Q2 Fiscal 2005 Transcript David Gennarelli, Director, Investor Relations

Good afternoon and thank you for joining us. With me today are John Thompson, Chairman of the Board, and CEO of Symantec and Greg Myers, Senior Vice President of Finance and CFO.

In a moment, I will turn the call over to Greg. He will discuss our financial results for the fiscal second quarter, which ended October 1, 2004. He will also review the raised guidance for the December quarter and fiscal 2005 as outlined in the press release. John will then discuss highlights of our performance. This will be followed by a Q&A session.

Today’s call is being recorded and will be available for replay on Symantec’s investor relations home page at symantec.com/invest. In addition to today’s press releases, a copy of our prepared remarks and supplemental financial information is also available on the IR website.

Before we begin, I would like to remind everyone that some of the information discussed on this call, particularly our revenue and operating model targets for the coming quarter and fiscal year, contain forward-looking statements that involve risks and uncertainty. These statements are based on current expectations. Actual results may differ materially from those set forth in such statements.

Additional information concerning factors that may cause actual results to differ is contained in the risk factor section of the Company’s previously filed form 10-Q.

Lastly, in addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Symantec reports non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which can be found in the press release and on the IR website.

And now I would like to introduce our CFO, Greg Myers.

Greg Myers – Chief Financial Officer

Thanks Dave. Good afternoon everyone and thank you for joining us for today’s earnings release. I am very pleased to provide you with the financial details for the September quarter, the second quarter of our fiscal year 2005.

Net revenue for our Sep-04 quarter was $618m and grew 44% above the Sep-03 quarter’s revenue of $429m.

This quarter’s GAAP earnings per share of 38¢ compared favorably to our GAAP earnings per share of 24¢ for the quarter ended Sep-03.

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Non-GAAP earnings per share, which excludes pre-tax charges of $17m from the amortization of acquisition related intangibles, deferred compensation amortization, and restructuring costs, was 41¢ for the Sep-04 quarter. This was 52% higher than the Sep-03 quarter’s non-GAAP earnings per share of 27¢.

Revenue by segment in the Sep-04 quarter was as follows:

Consumer revenue was $315m and grew 63% over the Sep-03 quarter. The quarter’s growth as compared to last September was driven primarily by:

The continued growth in the threat environment, despite a lack of high profile threats during the quarter.

A favorable currency effect driven by the strength of the Euro against the dollar.

Continued growth in electronic distribution across our e-storefront, subscription renewal business and OEMs subscriptions.

Enterprise security revenue of $225m grew by 27% over the Sep-03 quarter.

Symantec’s Enterprise Administration revenue of $66m grew 36% than the same quarter last year. It should be noted that revenues from the acquisition of Power Quest and ONTC contributed $19m to this segments performance. Excluding revenue from our recent acquisitions the segment declined 4%.

Service revenues of $11m for the quarter grew 22% over the Sep-03 quarter.

International revenues of $321m accounted for 52% of revenue and grew 51% over the Sep-03 quarter. U.S. revenue was at $297m. Regional revenues were as follows: Americas had revenue of $332m and grew 38%. The EMEA region produced $201m and grew 52%. Our Japan-Asia Pacific region had revenue of $85m grew 52% over the Sep- 03 quarter.

This quarter’s revenue growth was 44%. Assuming constant currency from the Sep-03 quarter the effect on revenue was a favorable $22m. The growth rate for the quarter, assuming no change in currency rates from the Sep-03 quarter would have been 39%. The overall benefit to net income from currency was $11m.

Non-GAAP gross margin, which excludes deal related intangibles, was 84.5%. This was just below the 84.9% in the Sep-03 quarter. In general, higher OEM royalties and an increase in the revenue mix from our lower margin consumer products were the most notable contributors to the slightly lower gross margin percentage.

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Non-GAAP operating expenses, which exclude all acquisition related intangibles, deferred compensation charges, restructuring charges and IPR&D costs, were $313m for the Sep-04 quarter. As a percent of revenue this quarter’s operating expense was 50.7%, comparing quite favorably to the 55.2% recorded last September. In part, the improved spending as a percent of revenue has come from the scale associated with higher than expected revenue growth and lower than anticipated growth in headcount.

Headcount at the end of the September quarter was 5,873 employees. This total includes 481 employees from acquired companies over the past three quarters. Headcount growth from the Sep-03 quarter excluding employees from our recent acquisitions was 16%.

Non-GAAP net income, which excludes all acquisition related intangibles, deferred compensation charges, restructuring charges and IPR&D costs, was $146m. This compared favorably to our Sep-03 quarter’s non-GAAP net income of $91m.

