™

Corporate Profile Symantec Corporation helps make users productive and keep their computers safe and reliable, anywhere and anytime. As the world leader in utility 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 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.

Founded in 1982, Symantec Corporation employs than 2,300 people worldwide, ™ with headquarters in Cupertino, California. 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.

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.

© 1998 Symantec Corporation. All rights reserved. Printed in the U.S.A. 7/98 35353 09-71-00293 Financial Highlights Corporate Directory

NET INCOME* Symantec and its shareholders experienced a strong Board of Directors Corporate Officers Corporate Headquarters Rest of World fiscal 1998 with successful financial performance and achievements. We have built Mar. 31, 1998 $ 24,138 Tania Amochaev and Key Employees Symantec Corporation 13% shareholder value by implementing a long-time vision, bringing solutions to customers North America Chairman of the Executive Committee, Gordon E. Eubanks, Jr. 10201 Torre Avenue Dec. 31, 1997 $ 21,836 QRS Corporation President & Chief Executive Officer Cupertino, California 95014-2132 that meet their needs and executing our business strategy well. Europe, RESS (408) 253-9600 P Sep. 30, 1997 $ 20,580 Middle East Charles M. Boesenberg and Africa 22% Howard A. Bain, III President & CEO, Magellan Corporation Vice President, Worldwide Operations Transfer Agent 65% Jun. 30, 1997 $ 18,535 & Chief Financial Officer Walter W. Bregman Bank of Boston ATERMARK

W Chairman & Co-Chief Executive Officer, P.O. Box 644 $ 8,269 Christopher Calisi Mar. 31, 1997 Boston, Massachusetts 02102 S&B Enterprises Vice President, Remote Productivity Solutions Business Unit Dec. 31, 1996 $ 13,852 Carl D. Carman Investor Relations

NET INCOME PER SHARE – DILUTED Printing: Chairman, Symantec Corporation Thomas Darnall A copy of the Company’s Form 10-K General Partner, Hill, Carman Ventures (in thousands) Vice President, Corporate Services for the fiscal year ended April 3, 1998 REVENUE BY REGION Mar. 31, 1998 $ 0.40 AM as filed with the Securities and * Quarterly operating results for the period ended March 31, 1997 includes K Robert R. B. Dykes revenue and charges related to the sale of Symantec’s networking business (for March 1998 Quarter) Dieter Giesbrecht Exchange Commission is available Senior Vice President, unit (see Note 12 of Notes to Consolidated Financial Statements). Vice President, Europe, Middle East & Africa upon request without charge. Dec. 31, 1997 $ 0.37 Finance & Administration, ENRIK Please contact the Investor Relations H Flextronics International LTD Akihiko Narita Hotline at (800) 883-4497. Sep. 30, 1997 $ 0.35 Managing Director & President, Japan Additional investment-oriented Gordon E. Eubanks, Jr. questions may be directed to: President & Chief Executive Officer $ 0.32 Mansour Safai Jun. 30, 1997 Shelley Wilson Symantec Corporation Vice President, Internet Tools Investor Relations Photography: Business Unit Mar. 31, 1997 $ 0.15 Robert S. Miller Symantec Corporation 10201 Torre Avenue CLOSING STOCK PRICES Chairman of the Board, Enrique T. Salem Dec. 31, 1996 $ 0.25 Cupertino, California 95014-2132 Waste Management, Inc. Vice President, Security & Assistance (408) 446-8990 Business Unit Mar. 1998 $ 20.88 $ 29.00 Internet Tools, OLDSTEIN

G Outside Counsel Royalties and Other Garry Sexton Dec. 1997 $ 19.19 $ 27.00 10% Vice President, Asia Pacific Fenwick & West

Security and TEVEN Two Palo Alto Square S Sep. 1997 $ 19.44 $ 25.50 Assistance Rebecca Ranninger Palo Alto, California 94306 Vice President, Human Resources 50% Independent Auditors NET REVENUES Jun. 1997 $ 12.50 $ 20.38

40% Writing: Dana E. Siebert LLP Vice President, Americas Ernst & Young Mar. 1997 $ 12.63 $ 18.38 Remote 55 Almaden Boulevard $ 156,092 Productivity Mar. 31, 1998 San Jose, California 95113 Solutions Derek P. Witte Dec. 1996 $ 9.88 $ 16.38 Vice President, General Counsel & Secretary Dec. 31, 1997 $ 148,240 Annual Meeting RANCISCO ...... F The annual meeting of Stockholders Sep. 30, 1997 $ 139,013 $0 $5 $10 $15 $20 $25 $30 AN will be held September 17, 1998, at , S REVENUE BY BUSINESS UNIT F OOTNOTES TO P AGE 3-7: Symantec Corporate Worldwide Jun. 30, 1997 $ 135,016 (prices by Quarter) (for Fiscal Year 1998) 1 Symantec Internal Reporting Headquarters, Cupertino, California. 11 International Data Corporation, 1998 HERMAN

Mar. 31, 1997 $ 129,706 S 111 Symantec Survey, June 1997 1v PC Data Retail Report —The market share is based on the Remote Control/Remote Access category

OOK as defined by Symantec. The following products are included: Symantec pcANYWHERE, Network Dec. 31, 1996 $ 124,081 C Associates Remote Desktop, Travelling Software Laplink, Stac Reachout, Netopia Timbuktu, Carbon Copy, Triton/Artisoft CoSession, Norton Lambert Close-Up, and Funk Proxy. v Soft Letter, April 1998

(in thousands) Design: Symantec and the Symantec logo are U.S. registered trademarks of Symantec Corporation. , Windows, Windows NT, and the Windows logo are registered trademarks of Microsoft Corporation. = Fiscal 1998 Other brands and products are trademarks of their respective holder/s.

= 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 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.

Founded in 1982, Symantec Corporation The desktop. 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.

A N E NHANCED M ARKET P RESENCE

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. 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 and Windows NT operating systems, all of our products, both existing and new, are Year 2000 compliant.

W ORKING T OGETHER FOR S UCCESS

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.

I NTERNAL I MPROVEMENTS

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 COMPANY ON THE M OVE

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.

