $ 165,735 $ 125,465
Cost of revenues:
Amortization of other intangibles from acquisitions (10,240) (6,681) (19,005) (13,546)
Operating expenses
Amortization of other intangibles from acquisitions (756) (665) (1,547)
(665)
Acquired in-process research and development (1,000) (4,700) (1,000)
(4,700)
Restructuring, site closures and other (2) 1,179 (570) (4,874)
Patent Settlement -- -- (13,917) --
Income tax benefit 4,333 3,021 12,518 6,883
Net income $ 83,433 $ 51,994 $ 142,214 $ 108,563
Net income per share – diluted $ 0.49 $ 0.33 $ 0.85 $ 0.69
Shares used to compute net income
per share – diluted 178,415 168,489 176,786 168,743
SYMANTEC CORPORATION
Consolidated Balance Sheets
September 30, March 31,
(In thousands) 2003 2003
ASSETS (unaudited)
Current assets:
Cash, cash equivalents and short-term investments $ 2,026,570 $ 1,705,658
Trade accounts receivable, net 224,954 149,664
Inventories 11,587 5,912
Deferred income taxes 94,081 92,284
Other 50,803 34,628
Total current assets 2,407,995 1,988,146
Property, equipment and leasehold improvements, net 364,657 333,275
Deferred income taxes 7,600 7,986
Acquired product rights, net 115,635 73,125
Goodwill, net 853,629 833,449
Other, net 28,285 29,749
$ 3,777,801 $ 3,265,730
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 80,052 $ 67,720
Accrued compensation and benefits 85,135 90,947
Deferred revenue 719,411 589,629
Other accrued expenses 76,937 69,363
Income taxes payable 86,251 76,965
Total current liabilities 1,047,786 894,624
Convertible subordinated notes 599,993 599,998
Other long-term obligations 5,903 6,729
Commitments and contingencies
Stockholders’ equity:
Common stock 1,537 1,488
Capital in excess of par value 1,485,907 1,335,028
Accumulated other comprehensive income 96,719 30,121
Retained earnings 539,956 397,742
Total stockholders’ equity 2,124,119 1,764,379
$ 3,777,801 $ 3,265,730