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    symc_annual1998 symc_annual1998 Document Transcript

    • Financial Highlights NET INCOME* Symantec and its shareholders experienced a strong R es t of W or ld fiscal 1998 with successful financial performance and achievements. We have built Ma r . 3 1, 19 9 8 $ 24,138 13% shareholder value by implementing a long-time vision, bringing solutions to customers N o rt h A me rica Dec. 3 1, 19 9 7 $ 21,836 that meet their needs and executing our business strategy well. Eur ope, Middle Ea s t Sep. 3 0 , 19 9 7 $ 20,580 22% a nd Afr ica 65% Jun. 3 0 , 19 9 7 $ 18,535 Ma r . 3 1, 19 9 7 $ 8,269 Dec. 3 1, 19 9 6 $ 13,852 NET INCOME PER SHARE – DILUTED (in thousands) REVENUE BY REGION M a r. 3 1, 1 998 $ 0. 40 * Quarterly operating results for the period ended March 31, 1997 includes (for March 1998 Quarter) r e v e n u e a n d c h a r g e s r e la t e d t o t h e sa le of S y ma n t e c ’s n e t wor k in g b u sin e ss u n it (se e N ot e 1 2 of N ot e s t o C on solid a t e d F in a n c ia l S t a t e me n t s). Dec . 3 1, 1 997 $ 0. 37 Sep. 3 0, 1 997 $ 0. 35 J un . 3 0, 1 997 $ 0. 32 M a r. 3 1, 1 997 $ 0. 15 CLOSING STOCK PRICES Dec . 3 1, 1 996 $ 0. 25 ........................................................ .................................... ................ .............................................. .................................... ................ Ma r . 19 9 8 $ 29.00 $ 20.88 I nter net T ools , R oya lties a nd Other Dec. 19 9 7 $ 19.19 $ 27.00 10% ........ ........ Se curit y and A ssist ance S e p. 19 9 7 $ 19.44 $ 25.50 ..................................... ..................................... 50% J u n. 19 9 7 $ 12.50 $ 20.38 NET REVENUES ........ ........................... 40% R emote Ma r . 19 9 7 $ 12.63 $ 18.38 ................. ........ Pr oductivity M a r. 3 1, 1 998 $ 156, 092 Solutions Dec. 19 9 6 $ 9.88 $ 16.38 ....... ....... Dec . 3 1, 1 997 $ 148, 240 $0 $5 $10 $15 $20 $25 $30 Sep. 3 0 , 1 997 $ 139, 013 REVENUE BY BUSINESS UNIT J un . 3 0 , 1 997 $ 135, 016 ( f o r F i s c a l Ye a r 1 9 9 8 ) (prices by Quarter) M a r. 3 1, 1 997 $ 129, 706 Dec . 3 1, 1 996 $ 124, 081 (in thousands) = Fiscal 1998 = Fiscal 1997
    • ™ 1998 Annual Report Corporate Profile Symantec Corporation helps make users productive and keep their computers safe and reliable, anywhere and anytime. As the world leader in utility software for business and personal computing, Symantec is acclaimed for both its customer satisfaction and product brand recognition. The Company offers a broad range of solutions focused on addressing customer needs in three main areas: the Norton product line of anti-virus and PC- assistance products; products that cater to remote user productivity; and the Visual Café product lines in Internet development tools. The desktop. Founded in 1982, Symantec Corporation employs more than 2,300 people worldwide, A one-to-one customer relationship with headquarters in Cupertino, California. we build everyday. The stock is traded on NASDAQ under the symbol SYMC. Information on the Company and its products can be obtained by calling (800) 441-7234 toll free or (541) 334-6054, or accessed on the World Wide Web at www.symantec.com. Table of Contents Letter to Shareholders 2 Product Portfolio 9 Financial Reports 11 Corporate Directory 59 The following letter and report contain forward-looking statements that are subject to significant risks and uncertainties. Several important factors could cause actual results to differ materially from historical results and percentages and results anticipated by the forward-looking statements contained in this report. Readers should pay particular attention to the risk factors described in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers should carefully review the risk factors described in the other documents the Company files from time to time with the Securities and Exchange Commission, including the Annual Report on Form 10-K as filed by Symantec Corporation June 5, 1998.
    • Letter to Shareholders 1 11
    • Symantec Corporation 10201 Torre Avenue Cupertino, CA 95014 Gordon E. Eubanks, Jr. President and Chief Executive Officer To our shareholders, I’m pleased to report to you that fiscal 1998 was the most successful year in Symantec’s history, with record revenue and profit achieved in each quarter. Through the hard work of our dedicated employees and partners, we met and surpassed the goals we set for ourselves, and consolidated our position as the world leader in providing utility software for business and personal computing. We closed fiscal 1998 with our sixth consecutive quarter of record revenue. Revenues in fiscal 1998 grew 22% over revenues in fiscal 1997. We increased gross margins to 85% while reducing operating expenses from 75% to 68% as a percentage of revenue. This resulted in an improvement in profit-before-tax from 7% to 19%. Our international regions contributed strongly to our growth. And by the end of fiscal 1998, the contribution from international revenue grew to 35% up from 27% the year before. This strong financial performance is a testament to the importance we place on serving the needs of our customers. The Company’s corporate vision statement says it well: “We will make our customers productive and keep their computers safe and reliable. Anywhere. Anytime.” During the year, we undertook several major initiatives to strengthen our leadership role. These included aggressive product and marketing efforts aimed at our retail and corporate markets; programs that both reinforced and reflected our status as a truly global corporation; and finally, the implementation of more efficient administrative and management processes begun over the past several years. I’d like to share with you some of the highlights of these efforts. AN ENHANCED MARKET PRESENCE Symantec’s principal business units—Security and Assistance and Remote Productivity Solutions—showed strong growth in fiscal 1998. Security and Assistance Led by the continued strength of our Norton AntiVirus and Utilities products, the Security and Assistance unit achieved a 28% increase in sales and comprised 50% of Company revenues. Two new products, Norton Uninstall Deluxe and Norton CrashGuard Deluxe, entered competitive market sectors near the end of calendar year 1997 and took I
    • market share away from established solutions; both products placed high on PC Data’s Top Ten list of best-selling software in early 1998. To identify viruses before they become a problem for customers, we opened new Symantec AntiVirus Research Centers in the U.S. and Australia. These state-of-the art facilities are staffed by teams of highly experienced engineers to detect and repair computer viruses. Remote Productivity Solutions In a market in which a large percent of mobile professionals and telecommuters work significantly more hours while on the road than when in the office, Symantec achieved a 30% increase in sales in fiscal 1998 and comprised 40% of Company revenues. This was due largely to the success of our continuing upgrades to the WinFax PRO and pcANYWHERE product lines. Internet Tools The remaining 10% of the Company’s revenues is comprised of our third business unit; Internet Tools. Symantec’s Java development tools achieved increased revenues over fiscal 1997 with products such as Visual Café for Java, which provides solutions to companies doing internal development for distributed applications, and Visual Page for Windows, which provides users with a fast and easy way to move important business documents and information to the web. Also, in 1997, Visual Café won the prestigious PC Magazine Technical Excellence Award. For reporting purposes, this business unit also includes royalties and other products nearing the end of their life cycle. Symantec is committed to enabling all of our products with web capabilities as part of our focus on delivering the features our customers are demanding. Users of ACT! 4.0, for example, can launch links to customer sites from within the program. Norton Utilities users can download, via our LiveUpdate web service, software drivers that may be missing from their systems, or which are more current than those they presently have. As an indication of the popularity of this feature, LiveUpdate requests average over 5.4 million per month. At the end of the fiscal year, Symantec had a total of five programs in the PC Data Top Ten list: Norton Uninstall Deluxe, Norton CrashGuard Deluxe, Norton Utilities 3.0, Norton II
    • AntiVirus 4.0, and Norton AntiVirus Deluxe 4.0. Beginning the new year this way put Symantec in the enviable and unprecedented position of being the first and only software publisher to have five of the top ten best-selling software packages in a given month. And because we realize that our customers look to us as they migrate to the new Windows 98 and Windows NT operating systems, all of our products, both existing and new, are Year 2000 compliant. WORKING TOGETHER SUCCESS FOR As part of our strategy to strengthen the Company’s presence in worldwide corporate markets, we announced a joint development, cross-licensing, and distribution arrangement with Entrust Technologies, Inc., the leading provider of Certification Authority (CA) and public- key encryption technology. This agreement will provide PC users with comprehensive security solutions—based on award-winning, open technology from both companies—that offer scalable certificate management and centralized key backup and recovery to the consumer, workgroup, and enterprise. The Company’s electronic commerce initiatives also experienced significant activity and growth in fiscal 1998. The current Symantec storefront has 20 localized products—and climbing. Our website, which has been redesigned to reflect the growing international nature of our business, now receives an average of more than 3 million visitors each day. INTERNAL IMPROVEMENTS In fiscal 1998, we implemented a new product development process that raises the quality not only of the solutions we provide, but also of the relationships we cultivate. We start by allocating both the right people and the appropriate financial resources to the most important step in the development cycle: understanding our customers. Far more than just a traditional needs analysis, this process incorporates a significant amount of input from customers at every stage along the way; specifically, what they do, how they do it, and why they do it in that particular manner. And we don’t stop at mere market acceptance. We continue with feedback and customer satisfaction surveys to bring the process full circle, to always ensure that a customer’s experience matches or exceeds original expectations. III
    • On the operational side, in fiscal 1998 we continued our efforts to build excellence within our company by initiating programs that encouraged people to work together for common, customer-oriented results. One example of this was our company-wide management training programs, which we are pleased to say have had a significant impact in helping our managers build effective teams that communicate well across various disciplines. Such cross-functional teams have then subsequently been charged with reporting on corporate concerns—whether improving customer service or maintaining company values—in a timely and objective format. A C O M PA N Y MOVE ON THE In May 1998, we announced an alliance with IBM to deliver a single family of anti-virus products that will be marketed under the Norton AntiVirus brand name. Symantec will license IBM’s immune system technology and combine it with our own technology to produce powerful new products and solutions. Also, IBM will recommend Norton AntiVirus to its corporate customers worldwide as the anti-virus solution of choice. We are extremely excited about the opportunities that will result from this unique technology and marketing partnership. We will continue to drive internal efficiencies by leveraging the scope and scale not only of our products and services, but of our talented workforce as well. As we enter fiscal 1999, we are confident that the trust placed in us by our shareholders will continue to be rewarded. And as always, I thank you for your support. Gordon E. Eubanks, Jr. PRESIDENT CHIEF EXECUTIVE OFFICER AND IV
    • 111 1
    • 1v v 1
    • Symantec Product Portfolio Remote Productivity Solutions Business Unit ACT!® for Windows 3.1/95/NT ACT!® for Macintosh ACT! ACT!® for Windows CE ACT!® for Psion ACT!® for Newton ACT!® for PalmPilot pcANYWHERE ® for Windows 3.1/95/NT/DOS pcANYWHERE ® Express pcANYWHERE pcANYWHERE ® Access Server pcANYWHERE ® for Windows CE Norton Mobile Essentials ™ for Windows 95 Norton Mobile Essentials Symantec Mobile Update ™ for Windows 95/NT Symantec Mobile Update WinFax PRO™ for Windows 95/NT WinFax PRO™ for Windows 3.1 WinFax Security & Assistance Business Unit Norton AntiVirus ® for Windows Norton AntiVirus ® for Email Gateways Norton AntiVirus ® Norton AntiVirus ® for NetWare Norton AntiVirus Deluxe for Windows Norton AntiVirus ® for Firewalls Norton AntiVirus ® for Lotus Notes Norton AntiVirus ® for Windows NT Server Norton AntiVirus ® for Macintosh Norton CrashGuard ™ Deluxe for Windows 95/NT Norton CrashGuard Norton Your Eyes Only ® for Windows 95/NT Norton Your Eyes Only ® Administrator Norton Your Eyes Only Norton Utilities ® for Windows 3.1/95/NT/DOS Norton Utilities ® for Windows 3.1/DOS Norton Utilities Norton Utilities ® for Windows NT Norton Utilities ® for Macintosh Norton Uninstall ™ Deluxe for Windows 95 Norton Uninstall Norton Web Services™ I n t e r n e t To o l s B u s i n e s s U n i t Symantec Visual Café ™ for Java—Web Symantec Visual Café ™ for Java—Database Visual Café Development Edition for Windows 95/NT Development Edition for Windows 95/NT ™ Symantec Visual Café for Java—Professional Symantec Visual Café ™ for Macintosh Development Edition for Windows 95/NT Symantec Visual Page ™ for Macintosh Symantec Visual Page ™ for Windows 95/NT Visual Page
    • Financial Contents FORWARD-LOOKING STATEMENTS the periods ended April 3, 1998, March 28, The following discussion contains forward-looking statements that are subject to risks 1997and March 29, 1996, respectively. and uncertainties. There are several important factors that could cause actual results The fiscal accounting year ended April 3, to differ materially from those anticipated by the forward-looking statements con- 1998 comprised 53 weeks of operations. tained in the following discussion. Readers should pay particular attention to the risk factors set forth in this section and in the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” PRODUCTS AND SERVICES Nothing in this report shall impose upon Symantec or any person a duty to update Part One Item 1: Business 11 Symantec’s products, comprising utility any forward-looking statement. software for business and personal com- Item 2: Properties 18 This document contains reference to trademarks and trade names of other companies. puting, are currently organized into the following three business units: Security and Item 3: Legal Proceedings 18 Assistance; Remote Productivity Solutions; Fifth Generation Systems, Inc. (“Fifth GENERAL Item 4: Submission of Matters to a Vote of Security Holders 18 Symantec Corporation (“Symantec” or the and Internet Tools, Royalties and Other. Generation”) on October 4, 1993; and “Company”) is a world leader in utility The following table summarizes Symantec’s Contact Software International, Inc. software for business and personal com- principal products by business unit: (“Contact”) on June 2, 1993. The Company puting. Symantec’s business strategy is to acquired Peter Norton Computing, Inc. Part Two Item 5: Market for Registrant’s Common Equity 19 satisfy customer needs by developing and (“Norton”) on August 31, 1990 and con- PRINCIPAL PRODUCTS and Related Stockholder Matters marketing products across multiple tinues to use the Norton brand name for Security and Assistance operating platforms (currently those of products subsequently developed and Norton AntiVirus® Item 6: Selected Financial Data 20 Microsoft Corporation and Apple marketed by Symantec. Norton AntiVirus® for Macintosh Computer, Inc.) that make customers All of these acquisitions were account- Norton CrashGuard™ Deluxe Item 7: Management’s Discussion and Analysis of Financial 21 productive and keep their computers safe ed for as poolings of interests. Accordingly, Norton Uninstall™ Deluxe Condition and Results of Operations and reliable – anywhere, anytime. all financial information has been restated Norton Utilities® The Company’s predecessor, C&E to reflect the combined operations of Norton Web Services™ Item 8: Financial Statements and Supplementary Data 31 Software, Inc., a California corporation, these companies and Symantec, with the Norton Your Eyes Only® and that predecessor’s operating subsi- exception of Fast Track, Intec and SLR, Item 9: Changes in and Disagreements with Accountants 31 Remote Productivity Solutions diary, Symantec Corporation, a California each of which had results of operations ACT!® on Accounting and Financial Disclosure corporation, were formed in September that were not material to Symantec’s pcANYWHERE® 1983 and March 1982, respectively. The consolidated financial statements. WinFax PRO™ Company was incorporated in Delaware in During fiscal 1997, in a move to focus April 1988 in connection with the Septem- the Company’s product offerings on spe- I n t e r n e t To o l s , R o y a l t i e s Part Three Item 10: Directors and Executive Officers of the Registrant 32 ber 1988 reincorporation of the Company’s cific customer needs, Symantec sold its and Other Item 11: Executive Compensation 33 predecessor and its operating subsidiary FormFlow product line, acquired as part Symantec Visual Café™ into a single Delaware corporation. of the Delrina acquisition, to JetForm (Database Development Edition) Item 12: Security Ownership of Certain Beneficial Owners 33 Since Symantec’s initial public offer- Corporation (“JetForm”) and sold the Symantec Visual Café™ ing on June 23, 1989, the Company has assets and technology of its networking (Professional Development Edition) and Management completed acquisitions of 15 companies. business unit to the Hewlett-Packard Symantec Visual Café™ Item 13: Certain Relationships and Related Transactions 33 Companies acquired during the past five Company (“Hewlett-Packard”). See fur- (Web Development Edition) years include: Fast Track, Inc. (“Fast ther discussion in Item 7: Management’s Track”) on May 28, 1996; Delrina Corpo- Most of Symantec’s products that are Discussion and Analysis of Financial ration (“Delrina”) on November 22, 1995; currently being developed and marketed Condition and Results of Operations. Part Four Item 14: Exhibits, Financial Statement Schedules and 34 Intec Systems Corporation (“Intec”) on ™ feature LiveUpdate, which enables the Symantec has a 52/53-week fiscal account- Reports on Form 8-K August 31, 1994; Central Point Software, user, free of cost, to download application ing year. Accordingly, all references as of Inc. (“Central Point”) on June 1, 1994; bug-fix patches via an Internet connection and for the periods ended March 31, 1998, Signatures 56 SLR Systems, Inc. (“SLR”) on May 31, 1994; to Symantec’s corporate website. 1997 and 1996 reflect amounts as of and for 11 S C YMANTEC ORPORATION
    • Security and Assistance SALES AND MARKETING, Norton Uninstall Deluxe is designed to files, enable users to share files without The software enables the user to run The program also builds Java applications The Security and Assistance business unit compromising security, lock access to a add and remove programs and files from a Windows, Windows 95, Windows NT, and connects to multiple databases with- INTERNATIONAL SALES AND is dedicated to being indispensable in personal computer when the personal user’s hard drive. InstallGuard, a feature of Windows CE or MS-DOS applications out writing source code. The Database CUSTOMER SUPPORT customers’ daily use of computers by computer is idle and prevent booting by Norton Uninstall Deluxe, provides a one- remotely, transfer files and perform other Development Edition includes 100+ Symantec markets its products world- increasing productivity and keeping unauthorized users. The program runs button “undo” of program installations, data operations. JavaBeans (series of pre-written source wide, utilizing a multi-channel strategy computers safe and reliable. Net revenues WinFax PRO is designed to enable users on the Windows 95 and Windows NT restoring a computer’s Windows registry code) and 20 database templates, and of direct and indirect sales through inde- from this business unit comprised approxi- operating systems. and hard drive to its original condition to send, receive and manage faxes. WinFax connects to over 30 commercially available pendent software distributors, major mately 50% of total net revenues for the prior to the installation. The program’s PRO provides background faxing, which databases via industry standard protocols retail chains and resellers. fiscal years ended March 31, 1998 and system cleanup tools ensure that registry, allows users to continue working on other (“JDBC” or “ODBC”). Remote Productivity Solutions 1997 and 45% of total net revenues for Symantec Visual Café (Professional files, icons and other system options are applications while sending or receiving a The Remote Productivity Solutions Sales and Marketing the fiscal year ended March 31, 1996. Development Edition) is designed to set for optimum performance. Norton fax via the Internet or a fax machine. business unit focuses on helping remote Symantec sells its products to both indi- Norton AntiVirus and Norton Uninstall Deluxe runs on the Windows WinFax PRO also provides enhanced file provide a Java Integrated Development professionals remain productive – viduals and corporate users primarily AntiVirus for Macintosh run in a com- 95 and Windows NT operating systems. compression, increasing the speed at Environment solution for creating Java anywhere, anytime. This business unit through distributors and resellers. puter’s background and are designed to Norton Utilities is a set of “tools” designed which faxes are transmitted. Other fea- applications and JavaBeans with features focuses on customer needs to access infor- Symantec products are made available to protect against, detect and eliminate com- to address system-level operations. In tures include a paging function, which geared toward professional Java developers. mation, applications and data from any customers through channels that include: puter viruses. The software covers multiple addition, Norton Utilities finds and enables the computer to page a user Advanced power tools include native location. Net revenues from this business distributors, retail, mail order, corporate sources of infection, including the Inter- repairs problems with Windows 95 appli- upon receipt of an incoming fax or voice compilation, advanced Java Archive tools, unit comprised approximately 40% of resellers, value added resellers (“VARs”), net, floppy disks, email attachments, shared cations and includes an interface to message, and a “call identify” function, Java Development Kit 1.1.5 support and total net revenues for the fiscal year ended original equipment manufacturers files and networks. The software enables Norton Web Services, a paid subscription which allows a user to view an incoming Visual Page. In addition, to facilitate March 31, 1998 and approximately 35% (“OEMs”), partnerships, education, con- the user to download, via Symantec’s service that locates and installs patches, fax or phone number. WinFax PRO runs easier discovery of problems with source of total net revenues for the fiscal years sulting, etc. Symantec also sells product LiveUpdate functionality, new virus defi- updates and drivers specific to a user’s on the Windows, Windows 95 and code, the program supports “debugging” ended March 31, 1997 and 1996. upgrades and certain of its products nitions created by the Symantec AntiVirus installed hardware and software. The pro- Windows NT operating systems. directly within a Web browser. ACT! is designed to combine a customiz- through the use of direct mail and over ™ Research Center (SARC). The software Symantec Visual Café (Web gram also offers crash protection, limited able database, calendar and activity the Internet. Symantec maintains distribu- runs under the Windows, Windows 95, Development Edition) is designed to virus detection and repair and several management, automatic history logging, tion relationships with major independent I n t e r n e t To o l s , R o y a l t i e s a n d O t h e r Windows NT, MS-DOS, Macintosh and new optimization utilities to accelerate a provide a Rapid Application Java customizable reporting and communica- The Internet Tools, Royalties and Other distributors. These distributors stock Power Macintosh operating systems. The computer’s performance. Norton Utilities Development and an HTML Web author- tions via mail merge, telephone, email and business unit includes products providing Symantec’s products for redistribution to Norton AntiVirus product line also includes runs on the Windows, Windows 95, ing solution that provides support for fax into a single product. The product pro- an easy-to-use Java development environ- independent dealers, consultants and other support for Lotus Notes (Norton Windows NT, MS-DOS, Macintosh and Java Development Kit 1.1.5 and JavaBeans. vides extensive data sharing support for ment, as well as revenue streams from the resellers. Symantec also maintains relation- AntiVirus for Notes) and Novell NetWare Power Macintosh operating systems. The program includes a drag-and-drop Local Area Network (“LAN”) teams and sale to third-party computing companies ships with major retailers while marketing (The Norton AntiVirus NetWare). Norton Web Services (“NWS”) is interface, professional templates