P RESIDENT AND C HIEF E XECUTIVE O FFICER

IV 111

1 1v

v

1 Symantec Product Portfolio

Remote Productivity Solutions Business Unit

ACT! ACT!® for Windows 3.1/95/NT ACT!® for ACT!® for Windows CE ACT!® for Psion ACT!® for Newton ACT!® for PalmPilot pcANYWHERE pcANYWHERE® for Windows 3.1/95/NT/DOS pcANYWHERE® Express pcANYWHERE® Access Server pcANYWHERE® for Windows CE

Norton Mobile Essentials Norton Mobile Essentials™ for

Symantec Mobile Update Symantec Mobile Update™ for Windows 95/NT

WinFax WinFax PRO™ for Windows 95/NT WinFax PRO™ for Windows 3.1

Security & Assistance Business Unit

Norton AntiVirus Norton AntiVirus® for Windows Norton AntiVirus® for Email Gateways Norton AntiVirus® Deluxe for Windows Norton AntiVirus® for NetWare Norton AntiVirus® for Firewalls Norton AntiVirus® for Lotus Notes Norton AntiVirus® for Windows NT Server Norton AntiVirus® for Macintosh

Norton CrashGuard Norton CrashGuard™ Deluxe for Windows 95/NT

Norton Your Eyes Only Norton Your Eyes Only® for Windows 95/NT Norton Your Eyes Only® Administrator

Norton Utilities Norton Utilities® for Windows 3.1/95/NT/DOS Norton Utilities® for Windows 3.1/DOS Norton Utilities® for Windows NT Norton Utilities® for Macintosh

Norton Uninstall Norton Uninstall™ Deluxe for Windows 95

Norton Web Services™

Internet Tools Business Unit

Visual Café Symantec Visual Café™ for Java—Web Symantec Visual Café™ for Java—Database Development Edition for Windows 95/NT Development Edition for Windows 95/NT Symantec Visual Café™ for Java—Professional Development Edition for Windows 95/NT Symantec Visual Café™ for Macintosh

Visual Page Symantec Visual Page™ for Macintosh Symantec Visual Page™ for Windows 95/NT Financial Contents

FORWARD-LOOKING STATEMENTS The following discussion contains forward-looking statements that are subject to risks the periods ended April 3, 1998, March 28, and uncertainties. There are several important factors that could cause actual results 1997and March 29, 1996, respectively. to differ materially from those anticipated by the forward-looking statements con- The fiscal accounting year ended April 3, tained in the following discussion. Readers should pay particular attention to the risk 1998 comprised 53 weeks of operations. 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 Part One Item 1: Business 11 Nothing in this report shall impose upon Symantec or any person a duty to update 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 Item 3: Legal Proceedings 18 following three business units: Security and GENERAL , Inc. (“Fifth Assistance; Remote Productivity Solutions; Item 4: Submission of Matters to a Vote of Security Holders 18 Symantec Corporation (“Symantec” or the Generation”) on October 4, 1993; and and Internet Tools, Royalties and Other. “Company”) is a world leader in utility Contact Software International, Inc. The following table summarizes Symantec’s software for business and personal com- (“Contact”) on June 2, 1993. The Company principal products by business unit: Part Two Item 5: Market for Registrant’s Common Equity 19 puting. Symantec’s business strategy is to acquired Computing, Inc. 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 Item 7: Management’s Discussion and Analysis of Financial 21 Computer, Inc.) that make customers All of these acquisitions were account- Norton CrashGuard™ Deluxe 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 , 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 Part Three Item 10: Directors and Executive Officers of the Registrant 32 April 1988 in connection with the Septem- the Company’s product offerings on spe- Internet Tools, Royalties 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 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™ and Management ing on June 23, 1989, the Company has assets and technology of its networking (Professional Development Edition) 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- Discussion and Analysis of Financial Most of Symantec’s products that are Part Four Item 14: Exhibits, Financial Statement Schedules and 34 ration (“Delrina”) on November 22, 1995; Condition and Results of Operations. currently being developed and marketed Intec Systems Corporation (“Intec”) on Symantec has a 52/53-week fiscal account- feature LiveUpdate,™ which enables the Reports on Form 8-K August 31, 1994; , ing year. Accordingly, all references as of user, free of cost, to download application Inc. (“Central Point”) on June 1, 1994; and for the periods ended March 31, 1998, bug-fix patches via an Internet connection Signatures 56 SLR Systems, Inc. (“SLR”) on May 31, 1994; 1997 and 1996 reflect amounts as of and for to Symantec’s corporate website.

