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Symantec's Strategic Direction and Q3 2013 Earnings Presentation Document Transcript

  • 1. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Symantec’s Strategic Direction and  3Q 2013 Earnings Presentation January 23, 2013 Welcome Helyn Corcos Vice President Investor Relations 2 1
  • 2. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation 1 3Q FY13 Earnings Highlight 2 Strategic Direction and Operational Plan 3 Questions & Answers 3 Forward Looking Statements  This presentation contains statements regarding our intention to execute a new strategy, implement operational and  organizational changes and our projected financial and business results, as well as our intention to return cash to shareholders through dividends and continued share buyback activity, which may be considered forward‐looking within the meaning of the  U.S. federal securities laws. These statements are subject to known and unknown risks, uncertainties and other factors that may  cause our actual results, levels of activity, performance or achievements to differ materially from results expressed or implied in  this presentation. Such risk factors include those related to: maintaining customer and partner relationships; the anticipated  growth of certain market segments, particularly with regard to security and storage; the competitive environment in the software industry; changes to operating systems and product strategy by vendors of operating systems; fluctuations in currency exchange  rates; the timing and market acceptance of new product releases and upgrades; the successful development of new products and  integration of acquired businesses; and the degree to which these products and businesses gain market acceptance. Actual  results may differ materially from those contained in the forward‐looking statements in this presentation. Additional information  concerning these and other risk factors is contained in the Risk Factors section of our Form 10‐K for the year ended March 30,  2012 and in our Form 8‐K filed on June 11, 2012. Any information regarding pre‐release Symantec offerings, future updates or other planned modifications is subject to ongoing  evaluation by Symantec and therefore subject to change. This information is provided without warranty of any kind, express or implied.  Customers who purchase Symantec offerings should make their purchase decision based upon features that are  currently available. We assume no obligation to update any forward‐looking information contained in this presentation. 44 2
  • 3. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Use of GAAP and Non‐GAAP Financial Information Our results of operations have undergone significant changes due to a series of acquisitions, the impact of SFAS 123(R),  impairment charges and other corporate events. To help our readers understand our past financial performance and our future  results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or  GAAP, with non‐GAAP financial measures. The method we use to produce non‐GAAP results is not computed according to GAAP  and may differ from the methods used by other companies. Our non‐GAAP results are not meant to be considered in isolation or  as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements  prepared in accordance with GAAP. Our management regularly uses our non‐GAAP financial measures internally to understand, manage and evaluate our business  and make operating decisions. These non‐GAAP measures are among the primary factors management uses in planning for and  forecasting future periods. Investors are encouraged to review the reconciliation of our non‐GAAP financial measures to the  comparable GAAP results, which is attached to the financial review presentation, and which can also be found, along with other  financial information, on the investor relations page of our website at www.symantec.com/invest. 5 3Q13 Earnings Highlights James Beer Chief Financial Officer 66 3
  • 4. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Better than Expected Results for 3Q13 As Reported  3Q’13 3Q’12 Growth Y/Y Revenue $1,791m $1,715m 4% Non‐GAAP Operating Margin 25.6% 26.2% ‐60 bp Non‐GAAP EPS $0.45 $0.42 7% • Revenue Drivers – Constant currency adjusted revenue grew 5% Y/Y – Organic, constant currency revenue grew 4% Y/Y – Strength in EMEA, Information Management and Trust Services – License, constant currency revenue grew 8% Y/Y driven by strength in Information Management solutions – Subscription, constant currency revenue grew 5% and maintenance revenue grew 5% Y/Y… Enterprise,  constant currency subscription revenue grew 12% • Profitability Drivers – Operating margin and EPS driven by higher revenue and lower spending 77 Solid Revenue Results by Segment FX Adjusted 3Q’13 3Q’12 Growth Y/Y Consumer $530m $525m 2% Security and Compliance $527m $510m 4% Storage and Server Management $666m $618m 9% Services $68m $62m 9% • Consumer… up‐selling to premium suites and growing emerging backup, NortonLive services and mobile  • Security and Compliance… strength in Trust Services, MSS and Encryption • Storage and Server Management – Information Management revenue grew 12% Y/Y driven by double digit growth in NetBackup – Storage Management revenue grew 1% Y/Y as customers continue to deploy more mission critical applications  on Linux and virtualized infrastructures • Services… driven by Business Critical Services 88 4