and Java remote database synchronization for mobile of certain of the Company’s software to these retailers through independent Norton CrashGuard Deluxe runs in a designed to deliver an online subscription- applet and JavaBeans libraries. This users and small mobile teams. ACT! runs product lines and technologies, and distributors. (See further discussion in computer’s background and is designed to based service site that downloads Norton product did not generate material revenues on the Windows, Windows 95, Windows revenues from products nearing the end Item 7: Management’s Discussion and detect and fix a range of computer prob- technology to Windows 95 users via an in any fiscal years presented. The Company NT, Windows CE, MS-DOS, Macintosh, of their life cycle. Net revenues from this Analysis of Financial Condition and lems, including computer crashes and hard Internet connection. NWS features believes this product will generate increas- Newton and Psion operating systems. business unit comprised approximately Results of Operations - Retail Distribution disk fragmentation. When the program Symantec’s LiveUpdate Pro, a service that ing revenue amounts in future periods, pcANYWHERE is designed to offer reli- 10%, 15% and 20% of total net revenues Channel; New Distribution Channels.) detects a crash, it allows the computer locates and installs patches, updates and but there can be no assurance this prod- able, fast and flexible PC-to-PC remote for the fiscal years ended March 31, 1998, The Company’s sales force works user to unfreeze the crash and save any drivers specific to a user’s installed hard- uct will be commercially successful. The computing via serial or modem connec- 1997 and 1996, respectively. closely with its major distributor and open files. The program also optimizes ware and software. NWS was released by Visual Café products run on Windows 95, Symantec Visual Café (Database tions. pcANYWHERE enables the user reseller accounts to manage the flow of computer performance and provides basic Symantec in December 1997. As such, this Windows NT and Macintosh operating Development Edition) is designed to to control one PC remotely from the orders, inventory levels and sell-through virus detection and elimination. Norton service did not generate material revenues systems. The Java program code devel- keyboard of another PC. The offsite provide a solution for building business- to customers, as well as working closely CrashGuard Deluxe includes an interface in any fiscal years presented. The Company oped with these products, however, can remote PC, laptop or PC terminal con- critical Java applications with database with them to manage promotions and to Norton Web Services, a paid subscrip- believes this service will generate increas- be deployed on any platform that sup- trols the operation of the distant host connectivity. The program includes a other selling activities. The Company also tion service that locates and installs patches, ing revenue amounts in future periods, ports a Java Virtual Machine compliant PC. In addition to enabling a remote forms designer for drag-and-drop Graphical sells volume license programs (corporate updates and drivers specific to a user’s but there can be no assurance this product with Sun Microsystems’ JDK standards. user to run a distant PC, pcANYWHERE User Interface design and dbAWARE site licenses) through its distribution and installed hardware and software. The will be commercially successful. optionally allows users at the host (dis- project wizards that walk the user through corporate reseller channels. (See further program runs on the Windows 95 and Norton Your Eyes Only is designed to tant) machine to view the operations defining a data source, adding compo- discussion in Item 7: Management’s Windows NT operating systems. encrypt and decrypt private computer being conducted from the remote site. nents and the interactions between them. Discussion and Analysis of Financial 12 13 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Computer Software to be Sold, Leased, or with distributors, resellers and dealers, Condition and Results of Operations - Kingdom. These local offices facilitate provide pcANYWHERE32 free of charge Item 7: Management’s Discussion and Otherwise Marketed,” did not materially direct mailings to existing and prospective to its resellers. Site Licenses; Channel Fill.) Symantec’s marketing and distribution Analysis of Financial Condition and affect the Company in fiscal 1998 and 1996. end users and participation in trade and Microsoft and Symantec have entered Agreements with distributors are in international markets. The Company’s Results of Operations - Technical Support.) In fiscal 1997, Symantec capitalized computer shows. Additionally, the generally nonexclusive and may be termi- international operations are subject to into a strategic relationship to deliver P R O D U C T D E V E L O P M E N T, approximately $8 million of software deve- Company typically offers two types of integrated technology capabilities to the nated by either party without cause. Such certain risks common to international PARTNERSHIPS AND lopment costs, primarily related to network rebate programs: volume incentive rebates Microsoft Outlook 98 messaging and distributors are not within the control of operations, such as government regula- administration technology, which was sold and rebates to end users. Volume incentive collaboration client. The first project Symantec, are not obligated to purchase tions, import restrictions, currency ACQUISITIONS Symantec uses a multiple product sourcing to Hewlett-Packard in March 1997, result- rebates are made available to Symantec’s from this relationship will be the inclusion products from the Company and also fluctuations, repatriation restrictions and, strategy that includes internal develop- ing in the write-off of approximately $7 distributors and resellers whereby the of WinFax Starter Edition, which includes represent other vendors’ product lines. in certain jurisdictions, reduced protection ment, licensing from third parties and million of unamortized costs during the distributor or reseller earns a rebate based (See further discussion in Item 7: for the Company’s copyrights and trade- components of Symantec’s WinFax PRO acquisitions of technologies, product lines fourth quarter of fiscal 1997. (See further upon their purchases and sell-through of software, in Microsoft Outlook 98. The Management’s Discussion and Analysis marks. (See further discussion in Item 7: or companies, as necessary. Symantec discussion in Item 7: Management’s products to end users. Volume incentive second project from this relationship is of Financial Condition and Results of Management’s Discussion and Analysis typically develops new products and Discussion and Analysis of Financial rebates are accrued when revenue is Operations - Retail Distribution Channel.) of Financial Condition and Results of expected to be the integration between enhancements of existing products in its Condition and Results of Operations - recorded. From time to time, Symantec Symantec’s new ACT! contact manager Information with respect to customers Operations - Foreign Operations.) business units. Each group’s responsibilities Operating System; Uncertainty of also makes rebates available to end users and Microsoft’s Outlook 98. that represent more than 10% of the Information with respect to international include design, development, documen- Research and Development Efforts; of various products who acquired the Company’s revenues may be found in operations and export sales may be found On May 19, 1998, IBM and Symantec tation and quality assurance. Independent Length of Product Development Cycle.) products through major retailers. End Corporation entered into an agreement Note 16 of the Notes to Consolidated in Note 16 of Notes to Consolidated contractors are used for certain aspects of Symantec uses strategic acquisitions, user rebates are accrued when revenue is whereby Symantec will license IBM’s Financial Statements in Part IV, Item 14 Financial Statements in Part IV, Item 14 the product development process, and as necessary, to provide certain technology, recorded. (See further discussion in Item 7: of this Form 10-K. of this Form 10-K. immune system technology and patents. elements of certain Company products people and products for its overall product Management’s Discussion and Analysis Symantec will combine this technology Symantec’s return policy allows its are licensed from third-party developers. strategy. The Company has completed a of Financial Condition and Results of with its own technology to produce a distributors, subject to certain limitations, Customer Support During fiscal 1998, Symantec entered number of acquisitions and dispositions Operations - Sales and Marketing.) range of products, including new solutions to return purchased products in exchange Symantec’s product support program into strategic relationships with various of technologies, companies and products to support IBM platforms. As part of the for new products or for credit towards provides a wide variety of free and fee- companies including Entrust Technologies, and may acquire and dispose of other agreement, IBM has also assigned its future purchases. End users may return based technical support services to its International Revenues Inc. (“Entrust”), Hewlett-Packard and technologies, companies and products in existing anti-virus customer and OEM products through dealers and distributors International revenues outside of North customers. Symantec provides its customers Microsoft Corporation (“Microsoft”). the future. (See further discussion in contracts to Symantec and will recom- within a reasonable period from the date America represented approximately 32%, with free support via electronic and auto- Entrust has agreed to a joint development, Item 7: Management’s Discussion and mend Norton AntiVirus to its corporate of purchase for a full refund, and retailers 29% and 32% of Symantec’s net revenues mated services as well as 90-days free cross-licensing and distribution arrange- Analysis of Financial Condition and customers worldwide as the anti-virus may return older versions of products. in fiscal 1998, 1997 and 1996, respectively. telephone support for selected products. ment with Symantec for the development Results of Operations - Management of solution of choice. In addition, IBM and Various distributors and resellers may The majority of Symantec’s net In August 1996, Symantec introduced of secure desktop suites which will provide Expanding Operations.) Symantec intend to sell and market the have different return policies that may revenues from certain European regions LiveUpdate, which provides instant access comprehensive, easily managed desktop Norton AntiVirus product line worldwide. negatively impact the level of products are derived from sales by affiliates of to on-line application bug-fix patches for solutions. In addition, the secure desktop (See further discussion in Note 17 of Notes which are returned to Symantec. Product Symantec’s major United States distribu- most of Symantec’s currently marketed COMPETITION suites are expected to provide scalable The microcomputer software market is to Consolidated Financial Statements in returns occur when the Company intro- tors. In other countries, Symantec sells its and developed products. In addition, certificate management and centralized intensely competitive and is subject to Part IV, Item 14 of this Form 10-K.) duces upgrades and new versions of products through authorized distributors. Symantec offers both domestic individual key backup and recovery to the consumer, rapid changes in both technology and The Company is devoting substantial products or when distributors order too In some countries, these distributors are users and domestic corporate customers a workgroup and enterprise. (See further the strategic direction of major micro- efforts to the development of software much product. In addition, competitive restricted to specified territories. Symantec variety of fee-based options designed to discussion in Item 7: Management’s computer hardware manufacturers and products that are designed to operate on factors often require the Company to typically adapts products for local markets, meet their technical support requirements. Discussion and Analysis of Financial operating system providers. The Company’s various operating systems. Symantec’s offer rights of return for products that including translating the documentation These fee-based support programs are Condition and Results of Operations - competitiveness depends on its ability to total research and development expenses distributors or retail stores are unable to and software where necessary, and prepares revised from time to time as customer Reliance on Joint Business Arrangements.) enhance its existing products and to offer were approximately $91 million, $89 mil- sell. (See further discussion in Item 7: marketing programs for each local market. requirements change and as market trends Hewlett-Packard has agreed to incor- successful new products on a timely basis. lion and $95 million in fiscal 1998, 1997 Management’s Discussion and Analysis ™ Symantec has established marketing dictate. Symantec also offers Chat Now! , porate Symantec’s pcANYWHERE32 The Company has limited resources and and 1996, respectively. Research and of Financial Condition and Results of offices in Argentina, Australia, Brazil, a fee-based technical support service via remote-control software package on all must restrict its product development development expenditures are charged to Operations - Product Returns.) Canada, Denmark, France, Germany, the Internet. Fee-based technical support Hewlett-Packard Brio personal computers efforts to a relatively small number of operations as incurred. The current U.S. Symantec’s marketing activities Holland, Hong Kong, Italy, Japan, Korea, services did not generate material revenues targeted for small and medium sized projects. (See further discussion in Item 7: accounting standard, Statement of include advertising in trade, technical and Malaysia, Mexico, New Zealand, Russia, in any fiscal years presented and are not companies without an information tech- Management’s Discussion and Analysis Financial Accounting Standards (SFAS) business publications, on-line advertising, Singapore, South Africa, Sweden, expected to generate material revenues in nology staff. Hewlett-Packard will also of Financial Condition and Results of No. 86, “Accounting for the Costs of public relations, cooperative marketing Switzerland, Taiwan and the United the near future. (See further discussion in 14 15 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Security and Assistance international CD-ROM manufacturing Operations - Rapid Technological Change Enterprise from International Business Further, Symantec competes with other revenues and, accordingly, operating Norton AntiVirus competes with VirusScan is performed by outside contractors in and Development Risks.) Machines (“IBM”) and PowerJ from microcomputer software companies for results. (See further discussion in Item 7: from Network Associates, Inc. (“Network Dublin, Ireland. Operating system vendors such as Sybase, Inc. Symantec Visual Café access to the channels of retail distribution Management’s Discussion and Analysis Associates”), Dr. Solomon’s Anti-Virus Symantec has often been able to of Financial Condition and Results of Microsoft have added features to new (Professional Development Edition) and for the attention of customers at the from Dr. Solomon’s Software and Inoculan acquire materials on a volume-discount versions of their products that provide competes with Microsoft’s Visual J++, retail level and in corporate accounts. Operations - Fluctuations in Quarterly from Computer Associates International, basis and has had multiple sources of some of the same functionality traditionally Inprise’s Borland JBuilder Professional, Finally, Symantec competes with other Operating Results and Stock Price.) Inc. Norton AntiVirus also competes with supply for certain materials. To date, offered in Symantec’s products. Symantec IBM’s VisualAge for Java Professional, software companies in its efforts to acquire Trend Micro, Inc.’s InterScan VirusWall Symantec has not experienced any mate- believes this trend may continue. Microsoft SuperCede by SuperCede Inc. and Sun products or companies and to publish Product Protection and PC-cillin Corp. Edition. Norton rial difficulties or delays in production of may incorporate advanced features in Microsystem’s Java WorkShop. Symantec software developed by third parties. Symantec regards its software as propri- Utilities competes with First Aid and its software and related documentation future versions of operating systems that Visual Café (Web Development Edition) Symantec believes that competition in etary and relies on a combination of Oil Change from CyberMedia, Inc. and packaging. However, shortages may may decrease the demand for certain of competes with Microsoft’s Visual J++, the industry will continue to intensify as copyright, patent and trademark laws and (“CyberMedia”) and Helix’s Nuts & Bolts occur in the future. the Company’s products, including those Inprise’s Borland JBuilder Professional most major software companies expand license agreements in an attempt to pro- from Network Associates. Norton Uninstall Symantec normally ships products currently under development. In addition, and IBM’s VisualAge for Java Standard. their product lines into additional product tect its rights. However, Symantec is still Deluxe competes with UnInstaller from within one week after receiving an order. a number of software developers have In addition, these and other Company categories. Some of the Company’s com- subject to potential legal suits. (See fur- CyberMedia and CleanSweep from Thus, Symantec does not consider integrated antivirus capabilities into their products compete less directly with a petitors have substantial financial, marketing ther discussion in Item 7: Management’s Quarterdeck Corporation (“Quarterdeck”). backlog to be a significant indicator of Internet products. While Symantec plans number of other products that offer levels and technological resources. (See further Discussion and Analysis of Financial Norton CrashGuard Deluxe competes with future performance. to continue to improve its products with of functionality different from those discussion in Item 7: Management’s Condition and Results of Operations - First Aid 98 Deluxe from CyberMedia, PC a view toward providing enhanced func- offered by Symantec’s products or that Discussion and Analysis of Financial Intellectual Property Rights, Litigation.) Medic Deluxe from Network Associates and tionality over that provided in current were designed for a somewhat different Condition and Results of Operations - PRICE COMPETITION REALHELP from Quarterdeck. Norton and future operating systems, these efforts group of end users than those targeted by Rapid Technological Change and Price competition is sometimes intense EMPLOYEES Your Eyes Only competes with PGPdisk may not be successful and such improved Symantec. Microsoft has incorporated Development Risks, Operating System with certain products in the microcom- As of March 31, 1998, Symantec employed from Network Associates. Norton Web products may not be commercially accepted advanced utilities including telecommu- and Retail Distribution Channel.) puter business software market and is approximately 2,300 people, including Services competes with Oil Change and by software users. Symantec will also nications, facsimile and data recovery expected to continue to increase and 1,200 in sales, marketing and related staff First Aid from CyberMedia and TuneUp attempt to work with operating system utilities in Windows 95 and may include become even more significant in the activities; 600 in product development, and MANUFACTURING AND BACKLOG and REALHELP from Quarterdeck. vendors in an effort to make its products additional product features in Windows 98 future, and may result in reduced profit Symantec’s product development organi- 500 in management, manufacturing, compatible with those operating systems, or future releases of Windows NT that may margins. (See further discussion in Item 7: zation produces a set of master CD-ROMs administration and finance. None of the Remote Productivity Solutions yet differentiate those utility products decrease the demand for certain of the Management’s Discussion and Analysis or diskettes and documentation for each employees is represented by a labor union, pcANYWHERE competes with LapLink from features included in the operating Company’s products, including those of Financial Condition and Results of product that are then duplicated and and Symantec has experienced no work from Traveling Software, Inc., ReachOut systems. However, these efforts may not currently under development. Additionally, Operations –Price Competition.) packaged into products by the manufac- stoppages. Symantec believes that its from Stac, Inc. and Microcom by be successful. Other competitors may as hardware vendors incorporate additional turing organization. Most of Symantec’s employee relations are good. COMPAQ Computer Corporation. ACT! license their products to other hardware server-based network management and domestic manufacturing is performed by Competition in recruiting personnel in SEASONALITY competes with other contact managers, such and software original equipment manufac- security tools into network operating sys- outside contractors under the supervision While Symantec’s diverse product line the software industry is intense. Symantec as GoldMine from GoldMine Software turers (“OEMs”). In addition, as software tems, the demand may decrease for certain of Symantec’s manufacturing organiza- has tended to lessen fluctuations in quar- believes that its future success will depend Corporation, Maximizer from Maximizer users move toward running programs from of the Company’s products, including tion. Purchasing of most raw materials terly net revenues, these fluctuations have in part on its ability to recruit and retain Technologies, Inc. and Janna Contact from the Internet or over a LAN, the need for those currently under development. Also, and fulfillment of most orders is done by occurred and may occur in the future. highly skilled management, marketing and Janna Systems, Inc. ACT! also competes, certain of Symantec’s utility programs may Symantec’s competitors may license certain Symantec personnel in Symantec’s These fluctuations may be caused by a technical personnel. Symantec believes but less directly, with personal information decrease. (See further discussion in Item 7: of their products to Microsoft and OEMs Sunnyvale, California facility. The manu- number of factors, including the timing that it must provide personnel with a managers, such as Organizer from IBM’s Management’s Discussion and Analysis for inclusion in their operating systems, facturing steps that are subcontracted to of announcements and releases of new or competitive compensation package, which Lotus division and Sidekick from Starfish of Financial Condition and Results of which may reduce the demand for certain outside organizations include the dupli- enhanced versions of Symantec’s products necessitates the continued availability of Software. WinFax competes with Operations - Operating System; Microsoft of the Company’s products. (See further cation of diskettes and CD-ROMs, and product upgrades, the introduction stock options and shares to be issued under Quarterdeck’s Procomm Plus product line. Windows 98.) discussion in Item 7: Management’s printing of documentation materials and of competitive products by existing or new the Company’s employee stock purchase Symantec faces intense competition Discussion and Analysis of Financial assembly of the final package. Symantec competitors, reduced demand for any plan, and requires ongoing shareholder in each of the Company’s three business Condition and Results of Operations - I n t e r n e t To o l s , R o y a l t i e s a n d O t h e r performs diskette duplication and assem- given product, seasonality in the end-of- approval of such incentive programs. (See Symantec Visual Café (Database units: Security and Assistance, Remote Operating System; Microsoft Windows 98.) bly of the final package in its Dublin, period buying patterns of foreign software further discussion in Item 7: Management’s Development Edition) competes with Productivity Solutions and Internet Tools, Symantec also competes with micro- Ireland manufacturing facility for most markets and the market’s transition Discussion and Analysis of Financial Borland JBuilder Client/Server from Royalties and Other. Examples of key computer hardware manufacturers that products distributed outside of the United between operating systems. These factors Condition and Results of Operations - Inprise Corporation, VisualAge for Java competitors for business units include: develop their own software products. States and Canada. Most of Symantec’s may cause significant fluctuations in net Employee Risk.) 16 17 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Symantec’s principal locations, all of which are leased, are as follows: Approximate Size Expiration of Location Purpose (in square feet) Lease Symantec’s common stock is traded on the Nasdaq National Market under the Nasdaq symbol “SYMC”. The high and low closing sales prices set forth below are as North America reported on the Nasdaq National Market. Cupertino, California Corporate Headquarters Administration, sales and marketing 87,000 2003 Fiscal 1998 Fiscal 1997 Emerging Business and Research and development 161,000 2003 Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Remote Productivity Solutions 1998 1997 1997 1997 1997 1996 1996 1996 Symantec Technology Center Future expansion * 143,000 2003 High $ 29.00 $ 27.00 $ 25.50 $ 20.38 $ 18.38 $ 16.38 $ 12.75 $ 18.13 Sunnyvale, California Manufacturing 78,000 2000 Low 20.88 19 . 