S YMANTEC C ORPORATION 11 Security and Assistance 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 SALES AND MARKETING, The Security and Assistance business unit add and remove programs and files from a compromising security, lock access to a Windows, Windows 95, Windows NT, and connects to multiple databases with- INTERNATIONAL SALES AND is dedicated to being indispensable in user’s hard drive. InstallGuard, a feature of when the personal Windows CE or MS-DOS applications out writing source code. The Database CUSTOMER SUPPORT customers’ daily use of computers by Norton Uninstall Deluxe, provides a one- computer is idle and prevent booting by remotely, transfer files and perform other Development Edition includes 100+ Symantec markets its products world- increasing productivity and keeping button “undo” of program installations, unauthorized users. The program runs data operations. JavaBeans (series of pre-written source wide, utilizing a multi-channel strategy computers safe and reliable. Net revenues restoring a computer’s Windows registry on the Windows 95 and Windows NT WinFax PRO is designed to enable users code) and 20 database templates, and of direct and indirect sales through inde- from this business unit comprised approxi- and hard drive to its original condition operating systems. to send, receive and manage . 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, Remote Productivity Solutions allows users to continue working on other (“JDBC” or “ODBC”). 1997 and 45% of total net revenues for files, icons and other system options are The Remote Productivity Solutions applications while sending or receiving a Symantec Visual Café (Professional Sales and Marketing the fiscal year ended March 31, 1996. set for optimum performance. Norton business unit focuses on helping remote via the Internet or a fax machine. Development Edition) is designed to Symantec sells its products to both indi- Norton AntiVirus and Norton Uninstall Deluxe runs on the Windows professionals remain productive – WinFax PRO also provides enhanced file provide a Java Integrated Development viduals and corporate users primarily AntiVirus for Macintosh run in a com- 95 and Windows NT operating systems. anywhere, anytime. This business unit compression, increasing the speed at Environment solution for creating Java through distributors and resellers. puter’s background and are designed to Norton Utilities is a set of “tools” designed focuses on customer needs to access infor- which faxes are transmitted. Other fea- applications and JavaBeans with features Symantec products are made available to protect against, detect and eliminate com- to address system-level operations. In mation, applications and data from any tures include a paging function, which geared toward professional Java developers. customers through channels that include: puter viruses. The software covers multiple addition, Norton Utilities finds and location. Net revenues from this business enables the computer to page a user Advanced power tools include native distributors, retail, mail order, corporate sources of infection, including the Inter- repairs problems with Windows 95 appli- unit comprised approximately 40% of upon receipt of an incoming fax or voice compilation, advanced Java Archive tools, resellers, value added resellers (“VARs”), net, floppy disks, email attachments, shared cations and includes an interface to total net revenues for the fiscal year ended message, and a “call identify” function, Java Development Kit 1.1.5 support and original equipment manufacturers files and networks. The software enables Norton Web Services, a paid subscription March 31, 1998 and approximately 35% which allows a user to view an incoming Visual Page. In addition, to facilitate (“OEMs”), partnerships, education, con- the user to download, via Symantec’s service that locates and installs patches, of total net revenues for the fiscal years fax or phone number. WinFax PRO runs easier discovery of problems with source sulting, etc. Symantec also sells product LiveUpdate functionality, new virus defi- updates and drivers specific to a user’s ended March 31, 1997 and 1996. on the Windows, Windows 95 and code, the program supports “debugging” upgrades and certain of its products nitions created by the Symantec AntiVirus installed hardware and software. The pro- ACT! is designed to combine a customiz- Windows NT operating systems. directly within a . through the use of direct mail and over Research Center (SARC).™ The software gram also offers crash protection, limited able database, calendar and activity Symantec Visual Café (Web the Internet. Symantec maintains distribu- runs under the Windows, Windows 95, virus detection and repair and several management, automatic history logging, Internet Tools, Royalties and Other Development Edition) is designed to tion relationships with major independent Windows NT, MS-DOS, Macintosh and new optimization utilities to accelerate a customizable reporting and communica- The Internet Tools, Royalties and Other provide a Rapid Application Java distributors. These distributors stock Power Macintosh operating systems. The computer’s performance. Norton Utilities tions via mail merge, telephone, email and business unit includes products providing Development and an HTML Web author- Symantec’s products for redistribution to Norton AntiVirus product line also includes runs on the Windows, Windows 95, fax into a single product. The product pro- an easy-to-use Java development environ- ing solution that provides support for independent dealers, consultants and other support for Lotus Notes (Norton Windows NT, MS-DOS, Macintosh and vides extensive data sharing support for ment, as well as revenue streams from the Java Development Kit 1.1.5 and JavaBeans. resellers. Symantec also maintains relation- AntiVirus for Notes) and NetWare Power Macintosh operating systems. Local Area Network (“LAN”) teams and sale to third-party computing companies The program includes a drag-and-drop ships with major retailers while marketing (The Norton AntiVirus NetWare). Norton Web Services (“NWS”) is remote database synchronization for mobile of certain of the Company’s software interface, professional templates and Java to these retailers through independent Norton CrashGuard Deluxe runs in a designed to deliver an online subscription- users and small mobile teams. ACT! runs product lines and technologies, and applet and JavaBeans libraries. This distributors. (See further discussion in computer’s background and is designed to based service site that downloads Norton on the Windows, Windows 95, Windows revenues from products nearing the end product did not generate material revenues Item 7: Management’s Discussion and detect and fix a range of computer prob- technology to Windows 95 users via an NT, Windows CE, MS-DOS, Macintosh, of their life cycle. Net revenues from this in any fiscal years presented. The Company Analysis of Financial Condition and lems, including computer crashes and hard Internet connection. NWS features Newton and Psion operating systems. business unit comprised approximately believes this product will generate increas- Results of Operations - Retail Distribution disk fragmentation. When the program Symantec’s LiveUpdate Pro, a service that pcANYWHERE is designed to offer reli- 10%, 15% and 20% of total net revenues ing revenue amounts in future periods, Channel; New Distribution Channels.) detects a crash, it allows the computer locates and installs patches, updates and able, fast and flexible PC-to-PC remote for the fiscal years ended March 31, 1998, but there can be no assurance this prod- The Company’s sales force works user to unfreeze the crash and save any drivers specific to a user’s installed hard- computing via serial or modem connec- 1997 and 1996, respectively. uct will be commercially successful. The closely with its major distributor and open files. The program also optimizes ware and software. NWS was released by tions. pcANYWHERE enables the user Symantec Visual Café (Database Visual Café products run on Windows 95, reseller accounts to manage the flow of computer performance and provides basic Symantec in December 1997. As such, this to control one PC remotely from the Development Edition) is designed to Windows NT and Macintosh operating orders, inventory levels and sell-through virus detection and elimination. Norton service did not generate material revenues keyboard of another PC. The offsite provide a solution for building business- systems. The Java program code devel- to customers, as well as working closely CrashGuard Deluxe includes an interface in any fiscal years presented. The Company remote PC, or PC terminal con- critical Java applications with database oped with these products, however, can with them to manage promotions and to Norton Web Services, a paid subscrip- believes this service will generate increas- trols the operation of the distant host connectivity. The program includes a be deployed on any platform that sup- other selling activities. The Company also tion service that locates and installs patches, ing revenue amounts in future periods, PC. In addition to enabling a remote forms designer for drag-and-drop Graphical ports a Java Virtual Machine compliant sells license programs (corporate updates and drivers specific to a user’s but there can be no assurance this product user to run a distant PC, pcANYWHERE User Interface design and dbAWARE with Sun Microsystems’ JDK standards. 