  • 5. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Strong Cash Generation As Reported  3Q’13 3Q’12 Growth Y/Y Cash From Operating Activities $463m $403m 15% Cash, Cash Equivalents and Short Term  $4,252m $2,380m 79% Investments Balance • 43% of cash on shore… ~ 26% excluding $1 billion allocated to maturity of June 2013  convertible notes  • $200m to repurchase 11m shares at average price  $17.94… $283m remaining in  the current board authorized share repurchase plan 99 4Q FY13 Guidance FX Adjusted 4Q’13 Expected Y/Y Growth Growth Y/Y Revenue $1.70 to $1.74b 1 – 4% 1 – 3% GAAP EPS 18¢ to 19¢ ‐ (75 – 76)% na Non‐GAAP EPS 37¢ to 38¢ ‐ 2.6 – 0% na Deferred Revenue $4.01 to $4.07b 1 – 2% 1 – 3% • ~73% or $1.26b of March quarter revenue coming from balance sheet • Guidance assumes  – FX rate of $1.32 per Euro  – 24.6% effective tax rate and 702m CSE… R&D tax credit drives down our tax rate in 4Q13 10 5
  • 6. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Symantec 4.0 ‐ Strategy Steve Bennett President and Chief Executive Officer 11 11 Symantec 4.0 Financial Theme Organic growth focused company Complemented by accretive acquisitions… that add  value to customers Growing operating margins and cash flow Disciplined approach to capital allocation 12 12 6
  • 7. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Strategy and Operating Plan Agenda Learning Journey Customers and Market Overview Offering Strategy Go‐to‐Market Strategy Organization Resource Allocation Financial View 13 13 Over 8000 employees in  More than 1300 customers,  36 Analyst meetings across all  town hall and small team  including presenting at  regions, speaking to Gartner,  meetings VISION Barcelona IDC, Forrester and others Dublin Springfield Boston London Beijing Reading Paris Mountain View Roseville New York Barcelona Chengdu Tokyo Baltimore Washington DC Culver City Heathrow Pune Chennai Singapore Sydney 78 financial analysts  Meetings with various House and Senate members,  251 partners at the  including attending Citi  including General Alexander and presenting to over 900 Baltimore Partner Exchange Investor Conference attendees at the Symantec Government Symposium 14 7
  • 8. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Key Learnings… Strengths Portfolio of  Strong Brands  Deep Expertise  Strong Assets Leading  Reach and  and Capability Products Installed Base 15 15 Key Learnings… Opportunities GTM and Products and People and Global Services Organization Strategy 16 16 8
  • 9. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Evolution 17 17 A Revolution 18 18 9
  • 10. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Market Trends, Competitive Landscape and Product Offerings Stephen Gillett COO Francis deSouza President of Products & Services 19 19 Voice of the Customer • Global economic uncertainty  and enterprise security • Full Emergence of Digital and  Social Media • Explosive data and intelligence  growth • Enterprise IT will need to adapt  and evolve 20 10
  • 11. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Enterprise Security • Redefined boundaries between  consumer and business • Enterprise attack sophistication  is increasing • Technology realm transfer • Dispersion of authority  21 Countries and Government • Governments are responsible  for protecting their nations  critical infrastructure • Attacks on citizens and  institutions increasing in  complexity • Cyber has become the fifth  domain for warfare — after  land, sea, air, and space 22 11
  • 12. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Changing Landscape and Market Trends Internet of “Things” Mobility Digital & Social Life Computing Ecosystems 23 Changing Market Requires a New Model For Protection Corporate Network PCs Data Center 24 12
  • 13. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Integrated Startups Specialist Stack Providers 25 Best of Need Scale How We Win Integration Cross Platform 26 13
  • 14. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation We Will Strengthen Our Offerings: More R&D More  • Increase R&D spend Innovation • Redeploy and hire More R&D Better and  • Advanced research Easier  Customer  File System Encryption Better meet  Experience customer  Leverage  Centers of  needs…faster  Innovation DLP Excellence Endpoint organic growth Protection Security Intelligence Right‐for‐Me  New  Offerings Offerings Zero‐based  • Whole company scope mindset • Resource best growth opportunities • Eliminate redundancy 27 We Will Strengthen Our Offerings: Better and Easier  Customer Experience Better and  • Focus product teams on end‐to‐ More R&D Easier  To Use, Upgrade  end customer use experience Customer  and Maintain • Simplified licensing Better meet  Experience customer  • Self‐healing technology needs…faster  organic growth • Simplified support options Right‐for‐Me  New  Offerings Offerings To Get Help and  • Expanded support channels ex.  Support Web, chat, community support  • Knowledge management 28 14