19 19.44 12.50 12.63 9.88 8.75 11.00 Santa Monica, California Research and development and marketing 98,000 2000 Eugene, Oregon Customer service and technical support 150,000 2006 Delrina exchangeable stock has been traded on the Toronto Stock Exchange under Beaverton, Oregon Research and development, sales the symbol “DE” since the acquisition of Delrina by Symantec on November 22, 1995. and marketing 56,000 2001 The high and low closing sales prices set forth below are in Canadian dollars as reported Melville, New York Research and development and marketing 27,000 2000 on the Toronto Stock Exchange. Delrina exchangeable stock is exchangeable at the Toronto, Canada Research and development, sales 66,000 2005 option of the stockholders on a one-for-one basis into Symantec common stock. and technical support International Fiscal 1998 Fiscal 1997 Leiden, Holland Administration, sales, marketing 25,000 2003 Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, and technical support 1998 1997 1997 1997 1997 1996 1996 1996 Dublin, Ireland Administration, manufacturing 74,000 2026 (In Canadian dollars) and translations High $ 40.10 $ 39.00 $ 35.00 $ 28.00 $ 24.35 $ 22.00 $ 17.70 $ 25.00 Low 29.50 26. 75 26. 25 16. 50 17.55 13.00 12.00 15.50 Symantec’s principal administrative and sales and marketing facility, as well as cer- As of March 31, 1998, there were approximately 682 stockholders of record, including tain research and development and support Information with respect to this Item approximately 29 holders of record of Delrina exchangeable shares. The Company facilities, are located in Cupertino, Cali- may be found in Note 15 of Notes to has never paid cash dividends on its stock with the exception of cash distributions to fornia. The Company leases a number of Consolidated Financial Statements in stockholders of acquired companies. In addition, the Company’s bank line of credit additional facilities for marketing and Part IV, Item 14 of this Form 10-K. and outstanding convertible subordinated debentures limit the payment of cash divi- research and development in the United dends on common stock (See Notes 6 and 7 of Notes to Consolidated Financial States and for marketing in Australia, Statements in Part IV, Item 14 of this Form 10-K). Brazil, Canada, France, Germany, Holland, Hong Kong, Italy, Japan, Korea, Malaysia, Mexico, New Zealand, Russia, Singapore, South Africa, Sweden, Switzerland, Taiwan No matters were submitted to a vote of and the United Kingdom. Symantec the security holders during the quarter believes its facilities are adequate for its cur- ended March 31, 1998. rent needs and additional or substitute space will be available as needed to accommodate any future expansion of its operations. * The Symantec Technology Center is currently under construction, with anticipated completion in fiscal 1999. 18 19 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • FORWARD-LOOKING STATEMENTS The following selected financial data is companies. In fiscal 1996, Delrina AND FACTORS THAT MAY AFFECT qualified in its entirety by and should be Corporation was acquired. In fiscal 1995, OVERVIEW F U T U R E R E S U LT S read in conjunction with the more detailed acquisitions included Intec Systems Symantec is a world leader in utility software for business and personal computing. The following discussion contains forward- consolidated financial statements and Corporation, Central Point Software, Founded in 1982, the Company has offices in the United States, Canada, Asia, looking statements that are subject to risks related notes included elsewhere herein. Inc. and SLR Systems, Inc. In fiscal 1994, Australia, Europe, Africa, Latin America and South America. and uncertainties. There are several im- Symantec did not complete any acquisi- acquisitions included Fifth Generation During the last three fiscal years, Symantec has acquired the following companies: portant factors that could cause actual tions during fiscal 1998. During fiscal Systems, Inc. and Contact Software Shares of Symantec Acquired Company results to differ materially from those anti- 1997, Symantec acquired Fast Track, Inc. International, Inc. Each of the fiscal 1996, Common Stock Stock Options Companies Acquired Date Acquired Issued Assumed cipated by the forward-looking statements (“Fast Track”) in a transaction accounted 1995 and 1994 acquisitions was accounted Fast Track, Inc. (“Fast Track”) May 28, 1996 600,000 — contained in the following discussion. for as a pooling of interests. As the results for as poolings of interests. The Company Readers should pay particular attention to Delrina Corporation November 22, 1995 13,684,174* 1,271,677 of operations of Fast Track were not has never paid cash dividends on its (“Delrina”) the risk factors set forth within this sec- material to Symantec’s consolidated stock with the exception of distributions tion. Nothing in this report shall impose financial statements, amounts prior to to stockholders of acquired companies. * Includes Delrina exchangeable stock that is traded on the Toronto Stock Exchange. Delrina stockholders received Delrina exchangeable stock in exchange for Delrina common stock at a rate of 0.61 per share. upon Symantec or any person a duty to the date of acquisition were not restated Delrina exchangeable stock may be converted into Symantec common stock on a one-for-one basis at update any forward-looking statement. to reflect the combined operations of the each stockholder’s option. Symantec did not complete any acquisi- date of acquisition were not restated to tions during fiscal 1998. During fiscal 1997, reflect the combined operations of the F i v e Ye a r S u m m a r y Symantec acquired Fast Track, Inc. companies. In fiscal 1996, Delrina Year Ended March 31, (“Fast Track”) in a transaction accounted Corporation was acquired and was (In thousands, except net income (loss) per share) 1998 1997 1996 1995 1994 for as a pooling of interests. As the accounted for as a pooling of interests and Statements of Operations Data: results of operations of Fast Track were amounts prior to the date of acquisition Net revenues $ 578,361 $ 472,183 $ 445,432 $ 431,268 $ 403,206 not material to Symantec’s consolidated were restated to reflect the combined Acquisition, restructuring and other expenses — 8,585 27,617 9,545 56,094 financial statements, amounts prior to the operations of the companies. Operating income (loss) 100,345 26,289 (48,279) 40,286 (47,290) Net income (loss) 85,089 26,038 (39,783) 33,409 (44,421) R E S U LT S O F O P E R AT I O N S The following table sets forth each item from the consolidated statements of opera- Net income (loss) per share - basic $ 1.52 $ 0.48 $ (0.76) $ 0.68 $ (0.96) tions as a percentage of net revenues and the percentage change in the total amount of Net income (loss) per share - diluted $ 1.42 $ 0.47 $ (0.76) $ 0.64 $ (0.96) each item for the periods indicated. Shares used to compute net Period-to-Period Percentage income (loss) per share - basic 56,097 54,705 52,664 49,338 46,270 Increase (Decrease) 1998 1997 Shares used to compute net Year Ended March 31, Compared Compared income (loss) per share - diluted 60,281 55,407 52,664 54,303 46,270 1998 1997 1996 to 1997 to 1996 March 31, Net revenues 100 % 100% 100 % 22% 6% (In thousands) 1998 1997 1996 1995 1994 Cost of revenues 15 20 25 (7) (14) Gross margin 85 80 75 30 13 Balance Sheet Data: Operating expenses: Working capital $ 175,537 $ 129,569 $ 134,643 $ 143,405 $ 101,644 Research and development 16 19 21 3 (6) Sales and marketing 45 47 52 18 (4) Total assets 476,460 339,398 282,674 305,356 262,335 General and administrative 7 7 7 12 4 Long-term obligations, less current portion 5,951 15,066 15,393 25,413 25,967 Acquisition, restructuring and other expenses — 2 6 (100) (69) Stockholders’ equity 317,507 217,979 180,317 184,874 129,193 Total operating expenses 68 75 86 (8) 11 Operating income (loss) 17 5 (11) 282 * Interest income 2 2 2 83 (4) Interest expense — — — (13) (6) Other income (expense), net — — (1) (89) (21) Income (loss) before income taxes 19 7 (10) 269 * Provision (benefit) for income taxes 4 (1) 522 * 1 Net income (loss) 15 % 6% (9)% 227 * * Percentage change is not meaningful. 20 21 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Net Revenues Gross Margin solidated Financial Statements in Part IV, net revenues for fiscal 1998, and 35% of ment costs did not materially affect the Research and development expenses Net revenues increased 22% from $472 Gross margin represents net revenues less Item 14 of this Form 10-K for further dis- net revenues for fiscal 1997 and 1996. Company, except for amounts capitalized decreased 6% to $89 million in fiscal 1997 million in fiscal 1997 to $578 million in fis- cost of revenues. Cost of revenues consists cussion of the technology licensing and Increased net revenues for the business by Delrina prior to its acquisition by from $95 million in fiscal 1996 due pri- cal 1998. Net revenues increased 6% from primarily of manufacturing expenses, costs sale transactions. The Java development unit in fiscal 1998 primarily related to Symantec in fiscal 1996. marily to decreased product development $445 million in fiscal 1996 to $472 million in for producing manuals, packaging costs, tools product line continued to expand in sales of Windows 95 versions of WinFax Amortization of capitalized software, efforts resulting from the Company’s de- fiscal 1997. Revenue growth in fiscal 1998 royalties paid to third parties under pub- fiscal 1998, resulting in increased revenues PRO, pcANYWHERE and ACT!. including amortization and write-off of cision to cease developing certain sofware was largely due to sales of Windows 95 and lishing contracts and amortization and over fiscal 1997 and maintaining its fiscal Increased net revenues in fiscal 1997, over both purchased product rights and capi- products and an increase in the capital- Windows NT versions of the Company’s write-off of capitalized software. 1997 percentage contribution to total net fiscal 1996, were primarily attributed to talized software development expenses, ization of software development costs, principal products, as well as introduc- Gross margins increased to 85% of net revenues in fiscal 1998. the pcANYWHERE product line. totaled $1 million, $10 million and $19 including approximately $8 million related tions of new products, growth in inter- revenues in fiscal 1998 from 80% in fiscal International. Net revenues from interna- During fiscal 1998 and 1997, the finan- million for fiscal 1998, 1997 and 1996, res- to network administration technology. In national sales outside of North America 1997 and from 75% in fiscal 1996. tional sales outside of North America were cial impact of product price reductions pectively. The decrease in amortization addition, a $2 million research and develop- and royalty and revenue streams from the Factors contributing to an increase in $186 million and $138 million and repre- for certain of Symantec’s principal prod- expense in fiscal 1998 is attributed to the ment expense reimbursement was received sale of certain technologies and product gross margin percentage during fiscal 1998 sented 32% and 29% of total net revenues in ucts was more than offset by the increase write-off of approximately $8 million of from Hewlett-Packard in fiscal 1997 under lines to third-party computing companies. include reduction of direct material costs fiscal years 1998 and 1997, respectively. The in the volume of products sold, resulting unamortized capitalized software and the previously mentioned technology sale Product Groups. During fiscal 1998 and by shifting product media from more increase in net revenues was the result of in increased net revenues. unamortized purchased software product agreement, which further reduced research 1997, Symantec experienced increased expensive diskettes to lower priced CD- Symantec’s penetration of new and emerg- Internet Tools, Royalties and Other, rights related to network administration and development expenses in fiscal 1997. net revenues, over the prior fiscal year, ROMs and reductions in the size of bound ing markets in Latin America and Asia/ which includes products providing an easy- technology written off as part of the sale from each of its principal product groups: manuals through a shift in documentation Pacific, as well as increased sales in Europe. to-use Java development environment, as of the networking business unit to Hewlett- Sales and Marketing Expenses Security and Assistance and Remote from paper manuals to electronic manuals Net revenues from international sales well as revenue streams from the sale of Packard in March 1997. Amortization Sales and marketing expenses increased Productivity Solutions. included on CD-ROMs for all of the declined by $4 million in fiscal 1997, from certain of the Company’s software product and write-off expense in fiscal year 1997 18% to $261 million, or 45% of net revenues The Security and Assistance business Company’s principal products. Additional $142 million in fiscal 1996. This decrease lines and technologies, and revenues from was lower than in 1996 due to capitalized in fiscal 1998 from $221 million, or 47% unit is dedicated to being indispensable reductions occurred in manufacturing was due largely to the recognition in fiscal products nearing the end of their life software write-offs in fiscal 1996 related of net revenues, in fiscal 1997. The increase to customers’ daily use of computers by overhead costs due to improved economies 1996 of approximately $7 million of pre- cycles, comprised approximately 10%, 15% to de-emphasized products and Delrina in sales and marketing expenses in fiscal increasing productivity and keeping of scale and reductions in capitalized viously deferred revenue related to an and 20% of net revenues for fiscal 1998, Windows 3.1 products. 1998 as compared to fiscal 1997 is primarily computers safe and reliable. The Security software amortization and write-offs as acquired company. 1997 and 1996, respectively. The business related to increased international sales and Assistance business unit comprised discussed below. In addition, fiscal 1998 Foreign exchange rate fluctuations unit’s net revenues decreased in fiscal 1998 and marketing activities. North American Research and Development Expenses approximately 50% of net revenues for royalty revenues from JetForm and during fiscal 1998 and 1997 did not mate- and 1997 over the prior fiscal year, largely Research and development expenses rep- sales and marketing activities during fis- both fiscal 1998 and 1997 and 45% of net Hewlett-Packard totaling $46 million rially affect annual revenue. The impact as a result of declining sales from products resented 16%, 19% and 21% of net revenues cal 1998 decreased as a percentage of net revenues in fiscal 1996. Increased net rev- had minimal costs of revenue. of fluctuations in foreign exchange rates which Symantec no longer actively develops in fiscal 1998, 1997 and 1996, respetively. revenues as compared to fiscal 1997 due to enues for the business unit in fiscal 1998 The increase in gross margin percent- on international revenues is partially or markets. Also contributing to the fiscal Research and development expend tures the elimination of activities related to the primarily related to sales of Windows 95, age in fiscal 1997 compared to fiscal 1996 mitigated by operating expenses incurred 1998 decrease from the prior year was the are charged to operations as incurred. electronic forms and network adminis- Windows NT and Macintosh versions of was due to a decrease in capitalized soft- in local currencies. fiscal 1997 recognition of $6 million of Research and development expenses tration software technologies and products Norton Utilities, as well as the multi- ware amortization and write-offs as Product Returns. The Company estimates non-recurring consulting net revenues. increased 3% to $91 million in fiscal 1998 which were sold in fiscal 1997. platform workstations/servers version of discussed below. In addition, fiscal 1997 and maintains reserves for product returns. Also included in Internet Tools, from $89 million in fiscal 1997 as the Sales and marketing expenses decreased Norton AntiVirus. New product releases royalty revenues from JetForm and The level of actual product returns and Royalties and Other are royalties and result of increased spending on new 4% to $221 million, or 47% of net revenues, of CrashGuard Deluxe and Norton Hewlett-Packard totaling $19 million related product return provisions are other revenue of approximately $46 million product development. The decrease in in fiscal 1997 from $230 million, or 52% of Uninstall also contributed to the fiscal had minimal costs of revenue. largely a factor of the level of product and $19 million recorded in fiscal 1998 research and development expenses as a net revenues, in fiscal 1996. The decrease Capitalized Software. During fiscal 1998, 1998 net revenue increase. Increased net sell-in (gross revenue) from normal sales and 1997, respectively, which partially off- percentage of net revenues in fiscal 1998 in sales and marketing expenses in fiscal revenues in fiscal 1997 were primarily accounting standards requiring capitaliza- activity and the replacement of obsolete set the revenue declines mentioned above. largely resulted from the Company’s 1997 as compared to fiscal 1996 was due attributable to increases in Norton tion of certain software development costs quantities with the current version of the These royalties and other revenues related decision to cease development of certain primarily to the elimination of duplica- AntiVirus revenues over the prior year. did not materially affect the Company. Company’s products. Changes in the levels to the sale of certain software products, software products no longer actively mar- tive sales and marketing expenses as a The Remote Productivity Solutions During fiscal 1997, Symantec capitalized of product returns and related product technologies and certain tangible assets to keted by Symantec. Another contributing result of the acquisition of Delrina by business unit helps remote professionals approximately $8 million of software deve- returns provision are generally offset by JetForm Corporation (“JetForm”) and the factor was the elimination of certain net- Symantec and the elimination of sales remain productive and work reliably — lopment costs, primarily related to net- changing levels of gross revenue and, there- Hewlett-Packard Company (“Hewlett- work administration technology develop- and marketing expenses related to the anywhere, anytime. The Remote Producti- work administration technology. Prior to fore, the product return provision did not Packard”) during fiscal 1997. Revenues ment due to the sale of Symantec’s net- electronic forms software products which vity Solutions business unit comprised fiscal 1997, accounting standards requiring have a material impact on reported net from these agreements may decline in working business unit to Hewlett-Packard were sold in fiscal 1997. Reductions in approximately 40% of the Company’s capitalization of certain software develop- revenues in any period presented. fiscal 1999. See Note 12 of Notes to Con- during fiscal 1997. expenditures for products no longer 22 23 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Interest Income, Interest Expense end of fiscal 1998, there were no borrow- actively marketed by Symantec were offset related to legal, accounting and financial $23 million of the valuation allowance for Cupertino, California to maintain a and Other Income (Expense) ings outstanding and less than $1 million by increased spending for new products advisory services, elimination of duplica- deferred tax assets is attributable to unbene- restricted cash balance invested in U.S. Interest income was $13 million, $7 million of standby letters of credit outstanding released during fiscal 1997. tive and excess facilities and equipment, fitted stock option deductions, the benefit treasury securities with maturities not to and $8 million in fiscal 1998, 1997 and 1996, under this line. Future acquisitions by the personnel severance and outplacement of which will be credited to equity when exceed three years. In accordance with the respectively. Interest income increased Company may cause the Company to be services, and operational activities con- realized. The remaining $2 million of the lease terms, these funds are not available General and Administrative 83% in fiscal 1998 over fiscal 1997 due to in violation of the line of credit covenants. solidation and discontinuance. Offsetting valuation allowance represents net operat- to meet operating cash requirements. (See Expenses higher average invested cash balances. However, the Company believes that if these costs was a reduction in accrued ing loss and tax credit carryforwards of further discussion in Note 8 of Notes to In fiscal 1998, general and administrative Higher average cash balances during fiscal the line of credit were canceled or amounts acquisition, restructuring and other various acquired companies that are li- Consolidated Financial Statements in expenses increased by 12% to $38 million 1997 compared to fiscal 1996 were offset were not available under the line, there expenses of approximately $2 million, as mited by separate return limitations and Part IV, Item 14 of this Form 10-K.) from $34 million in fiscal 1997 and from by lower interest rates on invested cash would not be a material adverse impact actual costs incurred related to certain under the “change of ownership” rules of Net cash provided by operating $33 million in fiscal 1996. General and during fiscal 1997 compared to fiscal 1996. on the financial results, liquidity or capi- prior acquisitions were less than costs Internal Revenue Code Section 382. activities was $131 million and was com- administrative expenses were 7% of net Interest expense was approximately tal resources of the Company. previously accrued by the Company. Symantec projects the effective tax prised of the Company’s net income of revenues during fiscal 1998, 1997 and 1996. $1 million in fiscal 1998, 1997 and 1996. Restructuring Expenses. In fiscal 1997, If Symantec were to sustain significant rate to be 32% in fiscal 1999. This rate is $85 million, non-cash related expenses of General and administrative expenses Interest expense is principally related to losses, the Company could be required to the Company recorded a charge of lower than the expected U.S. federal and $21 million and a net decrease in assets increased in fiscal 1998 as compared to Symantec’s convertible subordinated reduce operating expenses, which could approximately $3 million for costs related state combined statutory rate of 40% due and liabilities of $25 million. fiscal 1997 at a rate proportionate to net debentures. (See Note 6 of Notes to result in product delays; reassess acquisi- to the restructuring of certain domestic primarily to a lower tax rate from the Net trade accounts receivable increased revenue growth as the result of increased Consolidated Financial Statements in tion opportunities, which could negatively and international sales and research and Company’s Irish operations. However, $20 million to $65 million at the end of personnel expenses associated with the Part IV, Item 14 of this Form 10-K.) impact the Company’s growth objectives; development operations, certain legal this projection is subject to change due to fiscal 1998 from $45 million at the end of growth of the Company. Other income (expense) is primarily and/or pursue further financing options. settlements and other expenses. In fiscal fluctuations in and the geographic alloca- fiscal 1997, primarily due to increased The fiscal 1997 increase in general comprised of foreign currency exchange The Company believes existing cash and 1996, the Company incurred approxi- tion of earnings. (See further discussion in operating activities during fiscal 1998. With and administrative expenses, as compared gains and losses from fluctuations in cur- short-term investments and cash generated mately $2 million for equipment and Item 7: Management’s Discussion and the growth of international sales to 32% to fiscal 1996, is primarily the result of rency exchange rates. from operating results will be sufficient personnel relocation costs related to the Analysis of Financial Condition and Results of net revenues in fiscal 1998 from 29% management consulting expenditures, to fund operations for the next year. consolidation of certain research and of Operations - Fluctuations in Quarterly of net revenues in fiscal 1997, Symantec offset by benefits from the elimination of I n c o m e Ta x e s development activities. The restructuring Operating Results; Foreign Operations.) is carrying an increased accounts receiv- duplicative general and administrative The effective income tax provision rate plans have been completed. able balance with longer average standard expenses as a result of the acquisition of BUSINESS RISKS for fiscal 1998 was 24%, which compares Other Expenses. In fiscal 1997, Symantec payment terms, as such longer payment Delrina by Symantec in fiscal 1996. LIQUIDITY AND CAPITAL The preceding discussion contains forward- to an effective income tax provision rate recorded an approximately $2 million terms are standard business practice in cer- RESOURCES looking statements that are subject to risks of 14% in fiscal 1997 and an effective tax charge in connection with the write-off tain international markets. At March 31, Cash, short-term investments and long- and uncertainties. There are several impor- Acquisition, Restructuring and benefit rate of 10% in fiscal 1996. The 1998 of an equity investment and an approxi- 1998, international days sale outstanding term investments increased $100 million to tant factors that could cause actual results Other Expenses income tax provision