2005 Annual Report

SYMANTEC 2005 ANNUAL REPORT BE FEARLESS LEAD THREE YEAR SUMMARY Fiscal Year Ended (in millions, except per share amounts) 2005 2004 2003 Reconciliation of Non-GAAP to GAAP Results*: Revenues $ 2,583 $ 1,870 $ 1,407 Non-GAAP Gross Margin $ 2,180 $ 1,584 $ 1,186 Cost of revenues: amortization of acquired product rights $ (49) $ (41) $ (29) GAAP Gross Margin $ 2,131 $ 1,543 $ 1,157 Non-GAAP Operating Expenses $ 1,292 $ 1,007 $ 796 Amortization of other intangibles from acquisitions $ 5 $ 3 $ 3 Amortization of deferred stock-based compensation $ 5 – – Acquired in-process research and development $ 3 $ 4 $ 5 Restructuring $ 3 $ 1 $ 11 Patent settlement – $ 14 – Integration costs $ 3 – – GAAP Operating Expenses $ 1,311 $ 1,029 $ 815 Non-GAAP Net Income $ 634 $ 411 $ 280 Cost of revenues $ (49) $ (41) $ (29) Operating expenses $ (20) $ (21) $ (19) Income tax benefit $ 25 $ 22 $ 16 Tax charge on cash repatriation $ (54) – – GAAP Net Income $ 536 $ 371 $ 248 GAAP Net Income per Share – Diluted $ 0.74 $ 0.54 $ 0.38 Non-GAAP Net Income per Share – Diluted $ 0.87 $ 0.59 $ 0.43 Other Information: Cash Flow from Operating Activities $ 1,207 $ 903 $ 599 Total Assets $ 5,614 $ 4,456 $ 3,266 Stockholders’ Equity $ 3,705 $ 2,426 $ 1,764 Total Employees 6,395 5,300 4,344 *In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Symantec reports non-GAAP financial results. Non-GAAP net income per share exclude amortization of acquisition-related intangibles, amortization of deferred stock-based compensation, in-process research and development, and certain other identified charges, such as restructuring, patent settlement, and integration planning expenses associated with the VERITAS merger, as well as the tax effect of these items, and the one-time tax effect associated with the company’s cash repatriation under the American Jobs Creation Act. Symantec’s management believes these non-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate the Company’s financial results, develop budgets, and manage expenditures. The calculations Symantec uses to produce non-GAAP results are not in accordance with GAAP, are likely to differ from the methods used by other companies, and should not be regarded as a replacement for corresponding GAAP measures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which can be found in our earnings press releases, investor presentations, and on the investor relations Web site at www.symantec.com/invest. ABOUT SYMANTEC FINANCIAL HIGHLIGHTS SYMANTEC IS THE WORLD LEADER IN PROVIDING 38% GROWTH $2.58 BILLION IN REVENUE IN REVENUE SOLUTIONS TO HELP INDIVIDUALS R E V E N U E * (millions) NET INCOME* (millions) AND ENTERPRISES ASSURE $634 $2,583 $536 THE SECURITY, AVAILABILITY, $411 $1,870 $371 AND INTEGRITY OF THEIR $1,407 $280 $248 INFORMATION. HEADQUARTERED IN CUPERTINO, CALIFORNIA, 2003 2004 2005 2003 2004 2005 GAAP NON-GAAP GAAP NON-GAAP SYMANTEC HAS OPERATIONS IN MORE THAN 40 COUNTRIES. EARNINGS PER DILUTED SHARE DEFERRED REVENUE (millions) $0.87 MORE INFORMATION IS AVAILABLE $1,330 $0.74 AT WWW.SYMANTEC.COM. $0.59 $0.54 $0.43 $971 $0.38 $590 2003 2004 2005 2003 2004 2005 GAAP NON-GAAP *Non-GAAP results are reconciled to GAAP results on the inside front cover. SYMANTEC 2005 ANNUAL REPORT 1 BE FOCUSED EXECUTE LETTER TO OUR SHAREHOLDERS Dear Shareholders, Fiscal 2005 was another tremendous year for almost $2.6 billion in fiscal 2005, and produced Symantec. We continued to execute our core record earnings. Non-GAAP1 earnings per share grew strategy: ensuring information integrity across 47% to $0.87 per share. Our deferred revenue for a broad range of environments. We integrated five the fiscal year grew nearly $360 million, an increase acquisitions and grew our business organically of 37%, and we ended the year with $3.2 billion in by launching powerful new products and services. cash and short-term investments. As we move into And, we announced our intent to merge with fiscal 2006, our overall financial health has never VERITAS. We believe combining the leaders of been stronger. security and storage management will position Symantec to help our customers build a resilient Our tenacious commitment to customer-driven infrastructure, manage complex network environ- solutions fueled results that surpassed our expecta- ments, and reduce risk. tions. During fiscal 2005, we booked almost 1,350 enterprise deals greater than $100,000—that’s 64% Evolving Security Threat Environment more than we booked in fiscal 2004. The number Today’s evolving security threat environment is as of million-dollar deals increased 85%. Our strategy dangerous as it has ever been. Symantec’s Internet of providing customers with a