  • 15. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation We Will Strengthen Our Offerings: Right‐For‐Me Offerings • Consumers • Geographies Better and  More R&D Easier  Tailored  • Small Businesses • Specific  Customer  Offerings Industries…verticals • Large Enterprise Better meet  Experience customer  • Governments needs…faster  organic growth • Software Right‐for‐Me  New  Offerings Offerings Choice of  • Appliance Deployment  • Cloud Option  • Hybrids 29 New Offerings Will Address Broader Customer Needs Better and  More R&D Easier  • Integrated, modular, solving bigger jobs  Customer  Better meet  Experience customer  needs…faster  •Customer can buy existing products OR  organic growth new integrated offerings Right‐for‐Me  New  • Turn on new capability as needed Offerings Offerings 30 15
  • 16. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Symantec Addresses Unmet, Underserved Needs In  Three Areas User Productivity & Protection Make it simple for me to be productive & protected at home and work Information Security Keep my business safe and compliant Information Management:  Keep my business information and Availability & Scalability applications up and running 31 How Current Offerings Map to Customer Jobs Current Offering Examples Norton 360 Norton Mobile Security Norton Data Services User Productivity & Protection Endpoint Protection Enterprise Mobility Endpoint Encryption User Authentication Managed Security Services Data Loss Prevention Mail and Web Security Information Security O3 Control Compliance Suite Critical System Protection Trust Services Storage Foundation HA NetBackup Information Management:  Enterprise Vault/eDiscovery Availability & Scalability Backup Exec BE.cloud FileStore 32 16
  • 17. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation We Will Deliver New Integrated, Modular Offerings  Over the Next 6‐24 Months New Higher‐Value Offerings Mobile Workforce Productivity Norton Protection User Productivity & Protection Norton Cloud Information Security Service Identity/Content‐aware Security Gateway Information Security Data Center Security Business Continuity Integrated Backup Information Management:  Availability & Scalability Cloud‐based Info Management Object Storage Platform 33 New Higher‐Value Offering: Mobile Workforce Productivity Enables authorized users to access corporate resources from any corporate or  personal mobile device, PC or Mac while protecting data, applications,  Integrated devices and identities • Endpoint protection • Corporate • Personal • Mobile device management • Mobile container • Mobile application  Management • Enterprise app store • Endpoint encryption Employee Owned/BYOD Enterprise Applications • Endpoint DLP  • User authentication Corporate Owned Cloud Services Solves an important customer problem and builds competitive advantage 34 17
  • 18. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation New Higher‐Value Offering: Information Security Service Provides visibility into, and comprehensive protection from, advanced  threats leveraging Symantec and 3rd‐party products Integrated • Analysis Symantec Security Offerings • Correlation • Visibility 3rd‐Party Products and Tools • Dashboard Symantec Global Security  • Threat Detection Intelligence Network • Prioritization and   Enterprise Apps Workflow • Incident Management • Risk Management Solves an important customer problem and builds competitive advantage 35 New Higher‐Value Offering: Business Continuity Delivers high availability, performance, and scalability for business  applications in virtual, private cloud environments Integrated • Windows Backup Applications • Unix/Linux Backup • Virtual Backup • Clustering Platforms • Virtual HA • Replication • Disaster Recovery Storage • Service Orchestration Solves an important customer problem and builds competitive advantage 36 18
  • 19. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Examples of New or Expanded Centers of Excellence Cloud Platform &  Hardware Capabilities Supply Chain Global Security  Information Fabric Intelligence  Network 37 Solve Bigger  Right‐for‐Me  Problems Offerings How This  Benefits  Customers Better and  How They  Easier Want to Buy 38 19