rate of 24% is lower mately $3 million charge for the write- was 48 days, as compared to 32 days for $260 million at fiscal 1998 year-end from No acquisition, restructuring and other to differ materially from those anticipated than the U.S. statutory rate primarily due off of certain in-process research and North America. $160 million at fiscal 1997 year-end. This expenses were incurred in fiscal 1998. by the forward-looking statements con- to the utilization of previously unbene- development acquired by the Company. During fiscal 1998, the Board of increase was largely due to cash provided Acquisition Expenses. In connection with tained in the following discussion. Readers fitted losses and tax credits and a lower In fiscal 1996, Symantec incurred a Directors of Symantec authorized the from operating activities, net proceeds the acquisitions completed in fiscal 1997 should pay particular attention to the statutory tax rate for the Company’s Irish $3 million loss on the sale of the assets of repurchase of up to 1,500,000 shares of from the exercise of stock options and and 1996 (see Summary of Significant risk factors set forth within this section. operations. In addition, fewer unbenefit- Time Line Solutions Corporation, a Symantec common stock. At the end of net proceeds from the sales of common Accounting Policies and Note 3 of Notes Nothing in this report shall impose upon ted losses were available in fiscal 1998, wholly-owned subsidiary. Additionally, fiscal 1998, a total of 1,000,000 shares were stock under the Company’s Employee to Consolidated Financial Statements in Symantec or any person a duty to update which caused the fiscal 1998 tax rate to in fiscal 1996, the Company recorded repurchased at prices ranging from $16.57 Stock Purchase Plan. Part IV, Item 14 of this Form 10-K), any forward-looking statement. be higher than the fiscal 1997 tax rate. $3 million for estimated legal fees and to $26.81 per share. The authorized repur- In addition to cash, short-term invest- Symantec incurred significant acquisition- Fluctuations in Quarterly Operating Realization of the $20 million of net other expenses. (See Note 15 of Notes to chase period has expired for the remaining ments and long-term investments of related expenses. Results and Stock Price. Due to the fac- deferred tax assets is dependent upon the Consolidated Financial Statements in 500,000 shares. The repurchased shares have $260 million, the Company has $59 million Symantec recorded total acquisition tors noted below, the Company’s earnings Company’s ability to generate sufficient Part IV, Item 14 of this Form 10-K.) been reissued under the Company’s em- of restricted investments related to collat- charges of approximately $1 million in and stock price have been and may con- future U.S. taxable income. Management Remaining acquisition, restructuring ployee stock purchase and option programs. eral requirements under lease agreements fiscal 1997 in connection with the acqui- tinue to be subject to significant volatility, believes that it is more likely than not that and other expense accruals as of March 31, The Company recently renewed its entered into by Symantec during fiscal sition of Fast Track. particularly on a quarterly basis. Symantec the asset will be realized based on fore- 1998 were approximately $3 million. $10 million line of credit to expire in 1997. Symantec is obligated under certain In connection with the acquisition of has previously experienced shortfalls in casted U.S. earnings. The net deferred tax May 2000. The Company was in com- lease agreements for two existing office Delrina in fiscal 1996, Symantec recorded revenue and earnings from levels expected asset includes a valuation allowance of pliance with the debt covenants for this buildings, one parcel of land and one total acquisition charges of $22 million. by securities analysts and investors, which approximately $25 million. Approximately line of credit as of April 3, 1998. At the office building under construction in These acquisition expenses primarily has had an immediate and significant 24 25 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Dependence on the Internet. Critical however, net revenues may still be mate- future net revenues and operating results or write-offs and could adversely affect adverse affect on the trading price of the effective in competing with integrated rially affected favorably or adversely by would be materially adversely affected. issues concerning the commercial use of operating results of the Company. Company’s common stock. This may suites either currently in the market or New Distribution Channels. Symantec the effects of channel fill, particularly in Microsoft has incorporated advanced the Internet, including security, reliabil- occur again in the future. introduced in the future. Rapid Technological Change and Quarterly Buying Patterns; Absence of periods where a large number of new utilities including telecommunications, ity, cost, ease of use, accessibility, quality may not be able to develop an effective Development Risks. The Company par- Backlog. Most customers tend to make products are simultaneously introduced. facsimile and data recovery utilities in of service and potential tax or other gov- method of distributing its software prod- Channels may also become filled sim- Windows 95 and may include additional ernment regulation, remain unresolved ucts utilizing each of the rapidly evolving ticipates in a highly dynamic industry the majority of their purchases at the end ply because the distributors do not sell product features in Windows 98 or and may affect the use of the Internet as software distribution channels, including characterized by rapid change and uncer- of the fiscal quarter, in part because they their inventories to retail distribution or future releases of Windows NT that may a medium to support the functionality of the Internet. The presence of new channels tainty related to new and emerging techno- are able, or believe that they are able, to end users as anticipated. If sell-through decrease the demand for certain of the the Company’s products, as well as to could adversely impact existing channels logies and markets. The recent trend to- negotiate lower prices and more favorable does not occur at a sufficient rate, dis- Company’s products, including those distribute software. Should the Company and/or product pricing, which could ward server-based applications in networks terms. This is particularly true of large tributors will delay purchases or cancel currently under development. be unable to incorporate changes in the have a material adverse impact on the and applications distributed over the Inter- corporate customers that negotiate large orders in later periods or return prior Additionally, as hardware vendors incor- Internet environment successfully or Company’s new revenues and profitability. net could have a material adverse affect on site licenses near the end of each quarter. Site Licenses. Symantec sells volume purchases in order to reduce their inven- porate additional server-based network timely into its business operations and sales of the Company’s products. Future This end-of-period buying pattern means tories. While such order delays or management and security tools into net- product development strategy, the license programs (corporate site licenses) technology or market changes may cause that forecasts of quarterly and annual cancellations can cause fluctuations in work operating systems, the demand Company’s future net revenues and oper- through the distribution channel and certain of Symantec’s products to become financial results are particularly vulnerable net revenues from one quarter to the may decrease for certain of the Company’s ating results may be adversely affected. through corporate resellers. Average site obsolete more quickly than expected. to the risk that they will not be achieved, Price Competition. Price competition is next, the impact is substantially mitigated products, including those currently license revenue per unit is lower than the The use of a Web browser (running either because expected sales do not occur by the Company’s deferral of revenue under development. Also, Symantec’s sometimes intense for certain products in average revenue per unit from retail ver- on either a PC or network computer) to or because they occur at lower prices or associated with inventories estimated to competitors may license certain of their the microcomputer software market and sions shipped through the retail distribu- access client/server systems is emerging on less favorable terms to the Company. be in excess of appropriate levels in the products to Microsoft and OEMs for is expected to continue to increase and tion channel. Symantec may increase unit as an alternative to the traditional desktop The Company operates with relatively distribution channel. inclusion in their operating systems, become even more significant in the sales under volume licensing programs in access through operating systems resident little backlog; therefore, if near-term Product Returns. Product returns can which may reduce the demand for certain future, resulting in reduced profit margins. the future, which could have a material on personal computers. Should the func- demand for the Company’s products occur when the Company introduces of the Company’s products. Should competitive pressures in the adverse impact on the operating results of tionality associated with such system access weakens in a given quarter, there could be Microsoft Windows 98. With the antici- upgrades and new versions of products or industry continue to increase, Symantec the Company. Additionally, Symantec’s reduce the need for Symantec’s products, an immediate, material adverse affect on when distributors have excess inventories. pated introduction of Microsoft’s may be required to reduce software products may not be effective in competing the Company’s future net revenues and net revenues and on the Company’s Symantec’s return policy allows its dis- Windows 98 operating system, the prices and/or increase its spending on with products either currently in the operating results may be adversely affected. operating results, which would likely Personal Computer and Hardware tributors, subject to certain limitations, Company’s ability to generate revenue sales, marketing and research and devel- market or introduced in the future, and result in a precipitous drop in stock price. Growth Rates. Fluctuations in customer Retail Distribution Channel. The to return purchased products in exchange from many of its current products will opment as a percentage of net revenues, the Company’s failure to compete effec- for new products or for credit towards depend on its ability to develop new ver- resulting in lower profit margins. These tively could have a material adverse impact spending from software to hardware as Company’s retail distribution customers future purchases. End users may return sions and enhancements of those products actions may not be sufficient to offset on the operating results of the Company. the result of technological advancements also carry the products of Symantec’s Channel Fill. The Company’s pattern of products through dealers and distribu- in a timely manner for the Windows 98 the impact of price competition in the in hardware or price reductions of hard- competitors. These retail distributors may tors within a reasonable period from the operating system. Because the Department Company’s business and net revenues. net revenues and earnings may be affected ware have in the past, and may in the have limited capital to invest in inven- Integrated Suites. In the future, date of purchase for a full refund, and of Justice and various state entities have by “channel fill.” Distributors may fill future, result in reduced revenues which tory, and their decisions to purchase the retailers may return older versions of filed lawsuits against Microsoft which Symantec and/or its competitors may their distribution channels in anticipation would have a material adverse affect on Company’s products is partly a function of products. The Company estimates and of price increases, sales promotions or may delay the introduction of Windows move toward providing integrated suites operating results. pricing, terms and special promotions Operating System. The release and sub- maintains reserves for product returns. of products. The price of integrated incentives. Inventories may be decreased 98 or change the interfaces or feature set offered by Symantec, as well as by its However, future returns could exceed the suites could be less than the sum of the between the date Symantec announces a sequent customer acceptance of current that will be incorporated into Windows 98, competitors over which the Company has reserves established by the Company, which prices of individual products included in new version or new product and the date or enhanced operating systems are par- the Company’s ability to develop appro- no control and which it cannot predict. could have a material adverse affect on these suites when such products are sold of release, because distributors, dealers ticularly important events that increase priate products for Windows 98 may be Agreements with distributors are the operating results of the Company. separately. The sales volume contribu- and end users often delay purchases, cancel the uncertainty and volatility of impeded, and consumers may delay pur- generally nonexclusive and may be ter- Foreign Operations. A significant portion tion to Symantec from integrated suites orders or return products in anticipation Symantec’s results. Should the Company chases of the Company’s products or minated by either party without cause. of Symantec’s revenues, manufacturing may not be sufficient to offset the gross of the availability of the new version or be unable successfully or timely to otherwise change purchase plans in a Certain distributors and resellers have costs and operating expenses is transacted margin impact of selling individual prod- new product. The impact of channel fill develop products that operate under manner that could adversely affect the experienced financial difficulties in the in foreign currencies. As a result, the ucts at a reduced price using integrated is somewhat mitigated by the Company’s existing or new operating systems, or Company and its financial results. past. Distributors that account for sig- Company’s results may be materially and product suites. Additionally, integrated deferral of revenue associated with inven- should the functionality of such operat- Adverse effects related to these events nificant sales of the Company may adversely affected by fluctuations in cur- suites may not achieve market acceptance tories estimated to be in excess of appro- ing systems reduce the need for could become apparent as early as the experience financial difficulties in the rency exchange rates, as well as increases and the Company’s products may not be priate levels in the distribution channel; Symantec’s products, the Company’s June quarter of 1998. future, which could lead to reduced sales 26 27 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • employee and facility related expenditures ticular period (See Note 15 of Notes to tion with the services rendered may not success will depend in part on its ability in duty rates, exchange or price controls (“VAR”) and independent software ven- comprise a significant portion of the Consolidated Financial Statements in be favorable. In the event of customer to recruit and retain highly skilled man- or other restrictions on foreign currencies. dor (“ISV”) customers whereby Company’s operating costs and expenses. Part IV, Item 14 of this Form 10-K). dissatisfaction, future product and up- agement, marketing and technical The Company expects that its non-U.S. Symantec’s products are included with Intellectual Property Rights. Symantec The Company’s expense levels are based, grade sales to that customer base may be personnel. Symantec believes that it dollar denominated sales activities may hardware products prior to sale through in a large part, on projections of future regards its software as proprietary and negatively impact-ed. Fee-based techni- must provide personnel with a competi- increase in the future. Symantec utilizes retail channels. VAR and ISV licensing revenue levels. Given the fixed nature of relies on a combination of copyright, cal support services did not generate tive compensation package, which natural hedging to mitigate Symantec’s agreements are generally non-exclusive these expenses over the short term, if rev- patent and trademark laws and license material revenues in any fiscal year pre- necessitates the continued availability of transaction exposures and hedges certain and do not require the VAR or ISV to enue levels fall below expectations, agreements in an attempt to protect its sented and are not expected to generate stock options which requires ongoing residual balance sheet positions through make minimum purchases. If the Symantec’s operating results are likely to rights. Despite these precautions, it may material revenues in the near future. stockholder approval. the use of one-month forward contracts. Company is not successful in maintain- Uncertainty of Research and Business Disruption. A disruption in be adversely affected. be possible for unauthorized third parties These strategies may not continue to be ing its current relationships and securing Management of Expanding Operations. Development Efforts. Symantec believes to copy aspects of Symantec’s products communications between the effective, and the Company may not be license agreements with additional VARs Symantec continually evaluates its product or to obtain and use information that significant research and development Company’s geographically dispersed successful in minimizing or accurately and ISVs, or if the Company’s VAR and and corporate strategy and has in the Symantec regards as proprietary. All of expenditures will be necessary in order to order entry and product shipping cen- forecasting transaction gains or losses. ISV customers are not successful in sell- past and will in the future undertake Symantec’s products are protected by remain competitive. While the Company ters, particularly at the end of a fiscal The Company’s international opera- ing their products, the Company’s future organizational changes, product and copyright, and Symantec has a number performs extensive usability and beta quarter, would likely result in an unex- tions are subject to certain risks common net revenues and operating results may marketing strategy modifications which of patents and patent applications pend- testing of new products, any products pected shortfall in net revenues and to international operations, such as gov- be adversely affected. Acquired Companies. Symantec has are designed to maximize market pene- ing. However, existing patent and currently being developed by Symantec could result in an adverse impact on ernment regulations, import restrictions, tration, maximize use of limited corporate copyright laws afford limited practical may not be technologically successful, operating results. Disruptions in com- currency fluctuations, repatriation restric- completed a number of acquisitions and resources and develop new products and protection. In addition, the laws of some resulting products may not achieve mar- munications and Internet connectivity tions and, in certain jurisdictions, reduced may acquire other companies in the product channels. These organizational foreign countries do not protect ket acceptance, and the Company’s may also cause delays in customer access protection for the Company’s copyrights future. Acquisitions involve a number of changes increase the risk that objectives Symantec’s proprietary rights in its prod- products may not be effective in compet- to Symantec’s Internet-based services or and trademarks and economic volatility. special risks, including the diversion of Sales and Marketing. Symantec believes will not be met due to the allocation of ucts to the same extent as do the laws of ing with products either currently in the product sales. A business disruption management’s attention to assimilation valuable limited resources to implement the United States. Symantec’s products market or introduced in the future. could occur as a result of natural disas- substantial sales and marketing efforts of the operations and personnel of the Length of Product Development Cycle. changes. Further, due to the uncertain are not copy protected. ters or the interruption in service by are essential to achieve revenue growth acquired companies in an efficient and nature of any of these undertakings, As the number of software products The length of Symantec’s product develop- communications carriers, and may cause and to maintain and enhance Symantec’s timely manner, the retention of key these efforts may not be successful, and in the industry increases and the func- ment cycle has generally been greater delays in product development that competitive position. There can be no employees, the difficulty of presenting a the Company may not realize any benefit tionality of these products further than Symantec originally expected. could adversely impact future net rev- assurance that these sales and marketing unified corporate image, the coordina- from these efforts. overlap, Symantec believes that software Although such delays have undoubtedly enues of the Company. efforts will be successful. tion of research and development and Reliance on Joint Business Arrangements. Litigation. Symantec is involved in a Technical Support. Consistent with developers will become increasingly sub- had a material adverse affect on Symantec’s sales efforts and the integration of the Symantec has entered, and may in the ject to infringement claims. This risk is business, Symantec is not able to quan- number of judicial and administrative many companies in the software industry, acquired products. In addition, because future enter, into various development or potentially greater for companies, such as tify the magnitude of net revenues that proceedings incidental to its business technical support costs comprise a signif- the employees of acquired companies joint business arrangements for the purpose Symantec, that obtain certain of their were deferred or lost as a result of any (See Note 15 of Notes to Consolidated icant portion of the Company’s operating have frequently remained in their exist- of developing new software products or en- products through publishing agreements particular delay because Symantec is not Financial Statements in Part IV, Item 14 costs and expenses. The Company’s ing, geographically diverse facilities, the hancements to existing software products. or acquisitions, since they have less able to predict the amount of net revenues of this Form 10-K). The Company technical support levels are based, in a Company has not realized certain Depending on the nature of each such direct control over the development of that would have been obtained had the intends to defend and/or pursue all of large part, on projections of future sales economies of scale that might otherwise arrangement, the development, distribu- those products. original development expectations been these lawsuits vigorously and, although levels. Over the short term, the Company have been achieved. tion, sale or marketing of the resulting In addition, an increasing number of met. Delays in future product develop- an unfavorable outcome could occur in may not be able to respond to fluctuations Symantec typically incurs significant product may be controlled either by patents are being issued that are poten- ment are likely to occur and could have a one or more of the cases, the final resolution in customer demand for support services expenses in connection with acquisi- Symantec or its business partner. Resulting tially applicable to software, and material adverse affect on the amount of these lawsuits, individually or in the or modify the format of the Company’s tions, which have a significant adverse products from joint business arrangements allegations of patent infringement are and timing of future revenues. Due to aggregate, is not expected to have a support services to compete with changes impact on the Company’s profitability may not be technologically successful, becoming increasingly common in the the inherent uncertainties of software material adverse affect on the financial in support services provided by competi- and financial resources. Future acquisi- may not achieve market acceptance and software industry. It is impossible to development projects, Symantec does position of the Company. However, tors. While the Company performs tions may have a significant adverse may not be effective in competing with ascertain all possible patent infringement not generally disclose or announce the depending on the amount and timing of extensive quality control review over its impact on the Company’s future prof- products either currently in the market claims because new patents are being specific expected shipment dates of the an unfavorable resolution of these lawsuits, technical support services provided by itability and financial resources. Employee Risk. Competition in recruit- or introduced in the future. issued continually, the subject of patent Company’s product introductions. it is possible that the Company’s future corporate personnel and, to a lesser Operating Leverage. Consistent with Symantec distributes certain of its applications is confidential until a patent results of operations or cash flows could extent, over support services outsourced ing personnel in the software industry is products through value-added reseller is issued, and it may not be apparent many companies in the software industry, be materially adversely affected in a par- to third-party vendors, customer satisfac- intense. Symantec believes that its future 28 29 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • this lawsuit, it is possible that the even from a patent that has already been ware viruses specifically designed to Company’s future results of operations issued whether it is potentially applicable impede the performance of the or cash flows could be materially to a particular software product. This Company’s products, there can be no Annual Financial Statements adversely affected in a particular period. increases the risk that Symantec’s products assurance that such viruses will not be See Part IV, Item 14 of this Form 10-K. (See Note 15 of Notes to Consolidated may be subject to claims of patent in- created in the future. Financial Statements in Part IV, Item 14 fringement. Although such claims may The Company’s license agreements Selected Quarterly Data of this Form 10-K.) ultimately prove to be without merit, with its customers contain provisions Symantec has a 52/53-week fiscal accounting year. Accordingly, all quarterly fiscal Year 2000 – Corporate Systems. The they are time consuming and expensive designed to limit the exposure to poten- periods presented comprised 13 weeks, with the exception of the quarter ended Company has completed an assessment to defend. Symantec has been involved tial product liability claims. It is June 30, 1997, which comprised 14 weeks. of its computer systems and software and in disputes claiming patent infringement possible, however, that the limitation of is modifying or replacing portions of its in the past, is currently involved in a liability provisions contained in such software so that its operating systems will number of such disputes and litigation, license agreements may not be valid as a (In thousands, except net income per share; unaudited) function properly with respect to dates and may be involved in the future in such result of federal, state, local laws or ordi- Fiscal 1998 Fiscal 1997 in the Year 2000 and thereafter. The disputes and/or litigation. If Symantec is nances or unfavorable judicial decisions. Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Company is currently evaluating system alleged to infringe one or more patents, A successful product liability claim could 1998 1997 1997 1997 1997 1996 1996 1996 interfaces with third-party systems, such it may choose to litigate the claim and/or have a material adverse affect on the Net revenues $ 156,092 $ 148,240 $ 139,013 $ 135,016 $ 129,706 $ 124,081 $ 109,178 $ 109,218 as those of key suppliers, distributors and seek an appropriate license. If litigation Company’s business, operating results Gross margin 134,561 125,649 116,624 114,096 100,352 102,105 88,448 87,734 financial institutions, for Year 2000 were to commence and a license were not and financial condition. Acquisition, restructuring and other expenses * — — — — — — 7,290 1,295 Year 2000 – Product Liability. While functionality. The Year 2000 project cost available on reasonable terms or if another Net income ** 24,138 21,836 20,580 18,535 8,269 13,852 882 3,035 is not expected to be material. The pro- party were found to have a valid patent the Company believes that most of its Net income per share - basic $ 0.43 $ 0.39 $ 0.37 $ 0.33 $ 0.15 $ 0.25 $ 0.02 $ 0.06 ject is estimated to be significantly claim against Symantec, such a result could currently developed and actively mar- diluted $ 0.40 $ 0.37 $ 0.35 $ 0.32 $ 0.15 $ 0.25 $ 0.02 $ 0.06 completed during the 1998 calendar year. have a material adverse affect on Symantec’s keted products are Year 2000 compliant * See Note 13 of Notes to Consolidated Financial Statements. The Company believes that, with modi- business, operating results and financial for significantly all functionality, these ** Quarterly operating results for the period ended March 31, 1997 include revenue and charges related to the sale of Symantec’s networking business unit (see Note 12 of Notes to Consolidated Financial Statements). fications to existing software and condition (See Note 15 of Notes to software products could contain errors or conversions to new software, the Year Consolidated Financial Statements in defects related to the Year 2000. 2000 issue will not pose significant oper- Part IV, Item 14 of this Form 10-K). Versions of the Company’s products Software Defects and Product Liability. ational problems for its computer which are not the most currently released systems. However, if such modifications Software products frequently contain or which are not currently being devel- and conversions are not made, or are not errors or defects, especially when first oped may not be Year 2000 compliant. completed timely, the Year 2000 issue introduced or when new versions or The Company sells some of its older could have a material adverse impact on enhancements are released. In the past, product lines, which are not being the operations of the Company. for example, Symantec’s anti-virus soft- actively developed and updated, as such Additionally, the systems of other com- ware products have incorrectly detected products are not necessarily Year 2000 None. panies with which Symantec does viruses which do not exist. Although the compliant. Symantec is currently party business may not address any Year 2000 Company has not experienced any mate- to a lawsuit related to the alleged inabil- problems on a timely basis, which could rial adverse effects resulting from any ity of pre-version 4.0 Norton AntiVirus have an adverse affect on Symantec’s sys- such defects or errors to date, defects and products to function properly in respect tems or business transactions. As testing errors could be found in current ver- to Year 2000. Symantec believes that this of Year 2000 functionality of the sions, future upgrades to current lawsuit has no merit and intends to Company’s systems must occur in a sim- products or newly developed and defend itself vigorously. The final resolu- ulated environment, the Company will released products, despite testing prior to tion of this lawsuit is not expected to not be able to test full system Year 2000 release. Software defects could result in have a material adverse affect on the interfaces and capabilities prior to Year delays in market acceptance or unex- results of operations and financial condi- 2000. The Company believes that its pected reprogramming costs, which tion of the Company, although it is not exposure on Year 2000 issues is not could have a material adverse affect on possible to estimate the possible loss. material to its business as a whole. the Company’s operating results. While However, depending on the amount and Symantec has not been the target of soft- timing of an unfavorable resolution of 30 31 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • as Vice President, Worldwide Sales of sioned officer in the United States Navy Associates. Mr. Calisi holds a Bachelor Symantec and prior to that, Vice President, from 1970 to 1979 serving in the Nuclear of Science degree from the State Worldwide Services of Symantec. Mr. Submarine Force. Mr. Eubanks is a University of New York at Empire State Information required by this Item with respect to Directors may be found in the sec- Siebert joined Symantec in September Information with respect to this Item member of the IEEE and ACM. and has received executive training at the tion captioned “Election of Symantec Directors” appearing in the definitive Proxy Howard A. Bain III is currently Vice 1987. From 1985 to 1987, he was a Sales may be found in the section captioned Wharton School. Mr. Calisi holds several Statement to be delivered to stockholders in connection with the Annual Meeting of Manager at THINK Technologies where “Executive Compensation” appearing in President, Worldwide Operations and copyrights for software innovations from Stockholders to be held on September 17, 1998 (the “Proxy Statement”). Such infor- he was responsible for U.S. corporate, the definitive Proxy Statement to be CFO, at Symantec Corporation. 1981 through 1986 and is an associate of the mation is incorporated herein by reference. Information required by this Item with OEM and international sales. Previously, delivered to stockholders in connection Mr. Bain has over twenty-five years of IEEE Committee. Mr. Calisi became an respect to compliance with Section 16(a) of the Securities Exchange Act of 1934, as he held a number of sales management po- with the Annual Meeting of experience in all phases of corporate executive officer of Symantec in May 1996. amended, may be found in the section captioned “Section 16(a) Beneficial Dieter Giesbrecht is Vice President, sitions in high technology companies in- Stockholders to be held on September 17, operations and challenges. Prior to join- Ownership Reporting Compliance” appearing in the Proxy Statement. cluding Computerland Corporation, 1998. Such information is incorporated ing Symantec in October 1991 as Vice EMEA (Europe, Middle East and Africa) Executive Officers of the Registrant: Wang Laboratories, and Burroughs Cor- herein by reference. President, Finance, he was CFO for sev- of Symantec. Mr. Giesbrecht joined poration. Mr. Siebert is a member of the eral private venture financed technology Symantec in September 1996. From 1995 Board of Directors of TimeLine Solutions companies (RTP semiconductor manu- until joining Symantec, he was Vice THE EXECUTIVE OFFICERS OF THE COMPANY ARE AS FOLLOWS: and Percon, Inc. Mr. Siebert holds a facturing equipment, BiCMOS SRAMs, President of Attachmate Europe based in Name Age Position Bachelor of Science degree in Business laser-based large screen projection sys- Paris, France and was responsible for the Gordon E. Eubanks, Jr. 51 President and Chief Executive Officer Administration from the University of tems for HDTV and computer graphics EMEA region. From 1991 to 1995, he Howard A. Bain III 52 Vice President, Worldwide Operations New Hampshire and is a member of the applications, and high performance disk held several executive functions within and Chief Financial Officer Software Publishers Association. Information with respect to this Item drives for personal computers) where he Lotus Development Europe including Christopher Calisi 38 Vice President, Derek Witte is Vice President, General may be found in the section captioned assisted those management teams in Managing Director UK and Managing Remote Productivity Solutions Business Unit Counsel and Secretary of Symantec. Mr. “Security Ownership of Certain growing their businesses through raising Director Central Europe. He has a Dieter Giesbrecht 54 Vice President, Europe, Middle East and Africa Witte joined Symantec in October 1990. Beneficial Owners and Management” over $50 million in venture capital and degree in Electronics Engineering from (“EMEA”) From October 1987 until joining appearing in the definitive Proxy controlling hyper-growth. His previous the Technical University of Furtwangen Enrique T. Salem 32 Vice President, Security and Assistance Business Symantec, Mr. Witte was Associate Statement to be delivered to stockhold- experience includes senior financial and located in Germany. Mr. Giesbrecht is a Unit and Chief Technical Officer General Counsel and later Director of ers in connection with the Annual accounting management positions with member of the Institute of Directors. Dana E. Siebert 38 Vice President, Americas Enrique T. Salem is Vice President, Legal Services for Claris Corporation, a Meeting of Stockholders to be held on Fairchild Camera and Instrument Derek Witte 41 Vice President, General Counsel and Secretary software subsidiary of Apple Computer, September 17, 1998. Such information is Corporation and as a consultant with Security and Assistance Business Unit Inc. Between January and October 1987, incorporated herein by reference. Arthur Andersen & Company. Mr. Bain and Chief Technical Officer. Mr. Salem Executive officers are chosen by and serve at the discretion of the Board of Directors. Mr. Witte was Assistant General Counsel is a CPA and holds a B.S. from joined Symantec in April 1990 and has There is no family relationship between any director or executive officer of Symantec at Worlds of Wonder, Inc. Previously, California Polytechnic University. held numerous positions including and any other director or executive officer of Symantec. Christopher Calisi is Vice President, Mr. Witte practiced law with the San Director of Development and General Francisco-based law firms of Brobeck, Remote Productivity Solutions Business Manager of Advanced Utilities Group. Gordon E. Eubanks, Jr. is the President Phleger & Harrison and Heller Ehrman ucts. He left Digital Research, Inc. in Unit of Symantec. From 1992 to 1996, Previous to joining Symantec, he was White and McAuliffe during the periods Mr. Calisi held several positions within Vice President in Security Pacific and Chief Executive Officer of September 1983. Mr. Eubanks founded Information with respect to this Item between 1981 and 1983 and 1983 and 1987, Symantec’s Remote Access Business National Bank, Merchant Bank Division, Symantec. He has served as a director of Compiler Systems, Inc. and authored its may be found in the section captioned respectively. Mr. Witte holds a law degree Unit, including Development Manager, where he was responsible for the develop- Symantec since November 1983 and as products: CBASIC, one of the first suc- “Executive Compensation - Certain and a Bachelor of Arts degree in Economics Director of Development, General ment and deployment of a global trading the President and Chief Executive cessful languages on personal computers, Transactions” appearing in the definitive from the University of California at Officer of Symantec since October 1986. and CB80, a compiled version of CBA- Manager and most recently, Vice system. Mr. Salem holds a Bachelor of Proxy Statement to be delivered to Berkeley. Mr. Witte has been a member President, Communication Products. Mr. Eubanks also served as Symantec’s SIC. Compiler Systems, Inc. was Arts degree in Computer Science from stockholders in connection with the of the California bar since 1981. Mr. Calisi joined Symantec in 1992 from Dartmouth College. He is a member of Chairman of the Board from November acquired by Digital Research, Inc. in Annual Meeting of Stockholders to be Unify Corporation, a relational database 1983 to October 1986 and from August of 1981. Mr. Eubanks received his the Board of Directors of the Software held on September 17, 1998. Such infor- and 4GL tools vendor where he served as Council of Southern California and a November 1990 to January 1993. Bachelor of Science degree in Electrical mation is incorporated herein by reference. the Manager of Sales Engineers. Prior to member of the IEEE. Mr. Salem became Previously, Mr. Eubanks was Vice Engineering from Oklahoma State Unify Corporation, Mr. Calisi held an executive officer of Symantec in President of Digital Research, Inc.’s University. He received his Masters development positions with several rela- October 1996. commercial systems division where he degree in Computer Science from Naval Dana E. Siebert is Vice President, tional database vendors, including was responsible for the development and Postgraduate School in Monterey, Britton Lee, Oracle and Computer Americas. Previously, Mr. Siebert served marketing of all system software prod- California. Mr. Eubanks was a commis- 32 33 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • 4.06 Form of Voting and Exchange Trust 10.10* Symantec Corporation 1996 Equity 10.18 Assignment of Lease and Rent, as regarding property located in Sunnyvale, Agreement dated July 5, 1996 between Incentive Plan. (Incorporated by refer- amended, dated as of October 18, 1996, California. (Incorporated by reference to Symantec and Delrina. (Incorporated by ence to Exhibit 4.01 filed with the from Sumitomo Bank Leasing and Exhibit 10.26 filed with the Registrant’s Upon written request, the Company will provide, without charge, a copy of the reference to Annex F filed with the Registrant’s Registration Statement on Finance, Inc., to The Sumitomo Bank, Annual Report on Form 10-K for the Company’s annual report on Form 10-K, including the consolidated financial state- Registrant’s Joint Management Form S-8 (No. 333-18355) filed Limited, San Francisco Branch. year ended March 31, 1991.) Information Circular and Proxy December 20, 1996.) (Incorporated by reference to ments, financial statement schedules and any exhibits for the Company’s most recent 10.27 Office building lease dated as of April 19, Statement dated October 17, 1995.) Exhibit 10.17 filed with the Registrant’s 10.11* Symantec Corporation 1996 Equity 1995, between the Registrant and fiscal year. All requests should be sent to: Shelley Wilson Annual Report on Form 10-K for the 10.01 Amended Agreement Respecting Certain Incentive Plan, as amended. CIGNA Property and Casualty year ended March 28, 1997.) Investor Relations Rights of Publicity. (Incorporated by ref- (Incorporated by reference to Insurance Company regarding property erence to Exhibit 10.04 filed with the Exhibit 4.01 filed with the Registrant’s 10.19 Agreement of Purchase and Sale of located in Cupertino, California. Symantec Corporation Registrant’s Registration Statement on Registration Statement on Form S-8 Cupertino City Center One between (Incorporated by reference to 10201 Torre Avenue Form S-4 (No. 33-35385) initially filed (No. 333-39175) filed October 31, 1997.) Cigna Property and Casualty Insurance Exhibit 10.16 filed with the Registrant’s June 13, 1990.) Company and Symantec Corporation. Annual Report on Form 10-K for the Cupertino, California 95014-2132 10.12* Symantec Corporation Deferred (Incorporated by reference to year ended March 31, 1995.) 408-446-8891 10.02 Non-Competition and Non-Solicitation Compensation Plan dated as of Exhibit 10.18 filed with the Registrant’s Agreement between Registrant and Peter November 7, 1996. (Incorporated by ref- 10.28 Office building lease, as amended, Annual Report on Form 10-K for the Norton and Ronald Posner. erence to Exhibit 10.11 filed with the dated as of December 1, 1995 between year ended March 28, 1997.) (a) The following documents are filed as part of this report: (Incorporated by reference to Exhibit Registrant’s Annual Report on Form Delrina (Canada) Corporation and 10.06 filed with the Registrant’s 10-K for the year ended March 28, 1997.) 10.20 Agreement for Purchase and Sale and Sherway Centre Limited regarding prop- Page Number 1. Consolidated Financial Statements Registration Statement on Form S-4 Escrow Instructions of 10201 Torre erty located in Toronto, Canada. 10.13 Participation Agreement dated as of Report of Ernst & Young LLP, Independent Auditors 37 (No. 33-35385) initially filed June 13, 1990.) Avenue, Cupertino, CA. (Incorporated (Incorporated by reference to October 18, 1996, by and among by reference to Exhibit 10.19 filed with Exhibit 10.01 filed with the Registrants Consolidated Balance Sheets as of March 31, 1998 and 1997 38 10.03* 1988 Employees Stock Option Plan, as Symantec Corporation, Sumitomo Bank the Registrant’s Annual Report on Form Quarterly Report on Form 10-Q for the amended to date. (Incorporated by refer- Leasing and Financing, Inc., The Consolidated Statements of Operations for the Years Ended 10-K for the year ended March 28, 1997.) quarter ended December 29, 1995.) ence to Exhibit 4.02 filed with the Sumitomo Bank, Limited, San Francisco March 31, 1998, 1997 and 1996 39 Registrant’s Registration Statement on Branch and the other Various Financial 10.21 Agreement for Purchase and Sale and 10.29 Form of Indemnity Agreement with Consolidated Statements of Stockholders’ Equity for the Years Form S-8 (No. 33-88694) filed Institutions Identified Herein and the Escrow Instructions, as amended, dated Officers and Directors. (Incorporated by Ended March 31, 1998, 1997 and 1996 40 January 23, 1995.) Sumitomo Bank, Limited, San Francisco as of May 31, 1996. (Incorporated by ref- reference to Exhibit 10.17 filed with the Branch. (Incorporated by reference to erence to Exhibit 10.20 filed with the Registrant’s Registration Statement on Consolidated Statements of Cash Flow for the Years Ended 10.04* 1989 Employee Stock Purchase Plan, as Exhibit 10.01 filed with the Registrants Registrant’s Annual Report on Form Form S-1 (No. 33-28655) originally filed March 31, 1998, 1997 and 1996 41 amended to date. (Incorporated by refer- Quarterly Report on Form 10-Q for the 10-K for the year ended March 28, 1997.) May 19, 1989, and amendment No. 1 ence to Exhibit 4.01 filed with the Summary of Significant Accounting Policies and Notes to quarter ended September 27, 1996.) thereto filed June 21, 1989, which Registrant’s Registration Statement on 10.22 Loan Agreement dated as of October 18, Consolidated Financial Statements 42 Registration Statement became effective Form S-8 (No. 333-18353) filed 10.14 Appendix A to Participation Agreement, 1996, among Sumitomo Bank Leasing June 22, 1989.) December 20, 1996.) Master Lease, Lease Supplements Loan and Finance, Inc., Various Financial 2. Financial Statement Schedules Agreements, Pledge Agreement, Lessor Institutions Identified Herein and The 10.30* Full Recourse Promissory Note and The following financial statement schedule of Symantec Corporation for the years ended 10.05* Form of Stock Option Agreement and Mortgages, and Guaranty. (Incorporated Sumitomo Bank, Limited, San Francisco Pledge Agreement between the Company March 31, 1998, 1997 and 1996 is filed as part of this Form 10-K and should be read in Form of Stock Option Exercise Request, by reference to Exhibit 10.02 filed with Branch. (Incorporated by reference to and Gordon E. Eubanks, Jr. conjunction with the Consolidated Financial Statements of Symantec Corporation. as currently in effect, under the the Registrants Quarterly Report on Exhibit 10.21 filed with the Registrant’s (Incorporated by reference to Registrant’s 1988 Employees Stock Form 10-Q for the quarter ended Annual Report on Form 10-K for the Exhibit 10.19 filed with the Registrant’s Schedule Option Plan. (Incorporated by reference September 27, 1996.) year ended March 28, 1997.) Annual Report on Form 10-K for the II Valuation and Qualifying Accounts 57 to Exhibit 10.10 filed with the year ended April 2, 1993.) Registrant’s Registration Statement on 10.15 Master Lease and Deed of Trust, as 10.23 Construction Agency Agreement dated Schedules other than that listed above have been omitted since they are either not Form S-4 (No. 33-35385) initially filed amended, dated as of October 18, 1996 as of March 3, 1997, between Sumitomo 10.31* Form of Promissory Note and Pledge required, not applicable, or the information is otherwise included. June 13, 1990.) between Symantec Corporation and Bank Leasing and Finance, Inc., and Agreement between the Company and Sumitomo Bank Leasing and Finance, Symantec Corporation. (Incorporated by certain executives. (Incorporated by ref- 3. Exhibits 4.02 Amendment No. One to Registration 10.06* 1988 Directors Stock Option Plan, as Inc. (Incorporated by reference to reference to Exhibit 10.22 filed with the erence to Exhibit 10.20 filed with the The following exhibits are filed as part of, or Rights Agreement. (Incorporated by ref- amended to date. (Incorporated by refer- Exhibit 10.14 filed with the Registrant’s Registrant’s Annual Report on Form Registrant’s Annual Report on Form incorporated by reference into, this Form 10-K: erence to Exhibit 4.03 filed with the ence to Exhibit 10.09 filed with the Annual Report on Form 10-K for the 10-K for the year ended March 28, 1997.) 10-K for the year ended April 2, 1993.) Registrant’s Annual Report on Form 10-K Registrant’s Annual Report on Form year ended March 28, 1997.) 3.01 The Registrant’s Restated Certificate for the year ended April 2, 1993.) 10-K for the year ended April 2, 1993.) 10.24 Symantec - CC5 Office Building and 10.32* Form of Housing Assistance Agreement of Incorporation. (Incorporated by ref- 10.16 Guaranty dated as of October 18, 1996, Parking Structure, as amended, dated as between the Company and certain execu- erence to Annex G filed with the 4.03 Amendment No. Two to Registration 10.07* 1993 Directors Stock Option Plan, as made by Symantec Corporation in favor of May 5, 1997, made by and between tives. (Incorporated by reference to Registrant’s Joint Management Rights Agreement (Incorporated by ref- amended. (Incorporated by reference to of Various Financial Institutions and Symantec Corporation and Webcor Exhibit 10.26 filed with the Registrant’s Information Circular and Proxy erence to Exhibit 4.04 filed with the Exhibit 10.07 filed with the Registrant’s The Sumitomo Bank, Limited, San Builders. (Incorporated by reference to Registration Statement on Form S-4 Statement (No. 000-17781) dated Registrant’s Annual Report on Form Quarterly Report on Form 10-Q for the Francisco Branch. (Incorporated by ref- Exhibit 10.23 filed with the Registrant’s (No. 33-35385) initially filed June 13, 1990.) October 17, 1995.) 10-K for the year ended April 2, 1993.) quarter ended September 30, 1994.) erence to Exhibit 10.05 filed with the Annual Report on Form 10-K for the 10.33 Note Purchase Agreement, dated April 2, Registrants Quarterly Report on Form year ended March 28, 1997.) 