breadth and depth Security Threat Report—the most comprehensive of integrated security and availability products has gauge of the cyberthreat landscape—found that been instrumental to these successes. malicious code that exposed confidential information made up 54% of the samples in the past six Boosting Consumer Confidence in a World months, up 10% from the previous six months. of Increasing Risk We documented about 1,400 new vulnerabilities, The Consumer segment was the star performer again this year, growing 51% to $1.3 billion in Our global sales team produced another year of remarkable results generating double-digit revenue growth in all major geographies. or gaps in programming code, that attackers can revenue. We shipped almost 26 million packaged exploit. That’s an astounding 58 new vulnerabilities products in addition to the tens of millions of every week. The majority of them were of moderate electronic transactions we conducted with customers or high severity and almost half of them occurred around the world. in Web applications. With our breadth of offerings Over the past 20 years, Symantec has built an extensive and track record of success, we believe no company network of channel partners providing us with is better positioned than Symantec to protect the broadest customer reach of any company in the enterprises and individuals against these threats. industry. Sales of our integrated product suite, Norton Another Year of Record Financial Performance Internet Security,™ grew nearly 100%—evidence that Our global sales team produced another year of consumers are gravitating towards integrated, multi- remarkable results generating double-digit revenue function security solutions. There is no doubt that growth in all major geographies. Following a very the Norton brand provides our customers—hundreds strong fiscal 2004, Symantec grew revenue 38% to of millions of PC users worldwide—confidence so 1 Non-GAAP results are reconciled to GAAP results on the inside front cover. SYMANTEC 2005 ANNUAL REPORT 3 they can live, learn, create, and play in a connected acquisitions of LIRIC and @Stake. We expanded our world. We are more committed than ever to Managed Security Service to support even more strengthening our Norton brand with consumers security devices. Recently we launched the Symantec around the world. Systems Continuity Service, which identifies security, network, and storage risks. Our consultants Helping Enterprises Build a Resilient provide detailed action plans and policy recommen- Infrastructure dations helping customers to rapidly recover from Our presence in the corporate world is equally strong— unforeseen systems attacks while maintaining our enterprise revenue grew 27% to $1.3 billion in continuous availability. fiscal 2005. Enterprise customers chose Symantec products and services to secure and manage their The Next Step: Solving Business Problems IT infrastructures and ensure compliance with In today’s digitally connected world, there are few evolving regulatory requirements. challenges more significant than protecting and We must deliver security and availability solutions that address complexity, cost, and compliance issues across our customers’ entire network environment. Our enterprise security segment remains the efficiently managing information. Information largest enterprise group, growing 26% during the is nothing less than the lifeblood of customers’ year. Enterprise antivirus solutions continued operations—even the global economy. Information to be the most significant contributor to the mix. is under increasing attack and its integrity is being Through last year’s acquisition of Brightmail, we compromised—not just from worms, viruses, and added market-leading antispam solutions to our hackers, but also from an array of new cyberthreats integrated security offerings and we recently added including spam, spyware, and phishing. We must antispyware technology to our offerings. In addition, protect information differently. It is not enough to our unique products, such as Symantec Enterprise make information secure, we also need to ensure Security Manager,™ are gaining momentum as companies that information is always available. Information is in highly regulated industries, like financial services the currency of our age, and as such, it is invaluable. and health care, turn to Symantec for help in meeting Unlike a disk, server, or laptop, information is evolving regulatory compliance requirements. not replaceable. In the past 18 months, our Enterprise Administration Today’s dynamic businesses are challenged to find team integrated the advanced

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