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 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 13 Condition and Results of Operations - with distributors, resellers and dealers, Kingdom. These local offices facilitate Item 7: Management’s Discussion and provide pcANYWHERE32 free of charge Computer Software to be Sold, Leased, or Site Licenses; Channel Fill.) direct mailings to existing and prospective Symantec’s marketing and distribution Analysis of Financial Condition and to its resellers. Otherwise Marketed,” did not materially Agreements with distributors are end users and participation in trade and in international markets. The Company’s Results of Operations - Technical Support.) Microsoft and Symantec have entered affect the Company in fiscal 1998 and 1996. generally nonexclusive and may be termi- computer shows. Additionally, the international operations are subject to into a strategic relationship to deliver In fiscal 1997, Symantec capitalized nated by either party without cause. Such Company typically offers two types of certain risks common to international PRODUCT DEVELOPMENT, integrated technology capabilities to the approximately $8 million of software deve- distributors are not within the control of rebate programs: volume incentive rebates operations, such as government regula- PARTNERSHIPS AND Microsoft Outlook 98 messaging and lopment costs, primarily related to network Symantec, are not obligated to purchase and rebates to end users. Volume incentive tions, import restrictions, currency ACQUISITIONS collaboration client. The first project administration technology, which was sold products from the Company and also rebates are made available to Symantec’s fluctuations, repatriation restrictions and, Symantec uses a multiple product sourcing from this relationship will be the inclusion to Hewlett-Packard in March 1997, result- represent other vendors’ product lines. distributors and resellers whereby the in certain jurisdictions, reduced protection strategy that includes internal develop- of WinFax Starter Edition, which includes ing in the write-off of approximately $7 (See further discussion in Item 7: distributor or reseller earns a rebate based for the Company’s copyrights and trade- ment, licensing from third parties and components of Symantec’s WinFax PRO million of unamortized costs during the Management’s Discussion and Analysis upon their purchases and sell-through of marks. (See further discussion in Item 7: acquisitions of technologies, product lines software, in Microsoft Outlook 98. The fourth quarter of fiscal 1997. (See further of Financial Condition and Results of products to end users. Volume incentive Management’s Discussion and Analysis or companies, as necessary. Symantec second project from this relationship is discussion in Item 7: Management’s Operations - Retail Distribution Channel.) rebates are accrued when revenue is of Financial Condition and Results of typically develops new products and expected to be the integration between Discussion and Analysis of Financial Information with respect to customers recorded. From time to time, Symantec Operations - Foreign Operations.) enhancements of existing products in its Symantec’s new ACT! contact manager Condition and Results of Operations - that represent more than 10% of the also makes rebates available to end users Information with respect to international business units. Each group’s responsibilities and Microsoft’s Outlook 98. ; Uncertainty of Company’s revenues may be found in of various products who acquired the operations and export sales may be found include design, development, documen- On May 19, 1998, IBM and Symantec Research and Development Efforts; Note 16 of the Notes to Consolidated products through major retailers. End in Note 16 of Notes to Consolidated tation and quality assurance. Independent Corporation entered into an agreement Length of Product Development Cycle.) Financial Statements in Part IV, Item 14 user rebates are accrued when revenue is Financial Statements in Part IV, Item 14 contractors are used for certain aspects of whereby Symantec will license IBM’s Symantec uses strategic acquisitions, of this Form 10-K. recorded. (See further discussion in Item 7: of this Form 10-K. the product development process, and immune system technology and patents. as necessary, to provide certain technology, Symantec’s return policy allows its Management’s Discussion and Analysis elements of certain Company products Symantec will combine this technology people and products for its overall product distributors, subject to certain limitations, of Financial Condition and Results of Customer Support are licensed from third-party developers. with its own technology to produce a strategy. The Company has completed a to return purchased products in exchange Operations - Sales and Marketing.) Symantec’s product support program During fiscal 1998, Symantec entered range of products, including new solutions number of acquisitions and dispositions for new products or for credit towards provides a wide variety of free and fee- into strategic relationships with various to support IBM platforms. As part of the of technologies, companies and products future purchases. End users may return International Revenues based technical support services to its companies including Entrust Technologies, agreement, IBM has also assigned its and may acquire and dispose of other products through dealers and distributors International revenues outside of North customers. Symantec provides its customers Inc. (“Entrust”), Hewlett-Packard and existing anti-virus customer and OEM technologies, companies and products in within a reasonable period from the date America represented approximately 32%, with free support via electronic and auto- Microsoft Corporation (“Microsoft”). contracts to Symantec and will recom- the future. (See further discussion in of purchase for a full refund, and retailers 29% and 32% of Symantec’s net revenues mated services as well as 90-days free Entrust has agreed to a joint development, mend Norton AntiVirus to its corporate Item 7: Management’s Discussion and may return older versions of products. in fiscal 1998, 1997 and 1996, respectively. telephone support for selected products. cross-licensing and distribution arrange- customers worldwide as the anti-virus Analysis of Financial Condition and Various distributors and resellers may The majority of Symantec’s net In August 1996, Symantec introduced ment with Symantec for the development solution of choice. In addition, IBM and Results of Operations - Management of have different return policies that may revenues from certain European regions LiveUpdate, which provides instant access of secure desktop suites which will provide Symantec intend to sell and market the Expanding Operations.) negatively impact the level of products are derived from sales by affiliates of to on-line application bug-fix patches for comprehensive, easily managed desktop Norton AntiVirus product line worldwide. which are returned to Symantec. Product Symantec’s major United States distribu- most of Symantec’s currently marketed solutions. In addition, the secure desktop (See further discussion in Note 17 of Notes COMPETITION returns occur when the Company intro- tors. In other countries, Symantec sells its and developed products. In addition, suites are expected to provide scalable to Consolidated Financial Statements in The microcomputer software market is duces upgrades and new versions of products through authorized distributors. Symantec offers both domestic individual certificate management and centralized Part IV, Item 14 of this Form 10-K.) intensely competitive and is subject to products or when distributors order too In some countries, these distributors are users and domestic corporate customers a key backup and recovery to the consumer, The Company is devoting substantial rapid changes in both technology and much product. In addition, competitive restricted to specified territories. Symantec variety of fee-based options designed to workgroup and enterprise. (See further efforts to the development of software the strategic direction of major micro- factors often require the Company to typically adapts products for local markets, meet their technical support requirements. discussion in Item 7: Management’s products that are designed to operate on computer hardware manufacturers and offer rights of return for products that including translating the documentation These fee-based support programs are Discussion and Analysis of Financial various operating systems. Symantec’s operating system providers. The Company’s distributors or retail stores are unable to and software where necessary, and prepares revised from time to time as customer Condition and Results of Operations - total research and development expenses competitiveness depends on its ability to sell. (See further discussion in Item 7: marketing programs for each local market. requirements change and as market trends Reliance on Joint Business Arrangements.) were approximately $91 million, $89 mil- enhance its existing products and to offer Management’s Discussion and Analysis Symantec has established marketing dictate. Symantec also offers Chat Now!™, Hewlett-Packard has agreed to incor- lion and $95 million in fiscal 1998, 1997 successful new products on a timely basis. of Financial Condition and Results of offices in Argentina, Australia, Brazil, a fee-based technical support service via porate Symantec’s pcANYWHERE32 and 1996, respectively. Research and The Company has limited resources and Operations - Product Returns.) Canada, Denmark, France, Germany, the Internet. Fee-based technical support remote-control software package on all development expenditures are charged to must restrict its product development Symantec’s marketing activities Holland, Hong Kong, Italy, Japan, Korea, services did not generate material revenues Hewlett-Packard Brio personal computers operations as incurred. The current U.S. efforts to a relatively small number of include advertising in trade, technical and Malaysia, Mexico, New Zealand, Russia, in any fiscal years presented and are not targeted for small and medium sized accounting standard, Statement of projects. (See further discussion in Item 7: business publications, on-line advertising, Singapore, South Africa, Sweden, expected to generate material revenues in companies without an information tech- Financial Accounting Standards (SFAS) Management’s Discussion and Analysis public relations, cooperative marketing Switzerland, Taiwan and the United the near future. (See further discussion in nology staff. Hewlett-Packard will also No. 86, “Accounting for the Costs of of Financial Condition and Results of