Our balance sheet continues to illustrate Symantec’s overall financial strength.

Cash and short-term investments, net of $60m in stock re-purchase activity and a $28m outlay for the acquisition of Turn Tide ended the quarter at $2,545m. Cash flow from operating activities was about $235m.

The company’s net accounts receivable balance at the end of the Sep-04 quarter was $328m, $103m higher than last September. Days Sales Outstanding were 48 days as we exited the Sep-04 quarter, the same as the Sep-03 quarter.

Deferred revenue at the end of the Sep-04 quarter was $1,153m, up $434m or 60% from last September. Given this deferred base $420m or 64% of our expected Dec-04 revenue will come from the balance sheet.

Now, I’d like to spend a moment discussing our expectations for the upcoming Dec-04 quarter and update our guidance for our fiscal year 2005. As in previous guidance statements it should be noted that our outlook assumes no significant changes in the current economic or competitive climates over the next six months as compared to the business climate we are currently experiencing as we exit the quarter. It should also be noted that December quarters in the past have been seasonally strong quarters when compared to the prior September quarter. We have assumed that this trend will continue. Finally, it should be noted that there are a number of forward-looking statements in today’s guidance. In order to clearly understand the risks involved it is recommended that each investor review the risks factors outlined in our latest form 10Q filing.

As such, for the December 2004 quarter our guidance is as follows:

Revenue is estimated between $645m and $665m.

GAAP EPS at the mid-point of the revenue guidance is forecasted at 41¢.

Page 3 Symantec Q2 Fiscal 2005 Transcript Non-GAAP earnings per share at the mid-point of the revenue guidance for the Dec-04 quarter excluding expenses related to the amortization of acquisition related intangibles and deferred compensation charges of approximately $14m, is forecasted to be 43¢.

It should also be noted that Symantec expects to call its convertible debt in early November. This activity will have no effect on our stated non-GAAP EPS guidance and assuming a 100% conversion rate this activity would have no effect on our stated GAAP EPS guidance.

For our fiscal year ending on April 1st of 2005 we are revising our guidance to reflect the strength we experienced in the Sep-04 quarter. As such our guidance is as follows:

Revenue is estimated at $2,495m. This is 33% above our FY-04 results and is $90m higher than our previous guidance of $2,405m. This increase is being driven by the inclusion of revenue our previously announced acquisitions and by the strength of our consumer releases in the September quarter.

Forecasted growth by segment for the full year is as follows: Enterprise Security 24% growth Consumer Security 44% growth Enterprise Administration 25% growth Services 19% growth

Deferred revenue is expected to be between $1,300m and $1,350m.

GAAP earnings per share are forecasted at $1.54.

Non-GAAP earnings per share for the fiscal year ending Mar-05, excluding the amortization of acquisition related intangibles, deferred compensation charges restructuring charges, and IPR&D costs of $56m, is forecasted at $1.64 per share. This is up 39% over FY-04 and is well above the previous guidance of $1.57.

Now, I would like to hand the call over to John to give you additional details on the quarter.

John W. Thompson, Chairman and CEO

Thanks Greg.

As you heard, this marks another quarter of strong financial performance, underpinned by great execution in all of our major business segments and geographies.

Before I go into details on the quarter, I thought I would make a few comments about the current threat environment. We recently issued our sixth Internet Security Threat Report, which provided an analysis of trends in Internet attacks, vulnerabilities and malicious code activity during the first half of this year.

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The report is based on data from our DeepSight Threat Management System, our Managed Security Services customers and data from over 20,000 security devices deployed in more than 180 countries.

The study documented approximately 4,500 new viruses and worms – four and a half times the number from the same period last year. This trend demonstrates that the virus and malicious code environment is not slowing down and it continues to be a driver for both our consumer and enterprise segments.

Perhaps more interesting was the determination that the time between the announcement of a new vulnerability and the release of exploit code has continued to decline – now standing at 5.8 days. This means that organizations have less than a week to patch vulnerable systems, which in many cases is just not achievable.

As you may recall, during the September quarter last year the Blaster worm wreaked havoc on networks around the world and drove an estimated $35 million in revenue upside for us.

This year, no malicious event captured the media’s attention the way Blaster did. However, the total level of malicious activity continues to grow exponentially and our performance reflects that activity and the growing level of awareness around the world.

More and more, our customers are realizing they require both security and availability solutions to ensure the integrity of their information.