  • 20. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Symantec 4.0 Portfolio Strategy • Evaluated entire portfolio • Portfolio review continues over  time • Two key criteria – Stand‐alone offering or part of a  larger, modular future offering • Will deal with anything that  doesn’t fit – Asset to solve new, important  customer problems? Nothing to announce today 39 Simplified Go‐to‐Market (GTM) Strategy Customer Segment Global • Global & Enterprise… Symantec direct + Customer led channel  involvement Enterprise • New Verticals business… Telco/ISPs, SIs, XaaS, National Public Sector Commercial • Channel‐led… dedicated Symantec team supports Consumer and • Combination of direct through e‐business and channel‐led Small Business Applied “Right for GEO” manner 40 20
  • 21. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation New Marketing and Sales Capabilities • New business growth ‐ Field paid only on new over time ‐ Separate renewals org • Expanded Marketing Beyond Beyond ‐ Total customer experience Current Short-Term ‐ New centers of excellence Point Bookings to • Expanded high quality/  Products to Lasting ‐ Strategic Pricing & Licensing lower cost models Integrated Customer ‐ Telesales Offerings Value • New, enhanced partner program ‐ e‐Business ‐ More selective based on capabilities ‐ In product ‐ Better enablement & Symantec support Offerings Customers ‐ New performance‐based incentives • New global sales and partner  enablement organization 41 Organizational Strategy July 25th to Present  Today • Common company level objectives • Symantec 4.0 strategy and plan • Financial results + customers + partners +  • New org structure and leadership team employees • New organization simplification initiative • New staff performance objectives • Splitting Chairman and CEO roles • Changed staff meeting cycle • Trained 95% of directors and VPs on SYMC  4.0 leadership   42 21
  • 22. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation New Organization Design: Objectives Improve Teamwork Increase Customer Focus Functionalize Upgrade Growth Capability • Office of the CEO • Consumer & business  • Upgrade process  • Marketing • Senior leadership  world merging capability • Sales process  decision on talent +  • Customer jobs vs.  • Consolidation for  management  collaboration skills segments leverage • IT  • Break up BU structure  – Centers of excellence that created silos – Eliminate redundancies • Cloud Ops • Global in thinking and  • Right talent… Fewer,  • HR actions… GEO leaders bigger roles for our  best and brightest Strengthen leadership… Improve Organic Growth Capabilities…  Minimize Execution Risk 43 Creation of the Office of the CEO New Roles or  Major Changes Office of the CEO • COO • President Products & Services • CFO 44 44 22
  • 23. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation New Structure 11 Direct Reports to the CEO New Roles or  Major Changes CEO Product &  NA Enterprise  COO Verticals Business APJ Services Sales Strategic Sales EMEA Strategy & Corp CFO HR Legal Dev 45 President of Products and Services Organization New Roles or  Major Changes CEO Products Information Information Business Critical  Mobile CTO Security Management Services Enterprise & Norton  Endpoint PD Education Enterprise & Norton  Global/Vertical  Endpoint PM Offering Integration 46 23
  • 24. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation COO Organization New Roles or  Major Changes CEO COO Consumer Sales CMO Sales Process &  Renewals Enablement e‐Business Customer Care CIO Communications Cloud Ops 47 Operational Plan James Beer Chief Financial Officer 48 24
  • 25. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Opportunities to Drive Efficiency & Redeploy Resources Company‐wide Opportunities Partially integrated acquisitions Duplication and  Siloed organization; redundancy Drove Complexity Too much management 49 Opportunities to Drive Efficiency & Redeploy Resources  Product Development 1 Consolidated $1.8 billion spending pool 2 Significant duplication today… 24 cloud service platforms and 54 data center locations 3 Align point product spending with market opportunity 50 25
  • 26. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Opportunities to Drive Efficiency & Redeploy Resources  Sales & Marketing 1 Simplify pricing & licensing … 31 price lists and 41 license meters 2 Build high performance and cost effective renewals team 3 Consolidate worldwide marketing spend 4 Streamline route to market structure … 23 distinct sales channels 5 Field sales real estate consolidation 6 Fewer individualized compensation plans 51 Opportunities to Drive Efficiency & Redeploy Resources  Cross‐company Management ranks have expanded steadily 1 • High cost • Slow decision making, removed from front line reality Organization Simplification Initiative 2 • Move from 10 layers of management to 6‐7  • Move from average of 4 spans to ~8 52 26