14 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 15 Operations - Rapid Technological Change Security and Assistance Enterprise from International Business Further, Symantec competes with other international CD-ROM manufacturing revenues and, accordingly, operating and Development Risks.) Norton AntiVirus competes with VirusScan Machines (“IBM”) and PowerJ from microcomputer software companies for is performed by outside contractors in results. (See further discussion in Item 7: Operating system vendors such as from Network Associates, Inc. (“Network Sybase, Inc. Symantec Visual Café access to the channels of retail distribution Dublin, Ireland. Management’s Discussion and Analysis Microsoft have added features to new Associates”), Dr. Solomon’s Anti-Virus (Professional Development Edition) and for the attention of customers at the Symantec has often been able to of Financial Condition and Results of versions of their products that provide from Dr. Solomon’s Software and Inoculan competes with Microsoft’s Visual J++, retail level and in corporate accounts. acquire materials on a volume-discount Operations - Fluctuations in Quarterly some of the same functionality traditionally from Computer Associates International, Inprise’s Borland JBuilder Professional, Finally, Symantec competes with other basis and has had multiple sources of Operating Results and Stock Price.) offered in Symantec’s products. Symantec Inc. Norton AntiVirus also competes with IBM’s VisualAge for Java Professional, software companies in its efforts to acquire supply for certain materials. To date, believes this trend may continue. Microsoft Trend Micro, Inc.’s InterScan VirusWall SuperCede by SuperCede Inc. and Sun products or companies and to publish Symantec has not experienced any mate- Product Protection may incorporate advanced features in and PC-cillin Corp. Edition. Norton Microsystem’s Java WorkShop. Symantec software developed by third parties. rial difficulties or delays in production of Symantec regards its software as propri- future versions of operating systems that Utilities competes with First Aid and Visual Café (Web Development Edition) Symantec believes that competition in its software and related documentation etary and relies on a combination of may decrease the demand for certain of Oil Change from CyberMedia, Inc. competes with Microsoft’s Visual J++, the industry will continue to intensify as and packaging. However, shortages may copyright, patent and trademark laws and the Company’s products, including those (“CyberMedia”) and Helix’s Nuts & Bolts Inprise’s Borland JBuilder Professional most major software companies expand occur in the future. license agreements in an attempt to pro- currently under development. In addition, from Network Associates. Norton Uninstall and IBM’s VisualAge for Java Standard. their product lines into additional product Symantec normally ships products tect its rights. However, Symantec is still a number of software developers have Deluxe competes with UnInstaller from In addition, these and other Company categories. Some of the Company’s com- within one week after receiving an order. subject to potential legal suits. (See fur- integrated antivirus capabilities into their CyberMedia and CleanSweep from products compete less directly with a petitors have substantial financial, marketing Thus, Symantec does not consider ther discussion in Item 7: Management’s Internet products. While Symantec plans Quarterdeck Corporation (“Quarterdeck”). number of other products that offer levels and technological resources. (See further backlog to be a significant indicator of Discussion and Analysis of Financial to continue to improve its products with Norton CrashGuard Deluxe competes with of functionality different from those discussion in Item 7: Management’s future performance. Condition and Results of Operations - a view toward providing enhanced func- First Aid 98 Deluxe from CyberMedia, PC offered by Symantec’s products or that Discussion and Analysis of Financial Intellectual Property Rights, Litigation.) tionality over that provided in current Medic Deluxe from Network Associates and were designed for a somewhat different Condition and Results of Operations - PRICE COMPETITION and future operating systems, these efforts REALHELP from Quarterdeck. Norton group of end users than those targeted by Rapid Technological Change and Price competition is sometimes intense EMPLOYEES may not be successful and such improved Your Eyes Only competes with PGPdisk Symantec. Microsoft has incorporated Development Risks, Operating System with certain products in the microcom- As of March 31, 1998, Symantec employed products may not be commercially accepted from Network Associates. Norton Web advanced utilities including telecommu- and Retail Distribution Channel.) puter business software market and is approximately 2,300 people, including by software users. Symantec will also Services competes with Oil Change and nications, facsimile and expected to continue to increase and 1,200 in sales, marketing and related staff attempt to work with operating system First Aid from CyberMedia and TuneUp utilities in Windows 95 and may include MANUFACTURING AND BACKLOG become even more significant in the activities; 600 in product development, and vendors in an effort to make its products and REALHELP from Quarterdeck. additional product features in Windows 98 Symantec’s product development organi- future, and may result in reduced profit 500 in management, manufacturing, compatible with those operating systems, or future releases of Windows NT that may zation produces a set of master CD-ROMs margins. (See further discussion in Item 7: administration and finance. None of the yet differentiate those utility products Remote Productivity Solutions decrease the demand for certain of the or diskettes and documentation for each Management’s Discussion and Analysis employees is represented by a labor union, from features included in the operating pcANYWHERE competes with LapLink Company’s products, including those product that are then duplicated and of Financial Condition and Results of and Symantec has experienced no work systems. However, these efforts may not from Traveling Software, Inc., ReachOut currently under development. Additionally, packaged into products by the manufac- Operations –Price Competition.) stoppages. Symantec believes that its be successful. Other competitors may from Stac, Inc. and Microcom by as hardware vendors incorporate additional turing organization. Most of Symantec’s employee relations are good. license their products to other hardware COMPAQ Computer Corporation. ACT! server-based network management and domestic manufacturing is performed by SEASONALITY Competition in recruiting personnel in and software original equipment manufac- competes with other contact managers, such security tools into network operating sys- outside contractors under the supervision While Symantec’s diverse product line the software industry is intense. Symantec turers (“OEMs”). In addition, as software as GoldMine from GoldMine 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 users move toward running programs from Corporation, Maximizer from Maximizer 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 the Internet or over a LAN, the need for Technologies, Inc. and Janna Contact from 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 certain of Symantec’s utility programs may Janna Systems, Inc. ACT! also competes, Symantec’s competitors may license certain Symantec personnel in Symantec’s These fluctuations may be caused by a technical personnel. Symantec believes decrease. (See further discussion in Item 7: but less directly, with personal information 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 Management’s Discussion and Analysis managers, such as Organizer from IBM’s for inclusion in their operating systems, facturing steps that are subcontracted to of announcements and releases of new or competitive compensation package, which of Financial Condition and Results of Lotus division and Sidekick from Starfish which may reduce the demand for certain outside organizations include the dupli- enhanced versions of Symantec’s products necessitates the continued availability of Operations - Operating System; Microsoft Software. WinFax competes with 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 Windows 98.) Quarterdeck’s Procomm Plus product line. 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 Internet Tools, Royalties and Other Condition and Results of Operations - performs diskette duplication and assem- given product, seasonality in the end-of- approval of such incentive programs. (See units: Security and Assistance, Remote Symantec Visual Café (Database Operating System; 98.) bly of the final package in its Dublin, period buying patterns of foreign software further discussion in Item 7: Management’s Productivity Solutions and Internet Tools, Development Edition) competes with Symantec also competes with micro- Ireland manufacturing facility for most markets and the market’s transition Discussion and Analysis of Financial Royalties and Other. Examples of key Borland JBuilder Client/Server from computer hardware manufacturers that products distributed outside of the United between operating systems. These factors Condition and Results of Operations - competitors for business units include: Inprise Corporation, VisualAge for Java develop their own software products. States and Canada. Most of Symantec’s may cause significant fluctuations in net Employee Risk.)