Our enterprise business turned in a very strong quarter growing a robust 29% year-over- year. Breaking it down we saw 36% year-over-year growth in our enterprise administration business and 27% year-over-year growth in our enterprise security business, and our services segment grew 22% over last year.

On a worldwide basis we are closing bigger deals, driven by the depth and breadth of our product and services offerings. As evidence, the total number of big deals we had – that is, transactions valued at $100,000 or more - increased to a record 311 deals; a 141% increase over the September quarter last year.

Broken down, we had 67 deals over $300,000 and 10 deals worth more than a million dollars. In addition, 56% of these transactions included multiple Symantec products and/or services.

Some of the new enterprise contracts we signed in the U.S. included Storage Tek, and Park Nicollet Health Services. Some international enterprise wins were with iiNet, a service provider in Australia and New Zealand; Alenia Spazio, an Italian aerospace company; TELCEL, a wireless operator in Mexico; Partner Re, an international reinsurance group, and All Nippon Airways. This diverse group of companies illustrates

Page 5 Symantec Q2 Fiscal 2005 Transcript the traction we are seeing in our enterprise business across numerous verticals around the globe.

Our core enterprise antivirus business had another very strong quarter. And, this continuing strength was reflected in a recent IDC report. In both the United States and throughout Europe, IDC proclaims Symantec as the market leader in the secure content management category for both the consumer and enterprise segments. I’m proud of our team’s leadership performance in the face of tough competition.

On the hardware front, we started shipping our new intrusion prevention appliance, the Symantec Network Security 7100 Series, offering multi-gigabit intrusion prevention. Available in three models, the 7100 Series delivers varying levels of performance to meet the different bandwidth needs of our customers. CRN Magazine awarded the 7100 Series top honors and a five star rating.

This product was released late in the quarter and we immediately saw very good traction. One significant win was the South Florida Water Management District. It represents a three-year, seven-figure deal that displaced a leading intrusion detection company, which had been very entrenched.

We were especially pleased with this deal as our services team drove it. The engagement was a total solution sell that included the 7100 for intrusion prevention, Intruder Alert for host-based detection, all complimented by our managed security services, and consulting services.

Our 5400 Series of integrated security appliances continues to gain acceptance in the marketplace. Sequential revenue growth was 43% and we closed a number of very nice six figure deals including two with large energy companies.

We also had an impressive quarter with our new Symantec Gateway Security 300 Series, which saw unit volume increase more than 50% from the June quarter. The 300 Series is targeted more towards the SME market segment. This quarter we plan to roll out our 400 Series of integrated security appliances.

The 400 Series will expand our segment focus to include the remote branch office market. It will deliver all of the capabilities of the 300 Series along with central management functionality.

On the secure email front, the integration of and Turntide has gone very well and we have experienced great traction across the board in the enterprise segment. Recent wins include a wide variety of vertical markets.

We recently landed a significant multi-year, multi-million dollar deal with the US Army to provide our Brightmail anti-spam solution for their intranet, which has over 1 million mailboxes. This competitive win displaced the incumbent, primarily due to the

Page 6 Symantec Q2 Fiscal 2005 Transcript performance and the exceptionally low false-positive rate of the Symantec Brightmail solution. We also launched our new online anti-fraud service called the Symantec Online Fraud Management Solution. This is a comprehensive solution that helps financial institutions and online retailers mitigate email related fraud and protect their brand.

Our Enterprise Administration group generated approximately $66 million in revenue for the September quarter, which represents a 36% increase versus the September quarter of last year. Key to this growth was the contributions from our recent acquisitions of PowerQuest and ON Technology.

Our Enterprise Administration products are earning high marks from our customers, as well as industry watchers. LiveState Recovery – a new release of the V2i Protector product -- was recently honored with the data protection product award at a large European trade show event dedicated entirely to data management. Our customers are especially impressed with the speed with which LiveState Recovery can restore a crashed server -- literally in minutes.

PC Magazine in the US and Germany's Computer Build put 9.0 through its paces in a bake-off against the competition and Ghost captured the top spot on both sides of the Atlantic.

The review points to a number of enhancements and features such as "hot imaging," incremental backups, the ability to restore a system to the state it was in at a specific time. All of these are important functions in helping customers maintain the integrity of their systems environment.

Our services business generated approximately $11 million in revenue in the September quarter, an increase of 22% compared to the same period last year. The largest component of this group, our managed security services business, grew 24% year-over- year.

The MSS market is entering a very interesting stage. The pricing environment is very unstable (and undisciplined I might add) as we regularly see competitors, new and old, vie to buy market share regardless of the underlying cost of the service. In our view, the current pricing environment is not sustainable and we will continue to monitor it and compete aggressively, but with an eye toward value delivered, not price.