3.02 The Registrant’s Bylaws, as currently 4.04 Plan of Arrangement and Exchangeable 10.08* Form of Stock Option Grant and Stock 1993, among Symantec Corporation, 10-Q for the quarter ended in effect. (Incorporated by reference to Share Provisions related to the acquisi- Option Exercise Notice and Agreement 10.25 Office building lease dated as of April 10, Morgan Guaranty Trust Company of September 27, 1996.) Exhibit 3.02 filed with the Registrant’s tion of Delrina. (Incorporated by refer- under the Registrant’s 1988 Directors 1991, between the Registrant and New York, as Trustee, J. P. Morgan Registration Statement on Form S-1 ence to Annex D filed with the Stock Option Plan. (Incorporated by ref- 10.17 Pledge Agreement dated as of October 18, Maguire Thomas Partners Colorado Investments Management, Inc., as (No. 33-28655) originally filed May 19, Registrant’s Joint Management erence to Exhibit 10.12 filed with the 1996, made by Symantec Corporation, in Place regarding property located in Santa Investment Manager and The 1989, and amendment No. 1 thereto Information Circular and Proxy Registrant’s Registration Statement on favor of Sumitomo Bank, Limited, San Monica, California. (Incorporated by ref- Northwestern Mutual Life Insurance filed June 21, 1989, which Registration Statement dated October 17, 1995.) Form S-4 (No. 33-35385) initially filed Francisco Branch for the benefit of the erence to Exhibit 10.25 filed with the Company, including Form of Statement became effective June 22, 1989.) June 13, 1990.) Lenders, and Donaldson, Lufkin, Jenrette Registrant’s Annual Report on Form Convertible Subordinated Notes. 4.05 Support Agreement dated July 5, 1995 Securities Corporations, as collateral 10-K for the year ended March 31, 1991.) (Incorporated by reference to 4.01 Registration Rights Agreement. between Symantec and Delrina. 10.09* 1994 Patent Incentive Plan. agent. (Incorporated by reference to Exhibit 10.30 filed with the Registrant’s (Incorporated by reference to Exhibit 4.02 (Incorporated by reference to Annex E (Incorporated by reference to 10.26 Office building lease dated as of Exhibit 10.06 filed with the Registrants Annual Report on Form 10-K for the filed with the Registrant’s Registration filed with the Registrant’s Joint Exhibit 4.01 filed with the Registrant’s February 27, 1991, between the Quarterly Report on Form 10-Q for the year ended April 2, 1993.) Statement on Form S-4 (No. 33-35385) Management Information Circular and Registration Statement on Form S-8 Registrant and Kim Camp No. VII quarter ended September 27, 1996.) initially filed June 13, 1990.) Proxy Statement dated October 17, 1995.) (No. 33-60141) filed June 9, 1995.) * Indicates a management contract or compensatory plan or arrangement. * Indicates a management contract or compensatory plan or arrangement. 35 34 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • INDEX TO CONSOLIDATED R E P O R T O F E R N S T & Y O U N G L L P, I N D E P E N D E N T A U D I T O R S 10.34* The Registrant’s Section 401(k) Plan, as 10.43 Asset Purchase Agreement dated as of amended. (Incorporated by reference to September 26, 1996, by and between FINANCIAL STATEMENTS Exhibit 10.25 filed with the Registrants Delrina and JetForm. (Incorporated by The Board of Directors and Stockholders Annual Report on Form 10-K for the reference to Exhibit 2.01 filed with the year ended March 31, 1995.) Registrant’s Current Report of Form 8-K Symantec Corporation Page filed September 26, 1996.) 10.35* Form of Executive Compensation Report of Ernst & Young LLP, Agreement between the Company and 10.44 Asset Purchase Agreement, as amended, We have audited the accompanying consolidated balance sheets of Symantec Corporation as of March 31, 1998 and 1997, and certain executives. (Incorporated by ref- dated as of March 28, 1998, by and Independent Auditors 37 erence to Exhibit 10.25 filed with the between Delrina and JetForm. the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period Registrants Annual Report on Form ended March 31, 1998. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial Consolidated Balance Sheets 10.45 Asset Purchase Agreement, as amended, 10-K for the year ended March 31, 1995.) dated as of March 27, 1997 by and statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on as of March 31, 1998 and 1997 38 10.36 Assignment of Copyright and Other between Hewlett-Packard Company and these consolidated financial statements and schedule based on our audits. Intellectual Property Rights. Symantec Corporation. (Incorporated by Consolidated Statements of (Incorporated by reference to appendix reference to Exhibit 10.43 filed with the We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and to Prospectus/Proxy Statement filed with Registrant’s Annual Report on Form Operations for the years ended perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An the Registrant’s Registration Statement 10-K for the year ended March 28, 1997.) March 31, 1998, 1997 and 1996 39 on Form S-4 (No. 33-35385) initially filed audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit 10.46 Master agreement, dated May 18, 1998, June 13, 1990.) between International Business Machines Consolidated Statements of also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the 10.37* Employment and Consulting Agreement Corporation and Symantec Corporation. Stockholders’ Equity for the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. among Symantec Corporation, Symantec (Confidential treatment has been requested Acquisition Corp. and Charles M. with respect to portions of this exhibit.) years ended March 31, 1998, In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial Boesenberg. (Incorporated by reference 1997 and 1996 40 position of Symantec Corporation at March 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for 10.47 Class action complaint filed by the law to Exhibit 10.32 filed with the firm of Milberg Weiss Bershad Hynes & Registrant’s Annual Report of Form each of the three years in the period ended March 31, 1998, in conformity with generally accepted accounting principles. Also, in Lerach in Superior Court of the State of Consolidated Statements of Cash 10-K for the year ended April 1, 1994.) our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a California, County of Santa Clara (Confidential treatment has been granted Flow for the years ended March 31, against the Company and several of its with respect to portions of this exhibit.) whole, presents fairly in all material respects the information set forth therein. current and former officers and directors. 1998, 1997 and 1996 41 10.38* Stock Option Grant between the (Incorporated by reference to Exhibit Company and Charles Boesenberg. 10.35 filed with the Registrant’s Annual Summary of Significant (Incorporated by reference to Report of Form 10-K for the year ended Accounting Policies 42 Exhibit 10.29 filed with the Registrants March 31, 1996.) Annual Report on Form 10-K for the 21.01 Subsidiaries of the Registrant. year ended March 31, 1995.) Notes to Consolidated 23.01 Consent of Ernst & Young LLP, Financial Statements 44 10.39 Authorized Distributor Agreement Independent Auditors. between Symantec Corporation and Ingram Micro, Inc. (Incorporated by ref- 27.01 Financial Data Schedule for the Year erence to Exhibit 10.34 filed with the Ended March 31, 1996 (restated). Registrant’s Quarterly Report of Form 10-Q for the quarter ended July 1, 1994.) 27.02 Financial Data Schedule for the Year (Confidential treatment has been granted Ended March 31, 1997 (restated). ERNST & YOUNG LLP with respect to portions of this exhibit.) 27.03 Financial Data Schedule for the Year 10.40 Authorized Distributor Agreement Ended March 31, 1998. between Symantec Corporation and San Jose, California Merisel Americas, Inc. (Incorporated by (b) Reports on Form 8-K: None. April 30, 1998, except for Note 17, as to which the date is May 19, 1998. reference to Exhibit 10.35 filed with the Registrant’s Quarterly Report of Form (c) Exhibits: The Registrant hereby files 10-Q for the quarter ended July 1, 1994.) (Confidential treatment has been granted as part of this Form 10-K the exhibits with respect to portions of this exhibit.) listed in Item 14(a)3, as set forth above. 10.41* Employment and Non-competition Agreement between Symantec (d) Financial Statement Schedules: The Corporation and Dennis Bennie. Registrant hereby files as part of this (Incorporated by reference to Exhibit 10.02 filed with the Registrants Form 10-K the schedule listed in Quarterly Report on Form 10-Q for the Item 14(a)2, as set forth on page 57. quarter ended December 29, 1995.) 10.42 Combination Agreement between Symantec Corporation and Delrina Corporation dated July 5, 1995. (Incorporated by reference to Exhibit 10.01 filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.) * Indicates a management contract or compensatory plan or arrangement. 36 37 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF OPERATIONS March 31, Year Ended March 31, (In thousands) 1998 1997 (In thousands, except net income (loss) per share) 1998 1997 1996 Net revenues $ 578,361 $ 472,183 $ 445,432 ASSETS Current assets: Cost of revenues 87,431 93,544 108,975 Cash and short-term investments $ 225,883 $ 160,082 Gross margin 490,930 378,639 336,457 Trade accounts receivable 65,158 45,375 Operating expenses: Inventories 3,175 4,476 Research and development 91,332 88,924 94,672 Deferred income taxes 19,677 12,823 Sales and marketing 261,190 220,811 229,703 Other 14,646 13,166 General and administrative 38,063 34,030 32,744 Total current assets 328,539 235,922 Acquisition, restructuring and other expenses — 8,585 27,617 Long-term investments 34,258 — Total operating expenses 390,585 352,350 384,736 Restricted investments 59,370 47,448 Operating income (loss) 100,345 26,289 (48,279) Equipment and leasehold improvements 50,030 51,610 Interest income 13,160 7,182 7,512 Other 4,263 4,418 Interest expense (1,218) (1,402) (1,495) $ 476,460 $ 339,398 Other income (expense), net (190) (1,691) (2,130) Income (loss) before income taxes 112,097 30,378 (44,392) Liabilities and Stockholders’ Equity Provision (benefit) for income taxes 27,008 4,340 (4,609) Current liabilities: Net income (loss) $ 85,089 $ 26,038 $ (39,783) Accounts payable $ 34,171 $ 30,328 Net income (loss) per share - basic $ 1.52 $ 0.48 $ (0.76) Net income (loss) per share - diluted $ 1.42 $ 0.47 $ (0.76) Accrued compensation and benefits 21,332 16,241 Shares used to compute net income (loss) per share - basic 56,097 54,705 52,664 Other accrued expenses 64,532 51,508 Shares used to compute net income (loss) per share - diluted 60,281 55,407 52,664 Income taxes payable 24,634 8,276 Current portion of convertible subordinated debentures 8,333 — Total current liabilities 153,002 106,353 Convertible subordinated debentures and other 5,951 15,066 Commitments and contingencies Stockholders’ equity: Preferred stock (authorized: 1,000; issued and outstanding: none) — — Common stock (authorized: 100,000; issued and outstanding: 57,109 and 55,427 shares) 571 554 Capital in excess of par value 311,106 291,548 Notes receivable from stockholders (144) (144) Cumulative translation adjustment (12,716) (7,580) Retained earnings (deficit) 18,690 (66,399) Total stockholders’ equity 317,507 217,979 $ 476,460 $ 339,398 The accompanying Summary of Significant Accounting Policies and Notes to The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements. Consolidated Financial Statements are an integral part of these statements. 38 39 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY CONSOLIDATED STATEMENTS OF CASH FLOW Year Ended March 31, Notes (In thousands) 1998 1997 1996 Capital in Receivable Cumulative Retained Total Common Excess of from Translation Earnings Stockholders’ Operating Activities: (In thousands) Stock Par Value Stockholders Adjustment (Deficit) Equity Net income (loss) $ 85,089 $ 26,038 $ (39,783) Delrina net loss for the quarter ended June 30, 1995 — — 4,834 Balances, March 31, 1995 $ 508 $ 248,766 $ (144) $ (7,213) $ (57,043) $ 184,874 Acquired company’s accumulated deficit — (445) — Net loss — — — — (39,783) (39,783) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Delrina net loss for the quarter Depreciation and amortization of equipment and ended June 30, 1995 — — — — 4,834 4,834 leasehold improvements 25,231 22,770 19,717 Issued common stock: Amortization and write-off of capitalized software costs 1,466 10,477 19,141 Write-off of equipment and leasehold improvements 1,225 4,010 3,403 2,021 shares under stock plans and other 20 21,101 — — — 21,121 Deferred income taxes (6,915) 21 (989) 833 shares from conversion of Net change in assets and liabilities: convertible debentures 8 9,641 — — — 9,649 Trade accounts receivable (22,873) 11,621 19,137 Inventories 1,040 3,432 1,450 Translation adjustment — — — (378) — (378) Other current assets (1,839) 1,304 (6,461) Balances, March 31, 1996 536 279,508 (144) (7,591) (91,992) 180,317 Capitalized software costs — (7,656) (3,286) Other assets (556) 2,720 2,465 Net income — — — — 26,038 26,038 Accounts payable 5,568 7,373 (2,368) Acquisition of Fast Track: Accrued compensation and benefits 5,371 1,502 1,313 Issued 600 shares of common stock 6 (5) — — — 1 Other accrued expenses 14,018 6,182 (8,786) Income taxes payable 17,051 5,031 1,211 Acquired company’s accumulated deficit — — — — (445) (445) Income tax benefit from stock options 7,000 — — Issued common stock: Net cash provided by operating activities 130,876 94,380 10,998 1,191 shares under stock plans and other 12 12,045 — — — 12,057 Investing Activities: Capital expenditures (26,339) (27,195) (35,767) Translation adjustment — — — — 11 11 Purchased intangibles (948) (698) (461) Balances, March 31, 1997 554 291,548 (144) (7,580) (66,399) 217,979 Purchases of marketable securities (230,891) (180,000) (154,500) Proceeds from sales of marketable securities 174,087 203,098 168,681 Net income — — — — 85,089 85,089 Purchases of long-term, restricted investments (11,922) (47,448) — Issued common stock: Net cash used in investing activities (96,013) (52,243) (22,047) 2,622 shares under stock plans and other 26 33,179 — — — 33,205 Financing Activities: 60 shares from conversion of Repurchase of Company’s common stock (21,346) — — convertible debentures 715 — — — 716 Net proceeds from sales of common stock and other 33,108 11,703 20,295 1 Net cash provided by financing activities 11,762 11,703 20,295 Repurchase 1,000 shares of common stock (10) (21,336) — — — (21,346) Effect of exchange rate fluctuations on cash and cash equivalents (3,370) 141 2,339 Income tax benefit related to stock options — 7,000 — — — 7,000 Increase in cash and cash equivalents 43,255 53,981 11,585 Beginning cash and cash equivalents 95,758 41,777 30,192 Translation adjustment — — — (5,136) — (5,136) Ending cash and cash equivalents $ 139,013 $ 95,758 $ 41,777 Balances, March 31, 1998 $ 571 $ 311,106 $ (144) $ (12,716) $ 18,690 $ 317,507 Supplemental cash flow disclosures: Income taxes paid (net of refunds) during the year $ 6,037 $ 392 $ 906 Interest paid on convertible subordinated debentures and long-term obligations $ 1,150 $ 1,182 $ 1,299 The accompanying Summary of Significant Accounting Policies and Notes to The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements. Consolidated Financial Statements are an integral part of these statements. 40 41 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • SUMMARY OF SIGNIFICANT Inventories April 3, 1998, March 28, 1997 and accrued at the time of the sale and is short collection terms and the geographi- Basic net income (loss) per share is Inventories are valued at the lower of March 29, 1996, respectively. The fiscal included in sales and marketing expense. cal dispersion of sales transactions. The computed using the weighted average ACCOUNTING POLICIES cost or market. Cost is principally deter- year ending on April 3, 1998 is comprised Royalty revenues are recognized as Company generally does not require col- number of common shares outstanding mined using currently adjusted of a 53-week period. earned unless collection of such revenues lateral and maintains reserves for potential during the periods. Diluted net income Business standards, which approximate actual cost Symantec Corporation (“Symantec” or is not assured. When collection is not credit losses and such losses have been (loss) per share is computed using the on a first-in, first-out basis. the “Company”) develops, markets and assured, revenues are recognized as pay- within management’s expectations. weighted average number of common Use of Estimates supports utility software for business and ments are received. shares outstanding and potentially dilu- The preparation of financial statements personal computing. Symantec’s products Equipment and Leasehold tive common shares during the periods. in conformity with generally accepted Impairment of Long-Lived Assets are currently organized into the following Improvements Diluted earnings per share includes the accounting principles requires management Statement of Financial Accounting Cash Equivalents, Investments and Equipment and leasehold improvements three business units: Security and assumed conversion of all of the out- to make estimates and assumptions that Standards (SFAS) No. 121, “Accounting Restricted Investments are stated at cost, net of accumulated Assistance; Remote Productivity Solutions; standing convertible subordinated affect the amounts reported in the financial Symantec considers investments in highly for the Impairment of Long-Lived Assets depreciation and amortization. and Internet Tools, Royalties and Other. debentures, if dilutive in the period. statements and accompanying notes. Actual liquid instruments purchased with an and for Long-Lived Assets to be Depreciation and amortization is pro- Customers consist primarily of individ- results could differ from those estimates. original maturity of 90 days or less to be Disposed of,” applicable for the fiscal vided on a straight-line basis over the ual users, corporations, higher education cash equivalents. All of the Company’s year beginning April 1, 1996, did not Concentrations of Credit Risk estimated useful lives of the respective institutions and government agencies, cash equivalents, short-term investments, The Company’s product revenues are have a material affect on the Company’s F o r e i g n C u r r e n c y Tr a n s l a t i o n assets, generally the shorter of the lease which are mainly located in North long-term investments and restricted concentrated in the personal computer consolidated financial condition or The functional currency of the term or three to seven years. America, Europe, Asia/Pacific, Latin investments are classified as available-for- software industry, which is highly com- results of operations. Company’s foreign subsidiaries is the America and South America. sale as of the balance sheet date. These petitive and rapidly changing. Significant local currency. Assets and liabilities Capitalized Software securities are reported at fair market technological changes in the industry or denominated in foreign currencies are Recent Accounting Pronouncements Purchased product rights are comprised value and any unrealized gains and losses customer requirements, or the emergence translated using the exchange rate on the In June 1997, the Financial Accounting Principles of Consolidation of acquired software (“product rights”) The accompanying consolidated finan- are included in stockholders’ equity. of competitive products with new capa- balance sheet dates. The cumulative Standards Board issued SFAS No. 130, and are stated at cost less accumulated cial statements include the accounts of Realized gains and losses and declines in bilities or technologies, could adversely translation adjustments resulting from “Reporting Comprehensive Income,” which amortization. Amortization is provided Symantec Corporation and its wholly- value judged to be other-than-temporary affect operating results. In addition, a this process are shown separately as a establishes standards for reporting and on the greater of the straight-line basis owned subsidiaries. All significant are included in interest income. The cost significant portion of the Company’s component of stockholders’ equity. displaying comprehensive income and its over the estimated useful lives of the intercompany accounts and transactions of securities sold is based upon the spe- revenue and net income is derived from Revenues and expenses are translated components in a full set of general-purpose respective assets, generally three to five have been eliminated. cific identification method. international sales and independent agents using average exchange rates prevailing financial statements and is required to be years, or on the basis of the ratio of cur- and distributors. Fluctuations of the during the year. Foreign currency trans- adopted by Symantec beginning in fiscal rent revenues to current revenues plus U.S. dollar against foreign currencies, action gains and losses are included in 1999. Symantec is evaluating the potential Basis of Presentation Derivative Financial Instruments anticipated future revenues. changes in local regulatory or economic During fiscal year 1998, no companies the determination of net income (loss). Symantec utilizes natural hedging to impact of this accounting pronouncement conditions, piracy or nonperformance by were acquired by Symantec. During mitigate the Company’s foreign currency on required disclosures. The Company independent agents or distributors could fiscal 1997 and 1996, Symantec acquired I n c o m e Ta x e s exposures and hedges certain residual anticipates that its unrealized gain and loss Revenue Recognition Income taxes are computed in accordance adversely affect operating results. Delrina Corporation (“Delrina”) and exposures through the use of one-month on investments and cumulative translation Symantec recognizes revenue upon ship- with Statement of Financial Accounting Financial instruments that potentially Fast Track, Inc. (“Fast Track”) in trans- foreign exchange forward contracts. The adjustment balances will be included as ment when no significant vendor Standards No. 109, “Accounting for subject the Company to concentrations actions accounted for as poolings of Company enters into foreign exchange components of comprehensive income. obligations remain and collection of the Income Taxes.” of credit risk consist principally of short- interests. All financial information has forward contracts with financial institu- Additionally, the Financial Accounting receivable, net of provisions for estimated term and long-term investments, been restated to reflect the combined tions primarily to minimize currency Standards Board issued SFAS No. 131, future returns, is probable. Symantec restricted investments and trade accounts operations of Symantec. The results of exchange risks associated with certain “Disclosures about Segments of an Net Income (Loss) Per Share offers the right of return of its products In 1997, the Financial Accounting receivable. The Company’s investment operations of Fast Track were not mater- balance sheet positions. Gains and losses Enterprise and Related Information,” under various programs. The Company Standards Board issued Statement No. 128, portfolio is diversified and consists of ial to Symantec’s consolidated financial on the contracts are included in other which establishes standards for the way that estimates and maintains reserves for “Accounting for Earnings Per Share,” investment grade securities. The statements, and therefore, amounts prior income (loss) in the period as gains and public business enterprises report infor- product returns. (“SFAS 128”). SFAS 128 replaced the Company is exposed to credit risks in the to the year of acquisition were not com- losses on the underlying transactions are mation in annual statements and interim Revenues related to significant post- calculation of primary and fully diluted event of default by these institutions to bined with Symantec’s financial statements. recognized and generally offset. The fair financial reports regarding operating seg- contract support agreements (generally net income (loss) per share with basic the extent of the amount recorded on the Symantec has a 52/53-week fiscal value of foreign currency exchange for- ments, products and services, geographic product maintenance agreements) are and diluted net income (loss) per share. balance sheet. The credit risk in the accounting year. Accordingly, all refer- ward contracts approximates cost due to areas and major customers. SFAS 131 will deferred and recognized over the period Accordingly, prior period net income Company’s trade accounts receivable is ences as of and for the periods ended the short maturity periods. be effective for Symantec for fiscal 1999 of the agreements. The estimated cost of (loss) per share have been restated in substantially mitigated by the Company’s March 31, 1998, 1997 and 1996 reflect year-end and will apply to both annual providing insignificant post-contract accordance with SFAS 128. credit evaluation process, reasonably amounts as of and for the periods ended and interim financial reporting subsequent support (generally telephone support) is 42 43 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3. Business Combinations and Purchased Product Rights to this date. Symantec is evaluating the Note 1. Balance Sheet Information During the three fiscal years ended March 31, 1998, Symantec completed acquisitions potential impact of these accounting pro- March 31, of the following companies: nouncements on required disclosures. (In thousands) 1998 1997 SFAS 131 is not expected to have a mater- Cash, cash equivalents and short-term investments: Shares of Acquired Cash $ 28,236 $ 33,755 Symantec Company ial impact on the financial condition or Cash equivalents 110,777 62,003 Common Stock results of operations of the Company. Short-term investments 86,870 64,324 Stock Options In October 1997 and March 1998, the $ 225,883 $ 160,082 Companies Acquired Date Acquired Issued Assumed Accounting Standards Executive Trade accounts receivable: Fast Track, Inc. (“Fast Track”) May 28, 1996 600,000 — Receivables $ 69,574 $ 49,675 Committee (“AcSEC”) issued Statement Delrina Corporation (“Delrina”) November 22, 1995 13,684,174* 1,271,677 Less: allowance for doubtful accounts (4,416) (4,300) of Position (“SOP”) 97-2, “Software $ 65,158 $ 45,375 Revenue Recognition” and SOP 98-4, Inventories: * Includes Delrina exchangeable stock that is traded on the Toronto Stock Exchange. Delrina stockholders “Deferral of the Effective Date of a Raw materials $ 1,091 $ 1,736 received Delrina exchangeable stock in exchange for Delrina common