16 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 17 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 North America Nasdaq symbol “SYMC”. The high and low closing sales prices set forth below are as Cupertino, California reported on the Nasdaq National Market. Corporate Headquarters Administration, sales and marketing 87,000 2003 Fiscal 1998 Fiscal 1997 Emerging Business and Research and development 161,000 2003 Remote Productivity Solutions Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Symantec Technology Center Future expansion * 143,000 2003 1998 1997 1997 1997 1997 1996 1996 1996 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 and translations (In Canadian dollars) 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 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 19 The following selected financial data is companies. In fiscal 1996, Delrina FORWARD-LOOKING STATEMENTS qualified in its entirety by and should be Corporation was acquired. In fiscal 1995, AND FACTORS THAT MAY AFFECT OVERVIEW read in conjunction with the more detailed acquisitions included Intec Systems FUTURE RESULTS Symantec is a world leader in utility software for business and personal computing. consolidated financial statements and Corporation, Central Point Software, The following discussion contains forward- Founded in 1982, the Company has offices in the United States, Canada, Asia, related notes included elsewhere herein. Inc. and SLR Systems, Inc. In fiscal 1994, looking statements that are subject to risks Australia, Europe, Africa, Latin America and South America. Symantec did not complete any acquisi- acquisitions included Fifth Generation and uncertainties. There are several im- During the last three fiscal years, Symantec has acquired the following companies: tions during fiscal 1998. During fiscal Systems, Inc. and Contact Software portant factors that could cause actual Shares of Symantec Acquired Company 1997, Symantec acquired Fast Track, Inc. International, Inc. Each of the fiscal 1996, results to differ materially from those anti- Common Stock Stock Options (“Fast Track”) in a transaction accounted 1995 and 1994 acquisitions was accounted cipated by the forward-looking statements Companies Acquired Date Acquired Issued Assumed for as a pooling of interests. As the results for as poolings of interests. The Company contained in the following discussion. Fast Track, Inc. (“Fast Track”) May 28, 1996 600,000 — of operations of Fast Track were not has never paid cash dividends on its Readers should pay particular attention to Delrina Corporation November 22, 1995 13,684,174* 1,271,677 (“Delrina”) material to Symantec’s consolidated stock with the exception of distributions the risk factors set forth within this sec- financial statements, amounts prior to to stockholders of acquired companies. tion. Nothing in this report shall impose * Includes Delrina exchangeable stock that is traded on the Toronto Stock Exchange. Delrina stockholders the date of acquisition were not restated upon Symantec or any person a duty to received Delrina exchangeable stock in exchange for Delrina common stock at a rate of 0.61 per share. Delrina exchangeable stock may be converted into Symantec common stock on a one-for-one basis at to reflect the combined operations of the update any forward-looking statement. each stockholder’s option.