  • 27. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Investments to Build Organic Growth Engine People Products Infrastructure General &  Product Development Sales & Marketing Administrative Existing offerings Marketing IT a strategic enabler • Pricing resources • Insource some activity New integrated offerings • Customer analytics • Applications and infrastructure Product delivery capabilities • Brand building • Cloud infrastructure platform HR… building talent and  • Hardware Supply Chain Sales organizational capability • Information Fabric • Process improvements • Global security intelligence  • Renewals team Process capability network • e‐Business expansion 53 Expense to Revenue Ratios Invest to drive faster organic growth Symantec Benchmark1 FY12A FY17E Median High R&D 14% 16% 13% 17% S&M 41% 27% 28% 50% G&A 6% 5% 8% 13% 1Benchmark includes 3 year averages for BMC, CA, CVLT, CRM, ORCL, MSFT, SAP, INTU, CTXS, ADBE 54 27
  • 28. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Financial Plan Commitment to 5%+ organic revenue growth and 30%+ operating margins • Organic revenue… 5%+ CAGR FY15‐17 • Operating margins… 30% goal in FY15 FY14 ‐ A Transition Year… Expect • 0‐2% revenue growth • Operating margins grow 200 bps  • Free cash flow impacted by • ~$275 million severance payments • Incremental CapEx $100‐$150 million 55 Capital Allocation • CapEx and acquisitions that support strategy + meet IRR hurdles Strategy • Return excess cash to shareholders • 15%+ IRR hurdle Strategy  • Target returning 50% of free cash flow longer‐term Elements • Over time, ~50/50 balance between dividends and repurchases 56 28
  • 29. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Capital Allocation • Initiating dividend with targeted yield of 2.5% in 1Q14 Announcing  • New $1B share repurchase authorization Today • Continue opportunistic buybacks • Expect to return $800m FY14 • Will invest $375‐425m for severance and CapEx investments 57 Symantec 4.0 Operating Theme… Better and Easier What we do… People and Partnerships… Internal and external… creating customer value How we play… As a Team… Making High Quality, Timely Decisions • Symantec‐wide objectives and performance metrics • One Symantec strategy with cascading organizational strategies and operational priorities • Individual accountability… to their role and the team How we think… Innovation + Execution…. Global and Local… Big and Small • Innovation everywhere with special focus on customer driven and technology innovation • Excellence in execution through people, process and technology • Act big where there is value… act small everywhere else • Eliminate complexity not valued by customers or partners • Create and leverage global centers of excellence How we organize… Simplified and Streamlined • Inverted triangle organizational philosophy • Lean and effective management structure • Culture of learning and sharing to make us better 58 29
  • 30. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation Symantec 4.0 Company Theme Enabling people, businesses and  countries… to protect and manage  their digital information… so they  can focus their time and energy  achieving their aspirations 59 Appendix 60 30
  • 31. Symantecs Strategic Direction and 3Q 2013  1/23/2013Earnings Presentation 4Q FY13 Guidance Three Month Ending March 29, 2013 Year‐Over‐Year Growth Rate Revenue Guidance Range Actual Constant Currency GAAP revenue range  $1.70 ‐ $1.74B  1% ‐ 4%  1% ‐ 3%  Three Month Ending March 29, 2013 Year‐Over‐Year Growth Rate Earnings Per Share Guidance and Reconciliation Range Actual GAAP diluted earnings per share range $0.18 ‐ $0.19 (76)% ‐ (75)% Add back: Stock‐based compensation, net of tax $0.04 Amortization of intangible assets, non‐cash interest expense and transition & transformation expenses, net of tax $0.15 Non‐GAAP diluted earnings per share range $0.37 ‐ $0.38 (3)% ‐ 0% Three Month Ending March 29, 2013 Year‐Over‐Year Growth Rate Deferred Revenue Guidance Range Actual Constant Currency GAAP deferred revenue range $4.01 ‐ $4.07B  1% ‐ 2%  1% ‐ 3%  61 GAAP to Non‐GAAP Reconciliation Year-Over-Year ($ In millions, except per share data) Three Months Ended Non-GAAP Growth Rate December 28, 2012 December 30, 2011 Constant GAAP Adj Non-GAAP GAAP Adj Non-GAAP Actual Currency Net revenue: $1,791 N/A $1,791 $1,715 N/A $1,715 4% 5% Gross profit: $1,492 $20 $1,512 $1,444 $26 $1,470 3% 4% Stock-based compensation 4 4 Amortization of intangible assets 16 22 Gross margin % 83.3% 84.4% 84.2% 85.7% -130 bps -110 bps Operating expenses: $1,194 $140 $1,054 $1,144 $123 $1,021 3% 4% Stock-based compensation 38 42 Amortization of intangible assets 71 73 Restructuring and transition 27 5 Acquisition/divestiture-related expenses 4 3 Operating expenses as a % of revenue 66.7% 58.8% 66.7% 59.5% -70 bps -40 bps Operating income $298 $160 $458 $300 $149 $449 2% 2% Operating margin % 16.6% 25.6% 17.5% 26.2% -60 bps -80 bps Net income: $212 $101 $313 $240 $74 $314 0% N/A Gross profit adjustment 20 26 Operating expense adjustment 140 123 Non-cash interest expense 15 12 China VAT tax refund (24) - Income tax effect on above items (44) (45) Tax related adjustments: Release of pre-acquisition tax contingencies (6) (42) Diluted net income per share attributable to Symantec Corporation stockholders $0.30 $0.15 $0.45 $0.32 $0.10 $0.42 7% N/A Diluted weighted-average shares outstanding attributable to Symantec Corporation stockholders 702 702 740 740 -5% N/A 62 31