As most of you know, we announced and closed the acquisition of two services companies in the last few months. The first of these is @stake, a leading digital security company with offices in the US and Europe. @stake brings Symantec a group of very skilled consultants experienced in vulnerability and risk assessment. By joining forces we significantly expand our consulting organization, thereby allowing us to help our customers better secure their applications.

Page 7 Symantec Q2 Fiscal 2005 Transcript We also announced and closed the acquisition of LIRIC Associates; a UK-based consultancy that offers expertise in assessing the security needs of highly complex global networks and designing the architecture and policies to secure those networks.

Both of these acquisitions increase the capacity and capability of our global professional services group. They also represent a strong complement to our current technology offerings and tremendous opportunities for our network of partners.

As Greg mentioned, our consumer business grew to a record $315 million, a 63% increase compared to the September quarter last year. The Norton brand continues to show its strength in the marketplace.

Our suite product, , grew 148% year-over-year. The value proposition of the suite versus single point AV products continues to resonate well with our customer base. Together with our partners, we continue to focus on migrating our customers to the more feature-rich suite, thereby offering better protection to address the rapidly changing threat environment.

Once again, the consumer retail distribution channel accounted for the largest share of consumer revenues. Even with the tough compare from last year, it achieved a very strong 47% year-over-year growth rate.

Electronic distribution, OEM and subscription renewal channels contributed $159 million to revenue in the September quarter, an increase of 85% over last year.

On the product front, we continue to add features and functionality to all of our software offerings. During the quarter, the consumer team released seven new versions of our award winning Norton products, a truly impressive feat for the team.

Just last week Norton 2005 was honored with PC Magazine’s Editor’s Choice award for the fourth time in five years and Norton Antivirus 2005 won the Editor’s Choice award for the 9th consecutive year. That’s a phenomenal… run but consistency like that doesn’t just happen. We have a team of fiercely dedicated security and software experts that pride themselves on building the best products in the world.

One important new offering for our OEM partners is the Center. It monitors a user’s PC to ensure that antivirus and firewall protection are installed and functioning properly. It not only detects and displays the status of Internet security programs from Symantec, but those of other security providers as well. Importantly, it also enhances the users experience by offering one-step remediation should the products be out of date or not activated.

Symantec has OEM agreements with many of the world’s largest PC manufactures. And, the Norton Security Center is now shipping with three major PC vendors and we expect others will be added over the next few quarters.

Page 8 Symantec Q2 Fiscal 2005 Transcript Our products and our brands are the most trusted names in Internet security; and, the fact that these major PC manufactures are working with us to provide their customers with a safe and easy-to-use environment speaks volumes about their confidence in us.

Finally, next week we are planning an important marketing launch that will focus on the security and availability of digital information. Digital Information has become a powerful and influential phenomena affecting our lives in many ways. In fact, many believe a substantial part of the world’s economy revolves around the use and movement of digital information.

It is “the” powerful enabler…but… only if it’s both secure and available. We must trust the integrity of the information we have come to rely on to make important business and personal decisions. And, as our Internet Security Threat Report suggest, this information is under attack more than ever before. Our marketing campaign will focus on a concept we are calling Information Integrity.

Our objective is to demonstrate to customers how the solutions we offer today can help them improve the confidence they have in the integrity of their digital assets.

So in closing, I’d say we had a very solid quarter, capping off a terrific first half of our fiscal year. As we head into what has traditionally been the strongest half of our fiscal year, we are very confident about our outlook. Our confidence is underscored by our board’s decision to announce a 2-for-1 stock split, our third split in three years, as well as the extension of our $60 million quarterly stock buy-back program through the March quarter of 2006.

Our company, with its diverse customer base, broad product portfolio, and network of value-add partners continues to demonstrate its ability to outpace the industry. I’m certain these strengths, coupled with our team’s strong focus on execution, will lead to another record year.

And now, I’ll turn it back to Dave.

David Gennarelli, Director, Investor Relations Thanks John. Operator will you please begin polling for questions.

While the operator is polling for questions, I’d like to announce that Symantec plans to attend the following upcoming conferences: the Prudential Technology Conference in New York City on Oct. 28th. The Morgan Stanley Software and Internet Conference in Phoenix on Nov. 2nd, and The Goldman Sachs Software Conference in New York City on Nov. 8th

For a complete list of investor related events, please visit our events calendar on the investor relations website. Operator, we are ready for the first question.

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