Symantec did not complete any acquisi- date of acquisition were not restated to

Five Year Summary tions during fiscal 1998. During fiscal 1997, reflect the combined operations of the Symantec acquired Fast Track, Inc. companies. In fiscal 1996, Delrina Year Ended March 31, (In thousands, except net income (loss) per share) 1998 1997 1996 1995 1994 (“Fast Track”) in a transaction accounted Corporation was acquired and was Statements of Operations Data: for as a pooling of interests. As the accounted for as a pooling of interests and 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) RESULTS OF OPERATIONS Net income (loss) per share - basic $ 1.52 $ 0.48 $ (0.76) $ 0.68 $ (0.96) The following table sets forth each item from the consolidated statements of opera- 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) Shares used to compute net 1998 1997 income (loss) per share - diluted 60,281 55,407 52,664 54,303 46,270 Year Ended March 31, Compared Compared 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) Total assets 476,460 339,398 282,674 305,356 262,335 Sales and marketing 45 47 52 18 (4) 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 11 (8)

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 (1) 522 * Net income (loss) 15% 6% (9)% 227 *

* Percentage change is not meaningful. 20 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 21 Net Revenues net revenues for fiscal 1998, and 35% of solidated Financial Statements in Part IV, Gross Margin ment costs did not materially affect the Research and development expenses Net revenues increased 22% from $472 net revenues for fiscal 1997 and 1996. Item 14 of this Form 10-K for further dis- Gross margin represents net revenues less Company, except for amounts capitalized decreased 6% to $89 million in fiscal 1997 million in fiscal 1997 to $578 million in fis- Increased net revenues for the business cussion of the technology licensing and cost of revenues. Cost of revenues consists by Delrina prior to its acquisition by from $95 million in fiscal 1996 due pri- cal 1998. Net revenues increased 6% from unit in fiscal 1998 primarily related to sale transactions. The Java development primarily of manufacturing expenses, costs Symantec in fiscal 1996. marily to decreased product development $445 million in fiscal 1996 to $472 million in sales of Windows 95 versions of WinFax tools product line continued to expand in for producing manuals, packaging costs, Amortization of capitalized software, efforts resulting from the Company’s de- fiscal 1997. Revenue growth in fiscal 1998 PRO, pcANYWHERE and ACT!. fiscal 1998, resulting in increased revenues royalties paid to third parties under pub- including amortization and write-off of cision to cease developing certain sofware was largely due to sales of Windows 95 and Increased net revenues in fiscal 1997, over over fiscal 1997 and maintaining its fiscal lishing contracts and amortization and both purchased product rights and capi- products and an increase in the capital- Windows NT versions of the Company’s fiscal 1996, were primarily attributed to 1997 percentage contribution to total net write-off of capitalized software. talized software development expenses, ization of software development costs, principal products, as well as introduc- the pcANYWHERE product line. revenues in fiscal 1998. Gross margins increased to 85% of net totaled $1 million, $10 million and $19 including approximately $8 million related tions of new products, growth in inter- During fiscal 1998 and 1997, the finan- International. Net revenues from interna- revenues in fiscal 1998 from 80% in fiscal million for fiscal 1998, 1997 and 1996, res- to network administration technology. In national sales outside of North America cial impact of product price reductions tional sales outside of North America were 1997 and from 75% in fiscal 1996. pectively. The decrease in amortization addition, a $2 million research and develop- and royalty and revenue streams from the for certain of Symantec’s principal prod- $186 million and $138 million and repre- Factors contributing to an increase in expense in fiscal 1998 is attributed to the ment expense reimbursement was received sale of certain technologies and product ucts was more than offset by the increase sented 32% and 29% of total net revenues in gross margin percentage during fiscal 1998 write-off of approximately $8 million of from Hewlett-Packard in fiscal 1997 under lines to third-party computing companies. in the volume of products sold, resulting fiscal years 1998 and 1997, respectively. The include reduction of direct material costs unamortized capitalized software and the previously mentioned technology sale Product Groups. During fiscal 1998 and in increased net revenues. increase in net revenues was the result of by shifting product media from more unamortized purchased software product agreement, which further reduced research 1997, Symantec experienced increased Internet Tools, Royalties and Other, Symantec’s penetration of new and emerg- expensive diskettes to lower priced CD- rights related to network administration and development expenses in fiscal 1997. net revenues, over the prior fiscal year, which includes products providing an easy- ing markets in Latin America and Asia/ ROMs and reductions in the size of bound technology written off as part of the sale from each of its principal product groups: to-use Java development environment, as Pacific, as well as increased sales in Europe. manuals through a shift in documentation of the networking business unit to Hewlett- Sales and Marketing Expenses Security and Assistance and Remote well as revenue streams from the sale of Net revenues from international sales from paper manuals to electronic manuals Packard in March 1997. Amortization Sales and marketing expenses increased Productivity Solutions. certain of the Company’s software product declined by $4 million in fiscal 1997, from included on CD-ROMs for all of the and write-off expense in fiscal year 1997 18% to $261 million, or 45% of net revenues The Security and Assistance business lines and technologies, and revenues from $142 million in fiscal 1996. This decrease Company’s principal products. Additional was lower than in 1996 due to capitalized in fiscal 1998 from $221 million, or 47% unit is dedicated to being indispensable products nearing the end of their life was due largely to the recognition in fiscal reductions occurred in manufacturing software write-offs in fiscal 1996 related of net revenues, in fiscal 1997. The increase to customers’ daily use of computers by cycles, comprised approximately 10%, 15% 1996 of approximately $7 million of pre- overhead costs due to improved economies to de-emphasized products and Delrina in sales and marketing expenses in fiscal increasing productivity and keeping and 20% of net revenues for fiscal 1998, viously deferred revenue related to an of scale and reductions in capitalized Windows 3.1 products. 1998 as compared to fiscal 1997 is primarily computers safe and reliable. The Security 1997 and 1996, respectively. The business acquired company. software amortization and write-offs as related to increased international sales and Assistance business unit comprised unit’s net revenues decreased in fiscal 1998 Foreign exchange rate fluctuations discussed below. In addition, fiscal 1998 Research and Development Expenses and marketing activities. North American approximately 50% of net revenues for and 1997 over the prior fiscal year, largely during fiscal 1998 and 1997 did not mate- royalty revenues from JetForm and Research and development expenses rep- sales and marketing activities during fis- both fiscal 1998 and 1997 and 45% of net as a result of declining sales from products rially affect annual revenue. The impact Hewlett-Packard totaling $46 million resented 16%, 19% and 21% of net revenues cal 1998 decreased as a percentage of net revenues in fiscal 1996. Increased net rev- which Symantec no longer actively develops of fluctuations in foreign exchange rates had minimal costs of revenue. in fiscal 1998, 1997 and 1996, respetively. revenues as compared to fiscal 1997 due to enues for the business unit in fiscal 1998 or markets. Also contributing to the fiscal on international revenues is partially The increase in gross margin percent- Research and development expend tures the elimination of activities related to the primarily related to sales of Windows 95, 1998 decrease from the prior year was the mitigated by operating expenses incurred age in fiscal 1997 compared to fiscal 1996 are charged to operations as incurred. electronic forms and network adminis- Windows NT and Macintosh versions of fiscal 1997 recognition of $6 million of in local currencies. was due to a decrease in capitalized soft- Research and development expenses tration software technologies and products Norton Utilities, as well as the multi- non-recurring consulting net revenues. Product Returns. The Company estimates ware amortization and write-offs as increased 3% to $91 million in fiscal 1998 which were sold in fiscal 1997. platform workstations/servers version of Also included in Internet Tools, and maintains reserves for product returns. discussed below. In addition, fiscal 1997 from $89 million in fiscal 1997 as the Sales and marketing expenses decreased Norton AntiVirus. New product releases Royalties and Other are royalties and The level of actual product returns and royalty revenues from JetForm and result of increased spending on new 4% to $221 million, or 47% of net revenues, of CrashGuard Deluxe and Norton other revenue of approximately $46 million related product return provisions are Hewlett-Packard totaling $19 million product development. The decrease in in fiscal 1997 from $230 million, or 52% of Uninstall also contributed to the fiscal and $19 million recorded in fiscal 1998 largely a factor of the level of product had minimal costs of revenue. research and development expenses as a net revenues, in fiscal 1996. The decrease 1998 net revenue increase. Increased net and 1997, respectively, which partially off- sell-in (gross revenue) from normal sales Capitalized Software. During fiscal 1998, percentage of net revenues in fiscal 1998 in sales and marketing expenses in fiscal revenues in fiscal 1997 were primarily set the revenue declines mentioned above. activity and the replacement of obsolete accounting standards requiring capitaliza- largely resulted from the Company’s 1997 as compared to fiscal 1996 was due attributable to increases in Norton These royalties and other revenues related quantities with the current version of the tion of certain software development costs decision to cease development of certain primarily to the elimination of duplica- AntiVirus revenues over the prior year. to the sale of certain software products, Company’s products. Changes in the levels did not materially affect the Company. software products no longer actively mar- tive sales and marketing expenses as a The Remote Productivity Solutions technologies and certain tangible assets to of product returns and related product During fiscal 1997, Symantec capitalized keted by Symantec. Another contributing result of the acquisition of Delrina by business unit helps remote professionals JetForm Corporation (“JetForm”) and the returns provision are generally offset by approximately $8 million of software deve- factor was the elimination of certain net- Symantec and the elimination of sales remain productive and work reliably — Hewlett-Packard Company (“Hewlett- changing levels of gross revenue and, there- lopment costs, primarily related to net- work administration technology develop- and marketing expenses related to the anywhere, anytime. The Remote Producti- Packard”) during fiscal 1997. Revenues fore, the product return provision did not work administration technology. Prior to ment due to the sale of Symantec’s net- electronic forms software products which vity Solutions business unit comprised from these agreements may decline in have a material impact on reported net fiscal 1997, accounting standards requiring working business unit to Hewlett-Packard were sold in fiscal 1997. Reductions in approximately 40% of the Company’s fiscal 1999. See Note 12 of Notes to Con- revenues in any period presented. capitalization of certain software develop- during fiscal 1997. expenditures for products no longer