shares at a rate of 0.61 per share. Finished goods 2,084 2,740 Provision of SOP 97-2, Software Revenue Delrina exchangeable stock may be converted at any time into Symantec common stock on a one-for-one $ 3,175 $ 4,476 basis at each stockholder’s option. Recognition,” respectively, which provide Equipment and leasehold improvements: guidance on applying generally accepted Computer hardware and software $ 107,724 $ 91,533 Both acquisitions were accounted for as Note 5. Cash Equivalents, Note 4. Capitalized Software accounting principles in recognizing Office furniture and equipment 29,407 27,706 In fiscal 1998, capitalization of certain poolings of interests. In connection with I n v e s t m e n t s a n d F a i r Va l u e o f Leasehold improvements 21,038 17,697 revenue on software transactions and is 158,169 136,936 software development costs in accordance the acquisitions of the companies listed Financial Instruments effective for Symantec’s transactions Less: accumulated depreciation and amortization (108,139) (85,326) Available-For-Sale Investments and with Statement of Financial Accounting above, Symantec incurred significant entered into subsequent to April 3, 1998. $ 50,030 $ 51,610 Trading Investments Standards No. 86 did not materially acquisition expenses (See Note 13 of Notes AcSEC is currently deliberating the Other assets: All cash equivalents, short-term invest- affect the Company. Amortization to Consolidated Financial Statements). Purchased product rights $ 1,358 $ 591 potential permanent deferral of certain Capitalized software costs 2,414 2,465 ments, long-term investments and expense for capitalized software develop- Due to differing year ends of Symantec provisions of SOP 97-2. Less: accumulated amortization of restricted investments have been classi- ment costs was approximately $0.8 and Delrina, financial information for The Company does not believe that purchased product rights (563) (55) fied as available-for-sale securities. million in fiscal 1998. dissimilar fiscal year ends was combined. the implementation of SOP 97-2 and Less: accumulated amortization During fiscal 1998, the Company main- In fiscal 1997, Symantec capitalized Delrina’s fiscal year ended June 30, 1995 of capitalized software costs (1,739) (964) SOP 98-4 will have a material adverse Other assets 2,793 2,381 tained a trading asset portfolio to approximately $7.7 million of software was combined with Symantec’s fiscal affect on expected revenues or earnings. $ 4,263 $ 4,418 generate returns that offset changes in development costs, primarily related to year ended March 31, 1995. Accordingly, However, in the event subsequent inter- Other accrued expenses: certain liabilities related to deferred network administration technology, Delrina’s results of operations for the pretations are contrary to the Company’s Deferred revenue $ 25,537 $ 11,550 compensation arrangements. The trading which was sold to Hewlett-Packard in quarter ended June 30, 1995 were duplicated Marketing development funds 12,815 12,529 revenue accounting practices, the Company Other 26,180 27,429 assets, which consist of marketable March 1997, resulting in the write off of in the combined statements of operations believes it can change its current business $ 64,532 $ 51,508 equity securities and have a fair value of approximately $7.0 million of unamor- for fiscal 1996 and 1995 and accordingly, practices to comply with this guidance approximately $0.2 million, have been tized costs during the fourth quarter of Delrina’s net loss for the quarter ended and avoid any material adverse affect on Note 2. Income Statement Information included in the available-for-sale tabular fiscal 1997 (See Note 12 of Notes to Year Ended March 31, June 30, 1995 was credited to stockholder’s reported revenues and earnings. There (In thousands) 1998 1997 1996 disclosure, due to immateriality. Consolidated Financial Statements). equity. Delrina reported net revenues of can be no assurance this will be the case. Technical support costs included Amortization expense for capitalized $19.8 million and a net loss of $4.8 million in sales and marketing $ 38,582 $ 35,1 1 1 $ 34,487 software development costs was approxi- in the quarter ended June 30, 1995. The Reclassifications Advertising expense $ 46,814 $ 39,147 $ 43,015 mately $2.9 million in fiscal 1997. results of operations of Fast Track were Certain previously reported amounts Prior to fiscal 1997, capitalization of not material to Symantec’s consolidated have been reclassified to conform to the certain software development costs in financial statements, and therefore, Technical support costs included in sales and marketing relate to the estimated cost current presentation format with no accordance with Statement of Financial amounts prior to the date of acquisition of providing insignificant post-contract support (generally telephone support) that is impact on net income (loss). All financial Accounting Standards No. 86 did not were not restated to reflect the combined accrued at the time of product sale. information has been restated to conform materially affect the Company, except for operations of the companies. Advertising expenditures are charged to operations as incurred except for certain to this presentation. amounts capitalized by Delrina prior to direct mail campaigns which are deferred and amortized over the expected period of its acquisition by Symantec in fiscal 1996. benefit. Deferred advertising costs have not been material in all periods presented. The related amortization expense was approximately $5.6 million in fiscal 1996. 44 45 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Note 8. Commitments As of March 31, 1998 and 1997, the estimated fair value of the cash equivalents, sures through the use of one-month foreign and the repurchase of capital stock to a total the property under lease or arrange a third Symantec leases all of its facilities and short-term investments and long-term investments consisted of the following: exchange forward contracts. The Company of $10.0 million plus 25% of cumulative party purchase, then the Company will certain equipment under operating leases enters into foreign exchange forward net income subsequent to April 2, 1993. be obligated to the lessor for a guaranteed Cash equivalents, short and long-term investments 1998 1997 (In thousands) that expire at various dates through 2026. contracts with financial institutions pri- On April 26, 1995, convertible subor- residual amount equal to a specified per- Money market funds $ 15,685 $ 2,598 The Company currently subleases some marily to protect against currency exchange dinated debentures totaling $10.0 million centage of the lessor’s purchase price of the Corporate securities 161,848 69,326 space under various operating leases which risks associated with certain balance sheet were converted into 833,333 shares of property. Symantec would also be obligated Bank securities and deposits 41,655 20,755 will expire at various dates through 2001. positions. The fair value of foreign Symantec common stock, leaving to the lessor for all or some portion of U.S. government and government sponsored securities 12,717 33,648 The future fiscal year minimum operating exchange forward contracts are based on 1,250,000 shares of common stock reserved this amount if the price paid by the third Total available-for-sale and trading investments $ 231,905 $ 126,327 lease commitments were as follows at quoted market prices. At March 31, 1998, for future conversion as of March 31, 1997. party is below the guaranteed residual March 31, 1998: (In thousands) outstanding forward exchange contracts During October 1997, convertible amount. The guaranteed residual payment The estimated fair value of marketable securities by contractual maturity as of 1999 $ 16,841 had a notional amount of approximately subordinated debentures totaling $0.7 on the lease agreements for the two existing March 31, 1998 are as follows: 2000 15,305 $47.5 million, all of which mature in 35 million were converted into 59,666 shares office buildings totals approximately $38.4 Cash equivalents, short and long-term investments 1998 2001 12,086 (In thousands) days or less. The net liability of forward of Symantec common stock, leaving million. The guaranteed residual payment Due in one year or less $ 197,647 2002 8,672 contracts was a notional amount of 1,190,334 shares of common stock reserved on the lease agreements for the land and Due after one year through three years 18,685 2003 8,169 approximately $47.5 million at March 31, for future conversions as of March 31, 1998. office building under construction was Due after three years 15,573 Thereafter 21,288 1998. The fair value of foreign currency The estimated fair value of the $14.3 approximately $19.4 million at March 31, 1998 $ 231,905 Operating lease commitments 82,361 exchange forward contracts approximates million convertible subordinated debentures and will increase to approximately $31.7 Sublease income (3,890 ) cost due to the short maturity periods was approximately $32.8 million at million at the completion of the con- Fair values of cash equivalents, short-term investments and long-term investments Net operating lease and the minimal fluctuations in foreign March 31, 1998. The estimated fair value struction during fiscal year 1999. As and trading assets approximate cost due to one or more of the following: the commitments $ 78,471 currency exchange rates. The Company was based on the total shares of common security against these guaranteed residual pay- short-term maturities of the investments, absence of changes in underlying interest rates or the absence of changes in security credit ratings. does not hedge its translation risk. stock reserved for issuance upon conversion ments, Symantec is required to maintain Rent expense charged to operations totaled of the debentures at the closing price of a corresponding investment in U.S. As of March 31, 1998 and 1997, the estimated fair value of the restricted investments consisted of the following: approximately $14.1 million, $12.4 million the Company’s common stock at March 31, Treasury securities with maturities not to Note 6. Convertible Subordinated Restricted Investments and $11.3 million for the years ended 1998 1997 1998, which exceeded the conversion exceed three years. Symantec is restricted Debentures (In thousands) March 31, 1998, 1997 and 1996, respectively. price of $12 per share, plus accrued interest. in its use of these investments per the On April 2, 1993, the Company issued Money market funds $— $6 In fiscal 1997, Symantec entered into terms of the lease agreement. At March convertible subordinated debentures U.S. government and government sponsored securities 59,370 47,442 lease agreements for two existing office 31, 1998, the investments total approxi- totaling $25.0 million. The debentures bear Note 7. Line of Credit $ 59,370 $ 47,448 buildings, land and one office building mately $59.4 million and are classified as interest at 7.75% payable semiannually and The Company recently renewed its $10.0 currently under construction in Cupertino, non-current restricted investments within are convertible into Symantec common million bank line of credit to expire in The estimated fair value of restricted marketable securities by contractual maturity as California. Lease payments are based on of March 31, 1998 are as follows: the financial statements. stock at $12 per share at the option of the May 2000. The line of credit is available the three-month LIBOR in effect at the Restricted Investments 1998 The Company currently occupies a investor. The debentures are due in three for general corporate purposes and bears (In thousands) beginning of each fiscal quarter. Symantec portion of these office buildings and has equal annual installments beginning in 1999 interest at the banks’ reference (prime) Due in one year or less $ 54,334 has the right to acquire the related properties assumed the right to sub-lease income and are redeemable at the option of the interest rate (8.50% at March 31, 1998), the Due after one year through three years 5,036 at any time during the seven-year lease provided by the other tenants. The sub- investors in the event of a change in control U.S. offshore rate plus 1.25%, a CD rate $ 59,370 period. If at the end of the lease term lease agreements have terms expiring in of Symantec or the sale of all or substantially plus 1.25% or LIBOR plus 1.25%, at the Symantec does not renew the lease, purchase August 1999 through February 2001. all of the assets of the Company. Symantec, Company’s discretion. The line of credit The Company’s available-for-sale Unrealized gains (losses) on all avail- at its option, may redeem the notes at any requires bank approval for the payment N o t e 9 . I n c o m e Ta x e s restricted investments relate to certain able-for-sale securities are reported as a time with 30 to 60 days notice; however, of cash dividends. Borrowings under this The components of the provision (benefit) for income taxes were as follows: collateral requirements for lease agreements component of stockholders’ equity and the Company could incur a prepayment line are unsecured and are subject to the Year Ended March 31, associated with Symantec’s corporate are not material. penalty for early redemption. The holders Company maintaining certain financial (In thousands) 1998 1997 1996 Current: Federal $ 13,615 $ 514 $ (5,882 ) facilities in Cupertino, California. Fair During the period covered by the are entitled to certain registration rights ratios and profits. The Company was in State 4,879 302 130 values of the restricted investments financial statements, the Company has relating to the shares of common stock compliance with the line of credit covenants International 15,368 3,472 2,149 approximate cost due to one or more of not used any derivative instrument for resulting from the conversion of the deben- as of March 31, 1998. At March 31, 1998, 33,862 4,288 (3,603 ) the following: the short-term maturities trading purposes. Symantec utilizes some tures. The Company reserved 2,083,333 there was less than $1 million of standby Deferred: Federal (5,788 ) 565 (1,006 ) State (2,247 ) 126 — of the investments, absence of changes in natural hedging to mitigate the Company’s shares of common stock to be issued upon letters of credit outstanding under this line International 1,181 (639 ) — underlying interest rates or the absence foreign currency exposures and the conversion of these debentures. The deben- of credit. There were no borrowings out- (6,854 ) 52 (1,006 ) of changes in security credit ratings. Company hedges certain residual expo- tures limit the payment of cash dividends standing under this line at March 31, 1998. $ 27,008 $ 4,340 $ (4,609 ) 46 47 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Realization of the $19.7 million of net offer to each employee with stock for issuance under this plan. As of March 31, The difference between the Company’s effective income tax rate and the federal statutory Company contributions under the plan deferred tax asset that is reflected in the options having an exercise price greater 1998, no shares had been issued under income tax rate as a percentage of income (loss) before income taxes was as follows: were $2.2 million, $2.0 million and $1.5 Year Ended March 31, financial statements is dependent upon than $13.10 (the “Old Options”) the this plan. million for the years ended March 31, 1998, 1998 1997 1996 Stock Option Plans. The Company the Company’s ability to generate suffi- opportunity to cancel the affected grants 1997 and 1996, respectively. Federal statutory rate 35.0 % 35.0 % (35.0)% Employee Stock Purchase Plan. In cient future U.S. taxable income. and receive a new grant for the same maintains stock option plans pursuant to State taxes, net of federal benefit 1.5 2.9 0.3 Management believes that it is more number of shares dated March 4, 1996 which an aggregate total of approximately October 1989, the Company established Non-deductible acquisition expenses — — 6.8 likely than not that the asset will be real- (the “New Options”). On the date of 20.1 million shares of common stock the 1989 Employee Stock Purchase Plan Impact of international operations (4.0) (9.2) — ized based on forecasted U.S. earnings. grant, the New Options had an exercise have been reserved for issuance as incentive and a total of 3.4 million shares of common Losses for which no benefit is Approximately $23.3 million of the price equal to $13.10 and a stock price of and nonqualified stock options to stock have been reserved for issuance currently recognizable — — 16.9 valuation allowance for deferred tax $12.63. Under the terms of this stock employees, officers, directors, consultants, under this plan. Subject to certain limi- Benefit of pre-acquisition losses assets is attributable to unbenefitted option cancellation and regrant, all independent contractors and advisors to tations, Company employees may of acquired entities (10.1) (16.5) — stock option deductions, the benefit of options began vesting as of the new grant the Company (or of any parent, subsidiary purchase, through payroll deductions of Other, net 1.7 2.1 0.7 which will be credited to equity when date and no portion of any regranted or affiliate of the Company as the Board 2 to 10% of compensation, shares of 24.1 % 14.3 % (10.3)% realized. The remaining $1.8 million of options were exercisable until March 4, of Directors or committee may deter- common stock at a price per share that is the valuation allowance represents net 1997. Options representing a total of mine). The purpose of these plans is to the lesser of 85% of the fair market value The principal components of deferred tax assets were as follows: operating loss and tax credit carryforwards approximately 2.3 million shares of com- attract, retain and motivate eligible persons as of the beginning of the offering period March 31, of various acquired companies that are mon stock were canceled and regranted. whose present and potential contributions or the end of the purchase period. As of (In thousands) 1998 1997 limited by separate return limitations and The weighted average fair value of these are important to the success of the March 31, 1998, approximately 2.4 million Tax credit carryforwards $ 6,821 $ 9,158 under the “change of ownership” rules New Options was $14.79. The President Company by offering them an opportunity shares had been issued and 1.0 million of Internal Revenue Code Section 382. and Chief Executive Officer, the then to participate in the Company’s future Net operating loss carryforwards 3,161 7,969 shares remain to be issued under the The change in the valuation allowance Executive Vice President, Worldwide performance through awards of stock Employee Stock Purchase Plan. Inventory valuation accounts 2,806 2,327 Stock Award Plans. During fiscal 1996, for the years ended March 31, 1998, Operations and Chief Financial Officer, options and stock bonuses. Under the terms Other reserves and accruals not currently tax deductible 12,828 8,570 1997 and 1996 was a net decrease of the majority of the then members of the of these plans, the option exercise price the Company registered 400,000 shares Accrued compensation and benefits 3,512 2,392 $15.1 million and $5.4 million, and a net Executive Staff, and all members of the may not be less than 100% of the fair to be issued under the terms of the 1994 Deferred revenue 4,155 10,187 increase of $14.8 million, respectively. Board of Directors elected to exclude market value on the date of grant, the Patent Incentive Plan. The purpose of Sales incentive programs 5,555 5,005 Pretax income (loss) from interna- themselves from this stock option cancel- options have a maximum term of ten years this plan is to increase awareness of the Allowance for doubtful accounts 1,365 984 tional operations was approximately lation and regrant. and generally vest over a four-year period. importance of patents to the Company’s Acquired software 1,139 2,613 $65.0 million, $24.9 million and On May 14, 1996, Symantec stock- business and to provide employees with Accrued acquisition, restructuring and other expenses 931 1,077 $(4.1) million for the years ended holders approved the 1996 Equity incentives to pursue patent protection Other 2,599 2,868 March 31, 1998, 1997 and 1996, respectively. Incentive Plan (the “96 Plan”) which for new technologies that may be valuable 44,872 53,150 At March 31, 1998, the Company had superseded the 1988 Option Plan (the “88 to the Company. The Company’s execu- Valuation allowance (25,195) (40,327) tax credit carryforwards of approximately Plan”) and made available approximately tive officers are not eligible for awards $ 19,677 $ 12,823 $7.0 million that expire in fiscal 1999 2.7 million shares. On September 25, 1996, under the 1994 Patent Incentive Plan. As through 2013. stockholders approved an amendment to of March 31, 1998, approximately 16,000 the 96 Plan to make available for issuance shares had been issued under this plan. up to approximately 1.3 million additional In March 1998, the Board of Note 10. Employee Benefits shares representing the number of options Directors approved the terms of the 1998 401(k) Plan. Symantec maintains a previously granted pursuant to the 88 Star Award Bonus Plan, under which the salary deferral 401(k) plan for all of its Plan that had expired, were canceled or Company may grant up to 5,000 shares domestic employees. The plan allows were unexercisable for any reason without of common stock to employees who employees to contribute up to 15% of having been exercised in full. On perform exceptionally in a given quarter. their pretax salary up to the maximum September 18, 1997, stockholders approved Directors and executive officers are not dollar limitation prescribed by the an amendment to increase the number of eligible to receive awards under this plan. Internal Revenue Code. Symantec shares reserved for issuance by approxi- Stock awards under this plan are recorded matches 100% of the first $500 of mately 2.6 million to 6.7 million shares. as compensation expense at the time of employees’ contributions and then 50% During March 1996, the Board of issuance. The Board of Directors of the employee’s contribution up to 6% Directors authorized the Company to reserved 20,000 shares of common stock of the employees’ eligible compensation. 48 49 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Stock option and warrant activity was as follows: Weighted four years in quarterly installments through Employee Employee Stock Number Average Exercise Stock Options Purchase Plan the June 2000 quarter. During February (In thousands, except exercise price per share) of Shares Price Range of Exercise Prices 1998 1997 1996 1998 1997 1996 1998, the purchase agreement was amended Outstanding at March 31, 1995 8,989 $ 14.36 Expected life (years) 4.84 4.34 4.34 0.50 0.50 0.50 to accelerate certain quarterly payments Granted 5,990 16.56 Expected volatility 0.61 0.63 0.74 0.55 0.74 0.60 during the remaining payment term in Exercised (1,601) 10.40 Risk free interest rate 5.4 % 6.7 % 6.0 % 5.2 % 5.4 % 5.4 % exchange for a reduction in the total sale Canceled (3,660) 22.14 price to approximately $92.5 million. JetForm Outstanding at March 31, 1996 9,718 13.43 The weighted-average estimated fair The Black-Scholes option valuation model has the option to tender payment in either Granted 2,681 13.90 values of employee stock options for fiscal was developed for use in estimating the cash or in registered JetForm common stock, Exercised (684) 9.89 year 1998 and 1997 were $13.44 and $7.81 fair value of traded options that have no within a contractually defined quantity Canceled (2,673) 14.21 per share, respectively. The weighted-average vesting restrictions and are fully transfer- threshold. Due to the uncertainty regarding Outstanding at March 31, 1997 9,042 13.61 estimated fair value of employee stock able. In addition, option valuation models the ultimate collectibility of these install- Granted 3,857 22.74 purchase rights granted under the Employee require the input of highly subjective ments, Symantec is recognizing the related Stock Purchase Plan during fiscal year 1998 assumptions, including the expected stock Exercised (2,158) 12.73 revenue as payments are due and collectibil- and 1997 were $14.71 and $7.74, respectively. price volatility. Because the Company’s Canceled (1,413) 15.29 ity is assured from JetForm. Symantec For purposes of pro forma disclosures, options have characteristics significantly recognized revenue of approximately $24.1 Outstanding at March 31, 1998 9,328 17.32 the estimated fair values of the options is different from those of traded options, million and $18.3 million from JetForm amortized to expense over the options’ and because changes in the subjective during fiscal 1998 and 1997, respectively. (In thousands) March 31, vesting period (for employee stock options) input assumptions can materially affect In March 1997, Symantec sold the soft- Balances are as follows: 1998 1997 and the six-month purchase period (for the fair value estimate, in the opinion of ware products and related tangible assets Authorized but unissued 10,785 11,901 stock purchases under the Employee management, the existing models do not of its Networking Business Unit to Hewlett- Available for future grants 1,457 2,859 Stock Purchase Plan). The Company’s necessarily provide a reliable single measure Packard, resulting in the receipt of Exercisable and vested 3,173 4,066 pro forma information is as follows: of the fair value of its options. approximately $1.0 million of revenue and a $2.0 million research and development reim- The following tables summarize information about options outstanding at March 31, 1998: Year Ended March 31, bursement in fiscal 1997. Additionally, a Outstanding options Exercisable options (In thousands) 1998 1997 1996 two-year quarterly royalty payment stream, Weighted Weighted Weighted Net income (loss) – Basic – Pro forma $ 68,601 $ 14,123 $ (47,015) not to exceed a present value of $27.0 Number of average average Number of average million as of March 1997, commenced shares contractual life exercise shares exercise Net income (loss) – Diluted – Pro forma 69,293 14,123 (47,015) Range of Exercise Prices (in thousands) (in years) price (in thousands) price beginning in fiscal 1998, which is solely Net income (loss) per share – Basic – Pro forma 1.29 0.28 (0.89) $ 1.00 - $ 13.10 3,246 6.93 $ 11.43 1,579 $ 11.25 contingent on future sales of certain Net income (loss) per share – Diluted – Pro forma 1.19 0.27 (0.89) $ 13.13 - $ 22.63 3,252 7.87 16.13 1,454 15.83 Hewlett-Packard products. Due to the $16.57 to $17.00 per share. Authorization The effects on pro forma disclosures of $ 22.75 - $ 39.13 2,830 9.56 25.44 140 28.03 uncertainty regarding the amounts upon to repurchase the remaining 500,000 applying SFAS No. 123 are not likely to be 9,328 8.06 17.32 3,173 14.09 which these royalties will be determined, shares has expired as of March 31, 1998. representative of the effects on pro forma Symantec is recognizing these amounts as Additionally, on November 24, 1997, disclosures of future years. Because These options will expire if not exercised by specific dates ranging from April 1998 to required to be determined as if the they are reported by Hewlett-Packard. the Board of Directors of Symantec autho- SFAS 123 is applicable only to options March 2008. Prices for options exercised during the three-year period ended March 31, Company had accounted for its employee Symantec recognized royalty revenue of rized the repurchase of up to 500,000 granted subsequent to March 31, 1995, 1998 ranged from $0.07 to $25.25. stock options (including shares issued approximately $21.5 million from shares of Symantec common stock. As of its pro forma effect will not be fully under the Employee Stock Purchase Plan, Pro Forma Information. The Company for use in valuing employee stock options. Hewlett-Packard during fiscal 1998. December 4, 1997 management completed reflected until approximately fiscal 2000. collectively called “options”) granted has elected to follow APB Opinion Under APB No. 25, because the exercise In connection with the sale to Hewlett- the repurchase of 500,000 shares at prices subsequent to March 31, 1995 under the No. 25, “Accounting for Stock Issued to price of the Company’s employee stock Packard, during fiscal 1997, Symantec ranging from $25.25 to $26.81 per share. fair value method of that statement. The Employees,” in accounting for its options generally equals the market price Note 11. Common Stock Repurchase wrote off approximately $7.0 million of On April 29, 1997, the Board of Directors fair value of options granted in fiscal employee stock options because, as dis- of the underlying stock on the date of grant, unamortized software development costs of Symantec authorized the repurchase of up years 1997 and 1998 reported below has cussed below, the alternative fair value no compensation expense is recognized Note 12. Sale of Product Rights and approximately $0.6 million of During September 1996, Symantec sold its to 1,000,000 shares of Symantec common been estimated at the date of grant using accounting provided for under SFAS No. in the Company’s financial statements. unamortized purchased product rights, as electronic forms software products and stock by June 13, 1997. As of June 13, 1997, a Black-Scholes option pricing model 123, “Accounting for Stock-Based Pro forma information regarding net well as incurred approximately $2.0 mil- related tangible assets to JetForm for management completed the repurchase assuming no expected dividends and the Compensation,” requires the use of option income and earnings per share is required lion of legal, accounting and other costs approximately $100.0 million, payable over of 500,000 shares at prices ranging from following weighted average assumptions: valuation models that were not developed by SFAS No. 123. This information is associated with the transaction. 50 51 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Note 13. Acquisition, Restructuring and Other Expenses Note 14. Net Income (Loss) Per Share District Court, Northern District of Acquisition, restructuring and other expenses consist of the following: In February 1997, the Financial Accounting Standards Board issued Statement California, for copyright infringement Year Ended March 31, (“SFAS”) No. 128, “Earnings Per Share,” which was required to be adopted on and unfair competition. On October 6, (In thousands) 1998 1997 1996 December 31, 1997. As a result, the Company has changed the method used to com- 1997, the court found that Symantec had Centralization and restructuring expenses $— $ 3,185 $— pute earnings per share and has restated all prior periods. demonstrated a likelihood of success on Year Ended March 31, Write off of acquired in-process research the merits of certain copyright claims, and development costs — 3,050 — (In thousands, except per share data) 1998 1997 1996 and issued a preliminary injunction (i) Write off of equity investment — 1,750 — Basic Net Income (Loss) Per Share prohibiting Network Associates from Fast Track, Inc. acquisition — 600 — Net income (loss) $ 85,089 $ 26,038 $ (39,783) infringing Symantec’s rights in specified Delrina acquisition — — 22,000 Weighted average number of common materials by marketing, selling, transfer- shares outstanding during the period 56,097 54,705 52,664 Loss on sale of Time Line Solutions ring or directly or indirectly copying Corporation assets — — 2,653 Basic net income (loss) per share $ 1.52 $ 0.48 $ (0.76) into any new Network Associates prod- Relocation of certain research and Diluted Net Income (Loss) Per Share uct or new version of an existing product development activities — — 2,229 Net income (loss) $ 85,089 $ 26,038 $ (39,783) that has Symantec code, (ii) requiring Central Point acquisition — — (2,300) Interest on convertible subordinated Network Associates to notify distributors Legal fees and expenses — — 2,000 debentures, net of income tax effect 692 — — who are still selling versions of PC Other — — 1,035 Net income (loss), as adjusted $ 85,781 $ 26,038 $ (39,783) Medic 97 that have Symantec’s code to Total acquisition, restructuring and other expenses $ — $ 8,585 $ 27,617 Weighted average number of common tell customers that they should upgrade shares outstanding during the period 56,097 54,705 52,664 to versions that do not contain Symantec and financial advisory services; $6.4 million During fiscal 1997, Symantec recorded a Consolidated Financial Statements). Shares issuable from assumed code, and (iii) requiring Network exercise of options 2,964 702 — for the elimination of duplicative and excess $1.8 million charge in connection with Symantec also expensed $1.0 million, Associates to provide Symantec and the Shares issuable from assumed conversion facilities and equipment; $3.7 million for the write-off of an equity investment in which included a loss on the sale of certain court with a sample of the notice to be of convertible subordinated debentures 1,220 — — personnel severance and outplacement a privately held company and a $3.1 mil- assets and liabilities of a subsidiary and used. On October 17, 1997, Symantec Total shares for purpose of calculating expenses; and $3.1 million for the consol- lion charge for the write off of certain other expenses, during fiscal 1996. amended its complaint to include addi- diluted net income (loss) per share 60,281 55,407 52,664 idation and discontinuance of certain in-process research and development During fiscal 1996, the Company recog- tional claims for copyright infringement Diluted net income (loss) per share $ 1.42 $ 0.47 $ (0.76) operational activities and other acquisi- costs acquired by the Company. nized a reduction in accrued acquisition, and misappropriation of trade secrets, tion-related expenses. Additionally, during fiscal 1997, the restructuring and other expenses of $2.3 For the twelve months ended March 31, based on additional evidence found in plaint seeks damages in an unspecified During fiscal 1996, Symantec sold Company recorded a charge of $3.2 mil- million, as actual costs incurred were less 1997, 1,250,000 shares of convertible the discovery process. On April 1, 1998, amount. The complaint has been refiled the assets of Time Line Solutions lion, which included $2.4 million for than costs previously accrued by the subordinated debentures and $708,000 Symantec amended its complaint to add twice in state court, most recently on Corporation, a wholly-owned subsidiary, personnel severance and outplacement Company in connection with the acqui- of interest expense were excluded from claims for misappropriation of trade January 13, 1997, following Symantec’s to a group comprised of Time Line charges, for costs related to the restruc- sitions of Central Point Software, Inc. the computation of diluted net income secrets, RICO (Racketeer Influenced and motions directed to previous complaints. Solution Corporation’s management and turing of certain domestic and and SLR Systems, Inc. in fiscal 1995. per share because the effect would have Corrupt Organizations Act) and related On January 7, 1997, the same plaintiffs incurred a $2.7 million loss on the sale. international sales and research and As of March 31, 1998, total accrued been anti-dilutive. claims based on additional evidence filed a complaint in federal court based The Company incurred $2.2 million development operations, settlement of a cash related acquisition and restructuring uncovered in the litigation. Symantec on the same facts as the state court com- for the relocation costs of moving equip- lawsuit and other expenses. The restruc- expenses were $2.5 million and included continues to investigate the extent to plaint, for violation of the Securities Note 15. Litigation ment and personnel, during fiscal 1996, turing plans were substantially $0.5 million for the elimination of duplica- which Network Associates may have mis- Exchange Act of 1934. The court dismissed On March 18, 1996, a class action com- as the result of the consolidation of certain completed during fiscal 1997. Symantec tive and excess facilities and $2.0 million appropriated Symantec’s intellectual that complaint, and plaintiffs served an plaint was filed by the law firm of research and development activities of recorded total acquisition charges of $0.6 for other acquisition related expenses. property, and plans to aggressively pur- amended complaint in April 1998. Milberg, Weiss, Bershad, Hynes & the Company’s Third Generation million in the quarter ended June 30, sue its remedies under this lawsuit, Symantec believes that neither the state Lerach in Superior Court of the State of Language and Fourth Generation 1996 in connection with the acquisition which include both injunctive relief and court complaint nor the federal court California, County of Santa Clara, Language development groups. of Fast Track, Inc. monetary damages. complaint has any merit and will vigor- against the Company and several of its During fiscal 1996, the Company In connection with the acquisition of On May 13, 1997, Trend Micro ously defend itself against both complaints. current and former officers and direc- recorded $2.0 million for estimated legal Delrina (See Note 3 of Notes to Incorporated (“Trend”) filed a lawsuit in On April 23, 1997, Symantec filed a tors. The complaint alleges that fees expected to be incurred in connection Consolidated Financial Statements) in the United States District Court, lawsuit against McAfee Associates, Inc., Symantec insiders inflated the stock with a securities class action complaint fiscal 1996, Symantec recorded total Northern District of California, against which pursuant to a merger has become price and then sold stock based on inside filed in March 1996 and other legal acquisition charges of $22.0 million, which Symantec Corporation and Network Network Associates, Inc. (“Network information that sales were not going to expenses (See Note 15 of Notes to included $8.8 million for legal, accounting Associates, alleging patent infringement. Associates”), in the United States meet analysts’ expectations. The com- 52 53 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Information by Geographic Area Note 17. Subsequent Event ously and although adverse decisions (or Trend claims that Norton AntiVirus for On February 19, 1998, a class action Year Ended March 31, On May 19, 1998, IBM and Symantec settlements) may occur in one or more of Internet E-mail Gateways and Norton complaint was filed by the Milberg, (In thousands) 1998 1997 1996 Corporation entered into an agreement the cases, the final resolution of these AntiVirus for Firewalls infringe a patent Weiss, Bershad, Hynes & Lerach law Net revenues: whereby Symantec will license IBM’s lawsuits, individually or in the aggregate, owned by Trend. The lawsuit was settled firm in Santa Clara County Superior U.S. operations: immune system technology and patents. is not expected to have a material adverse on April 6, 1998, on terms that were not Court, on behalf of a class of purchasers Symantec will combine this technology North American customers $ 392,224 $ 334,210 $ 303,280 affect on the financial condition of the material to Symantec. of pre-version 4.0 Norton AntiVirus with its own technology to produce a International customers 11,882 6,451 16,609 Company, although it is not possible to On August 22, 1997, Network products. A similar complaint was filed range of products, including new solutions estimate the possible loss or losses from Associates filed a lawsuit against in the same court on March 6, 1998 by Intercompany 52 79 6,015 to support IBM platforms. As part of the each of these cases. However, depending Symantec in the Superior Court of the an Oregon law firm. The complaints 404,158 340,740 325,904 agreement, IBM has also assigned its on the amount and timing of an unfavor- State of California, County of Santa purport to assert claims for breach of Other international operations: existing anti-virus customer and OEM able resolution of these lawsuits, it is Clara, alleging defamation, trade libel, implied warranty, fraud, unfair business Customers 174,255 131,522 125,543 contracts to Symantec and will recommend possible that the Company’s future unfair competition and unjust enrich- practices and violation of California’s Intercompany 1,380 745 11,387 Norton AntiVirus to its corporate cus- results of operations or cash flows could ment. The complaint alleged that Consumer Legal Remedies Act arising 175,635 132,267 136,930 tomers worldwide as the anti-virus be materially adversely affected in a par- damages to Network Associates could from the alleged inability of earlier ver- Eliminations (1,432) (824) (17,402) solution of choice. In addition, IBM and ® ticular period. The Company has accrued approximate $1 billion. Network sions of Norton AntiVirus to function $ 578,361 $ 472,183 $ 445,432 Symantec intend to sell and market the certain estimated legal fees and expenses Associates dismissed the lawsuit on or properly after the year 2000. The com- Operating income (loss): Norton AntiVirus product line world- related to certain of these matters; however, about December 30, 1997. The court plaints seek unspecified damages and U.S. operations $ 69,200 $ 11,415 $ (58,296) wide. Symantec will pay IBM $16 actual amounts may differ materially awarded Symantec costs and attorneys’ injunctive relief. Symantec believes that International operations 29,649 12,931 8,201 million in cash, plus future royalties and from those estimated amounts. fees in connection with this matter on these actions have no merit and intends Eliminations 1,496 1,943 1,816 assume obligations of approximately $3 April 10, 1998. to defend itself vigorously. $ 100,345 $ 26,289 $ (48,279) million in connection with this technology On September 15, 1997, Hilgraeve In connection with the May 1998 Note 16. Segment Information acquisition. Symantec expects to record Corporation filed a lawsuit in the United technology licensing agreement with Symantec operates in the microcomputer March 31, a charge of approximately $16 million for States District Court, Eastern District of IBM (see Note 17. Subsequent Event), software industry business segment. (In thousands) 1998 1997 1996 in-process research and development Michigan, against Symantec previously asserted claims of patent The Company markets its products in Identifiable assets: acquired from IBM in the June 1998 quarter. Corporation, alleging that unspecified infringement asserted by IBM with North America and international coun- U.S. operations $ 389,174 $ 281,748 $ 234,155 Symantec products infringe a patent respect to certain of the Company’s tries primarily through retail and International operations 87,286 57,650 48,519 owned by Hilgraeve. The lawsuit products were resolved. The terms of distribution channels. $ 476,460 $ 339,398 $ 282,674 requests damages, injunctive relief and resolution were not material. costs and attorney fees. Symantec Over the past few years, it has believes this claim has no merit and become common for software compa- Intercompany sales between geographic areas are accounted for at prices representative intends to defend the action vigorously. nies, including Symantec, to receive of unaffiliated party transactions. “U.S. operations” include sales to customers in the On February 4, 1998, CyberMedia, claims of patent infringement. Symantec United States and exports of finished goods directly to international customers, pri- Inc., filed a lawsuit in the United States is currently evaluating claims of patent marily in Canada. Exports and international OEM transactions are primarily District Court for the Northern District infringement asserted by several parties, denominated in U.S. dollars. “Other international operations” primarily include of California against Symantec with respect to certain of the Company’s export sales from the Irish manufacturing subsidiary to European and Asia/Pacific cus- Corporation, ZebraSoft Inc., and others, products. While the Company believes tomers. International revenues, which include net revenues from other international alleging that Symantec Norton Uninstall that it has valid defenses to these claims, operations and exports made by U.S. operations, were 32%, 29% and 32% of total rev- Deluxe infringes CyberMedia’s copy- there can be no assurance that the out- enue for fiscal 1998, 1997 and 1996, respectively. right, and asserting related state law come of any related litigation or Significant Customers claims. The suit requests damages, negotiation would not have a material The following customers accounted for more than 10% of net revenues during fiscal injunctive relief, costs and attorneys fees. adverse impact on the Company’s future 1998, 1997 and 1996: Year Ended March 31, In May 1998, CyberMedia filed a motion results of operations or cash flows. 1998 1997 1996 seeking an order prohibiting sale or Symantec is involved in a number of Ingram Micro, Inc. 33% 27 % 27 % development of the challenged code. A other judicial and administrative pro- Tech Data Corp. 11 * * hearing is set for mid-July. Symantec ceedings incidental to its business. The Merisel 10 * 10 believes this claim has no merit and Company intends to defend all of the intends to defend the action vigorously. aforementioned pending lawsuits vigor- * Amount is less than 10%. 54 55 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Schedule II Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VALUATION AND QUALIFYING ACCOUNTS Symantec Corporation (Registrant) (In thousands) Balance at Charged to Balance at Beginning Costs and End of Period Expenses Deductions of Period Allowance for doubtful accounts: (GORDON E. EUBANKS, JR., PRESIDENT CHIEF EXECUTIVE OFFICER) AND Year ended March 31, 1996 $ 4,852 $ 903 $ (739) $ 5,016 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons Year ended March 31, 1997 5,016 1,599 (2,315) 4,300 on behalf of the registrant and in the capacities and on the dates indicated below. Year ended March 31, 1998 4,300 1,036 (920) 4,416 Signature Title Date Exhibit 21.01 Chief Executive Officer: SUBSIDIARIES OF SYMANTEC President, Chief Executive June 5, 1998 Name of Subsidiary State or Country of Incorporation Officer and Director (GORDON E. EUBANKS, JR.) AntiVirus Update (AVU) GmbH Germany Chief Financial Officer: Delrina Corporation (Canada) Canada Delrina (Canada) Corporation Canada Vice President, June 5, 1998 Delrina (Delaware) Corporation Delaware, USA Worldwide Operations and (HOWARD A. BAIN III) Delrina (Germany) GmbH Germany Chief Financial Officer Delrina (UK) Corporation Limited United Kingdom Delrina (US) Corporation California, USA Chief Accounting Officer: Delrina (Wyoming) Limited Liability Company Wyoming, USA Delrina International Corporation (Barbados) Barbados Vice President Controller and June 5, 1998 Fifth Generation Systems GmbH Germany Chief Accounting Officer (RONALD W. KISLING) Gocorp Sdn. Bhd. Malaysia Directors: 1087013 Ontario Limited Canada Sym (UK) Holding, Ltd. United Kingdom Chairman of the Board June 5, 1998 Symantec (Deutschland) GmbH Germany (CARL D. CARMAN) Symantec (Japan) KK Japan Symantec (UK) Ltd. (“Symantec UK”) United Kingdom Symantec Australia Pty. Ltd. Australia Director June 5, 1998 Symantec do Brasil Ltda. Brazil (TANIA AMOCHAEV) Symantec EURL (France) France Symantec Financing B.V. (Netherlands) Netherlands Director June 5, 1998 Symantec Foreign Holding, Inc. Delaware, USA (CHARLES M. BOESENBERG) Symantec Foreign Sales Corporation (Barbados) Barbados Symantec Hong Kong Ltd. Hong Kong Director June 5, 1998 Symantec Korea Ltd. Korea (WALTER W. BREGMAN) Symantec Limited (Ireland) Ireland Symantec Nordic A.B. Sweden Director June 5, 1998 Symantec S.A. (Pty) Ltd. South Africa (ROBERT R. B. DYKES) Symantec (Singapore) PTE Ltd. Singapore Symantec SRL (Italy) Italy Director June 5, 1998 Zortech (UK) Ltd. United Kingdom Zortech Limited (“Zortech”) United Kingdom (ROBERT S. MILLER) 56 57 S C S C YMANTEC ORPORATION YMANTEC ORPORATION
    • Exhibit 23.01 C O N S E N T O F E R N S T & Y O U N G L L P, I N D E P E N D E N T A U D I T O R S We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-31444, 33-32065, 33-33654, 33-37066, 33-42440, 33-44203, 33-46927, 33-51612, 33-54396, 33-55300, 33-64290, 33-70558, 33-80360, 33-88694, 33-60141, 33-64507, 333-07223, 333-18353, 333-18355, 333-39175 and Form S-3 Nos. 33-82012 and 33-63513) of our report dated April 30, 1998, except for Note 17, as to which the date is May 19, 1998, with respect to the consolidated financial statements and schedule of Symantec Corporation included in this Annual Report (Form 10-K) for the year ended March 31, 1998. ERNST & YOUNG LLP San Jose, California June 5, 1998 58 S C YMANTEC ORPORATION
    • Corporate Directory Board of Directors Corporate Officers Corporate Headquarters and Key Employees Tania Amochaev Symantec Corporation 10201 Torre Avenue Chairman of the Executive Committee, Gordon E. Eubanks, Jr. Pr i n t i n g : WAT E R M A R K P R E S S Cupertino, California 95014-2132 QRS Corporation President & Chief Executive Officer (408) 253-9600 Charles M. Boesenberg Howard A. Bain, III President & CEO, Magellan Corporation Vice President, Worldwide Operations Tr a n s f e r A g e n t & Chief Financial Officer Bank of Boston Walter W. Bregman P.O. Box 644 Chairman & Co-Chief Executive Officer, Christopher Calisi Boston, Massachusetts 02102 S&B Enterprises Vice President, Remote Productivity Solutions Business Unit Investor Relations Carl D. Carman Chairman, Symantec Corporation Thomas Darnall A copy of the Company’s Form 10-K General Partner, Hill, Carman Ventures Vice President, Corporate Services for the fiscal year ended April 3, 1998 Photography: HENRIK KAM as filed with the Securities and Robert R. B. Dykes Dieter Giesbrecht Exchange Commission is available Senior Vice President, Vice President, Europe, Middle East & Africa upon request without charge. Finance & Administration, Please contact the Investor Relations Flextronics International LTD Akihiko Narita Hotline at (800) 883-4497. Managing Director & President, Japan Additional investment-oriented Gordon E. Eubanks, Jr. questions may be directed to: President & Chief Executive Officer Mansour Safai Shelley Wilson Symantec Corporation Vice President, Internet Tools Investor Relations Business Unit Symantec Corporation Robert S. Miller 10201 Torre Avenue Chairman of the Board, Enrique T. Salem Writing: STEVEN GOLDSTEIN Cupertino, California 95014-2132 Waste Management, Inc. Vice President, Security & Assistance (408) 446-8990 Business Unit Outside Counsel Garry Sexton Vice President, Asia Pacific Fenwick & West Two Palo Alto Square Rebecca Ranninger Palo Alto, California 94306 Vice President, Human Resources Independent Auditors Dana E. Siebert Ernst & Young LLP Vice President, Americas 55 Almaden Boulevard Design: COOKSHERMAN, SAN FRANCISCO San Jose, California 95113 Derek P. Witte Vice President, General Counsel & Secretary Annual Meeting The annual meeting of Stockholders will be held September 17, 1998, at Symantec Corporate Worldwide PAGE 3-7: FOOTNOTES TO Headquarters, Cupertino, California. 1 Symantec Internal Reporting 11 International Data Corporation, 1998 111 Symantec Survey, June 1997 PC Data Retail Report —The market share is based on the Remote Control/Remote Access category 1v as defined by Symantec. The following products are included: Symantec pcANYWHERE, Network Associates Remote Desktop, Travelling Software Laplink, Stac Reachout, Netopia Timbuktu, Compaq Carbon Copy, Triton/Artisoft CoSession, Norton Lambert Close-Up, and Funk Proxy. v Soft Letter, April 1998 Symantec and the Symantec logo are U.S. registered trademarks of Symantec Corporation. Microsoft, Windows, Windows NT, and the Windows logo are registered trademarks of Microsoft Corporation. Other brands and products are trademarks of their respective holder/s.