22 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 23 actively marketed by Symantec were offset related to legal, accounting and financial Interest Income, Interest Expense $23 million of the valuation allowance for Cupertino, California to maintain a end of fiscal 1998, there were no borrow- by increased spending for new products advisory services, elimination of duplica- and Other Income (Expense) deferred tax assets is attributable to unbene- restricted cash balance invested in U.S. ings outstanding and less than $1 million released during fiscal 1997. tive and excess facilities and equipment, Interest income was $13 million, $7 million fitted stock option deductions, the benefit treasury securities with maturities not to of standby letters of credit outstanding personnel severance and outplacement and $8 million in fiscal 1998, 1997 and 1996, of which will be credited to equity when exceed three years. In accordance with the under this line. Future acquisitions by the General and Administrative services, and operational activities con- respectively. Interest income increased realized. The remaining $2 million of the lease terms, these funds are not available Company may cause the Company to be Expenses solidation and discontinuance. Offsetting 83% in fiscal 1998 over fiscal 1997 due to valuation allowance represents net operat- to meet operating cash requirements. (See in violation of the line of credit covenants. In fiscal 1998, general and administrative these costs was a reduction in accrued higher average invested cash balances. ing loss and tax credit carryforwards of further discussion in Note 8 of Notes to However, the Company believes that if expenses increased by 12% to $38 million acquisition, restructuring and other Higher average cash balances during fiscal various acquired companies that are li- Consolidated Financial Statements in the line of credit were canceled or amounts from $34 million in fiscal 1997 and from expenses of approximately $2 million, as 1997 compared to fiscal 1996 were offset mited by separate return limitations and Part IV, Item 14 of this Form 10-K.) were not available under the line, there $33 million in fiscal 1996. General and actual costs incurred related to certain by lower interest rates on invested cash under the “change of ownership” rules of Net cash provided by operating would not be a material adverse impact administrative expenses were 7% of net prior acquisitions were less than costs during fiscal 1997 compared to fiscal 1996. Internal Revenue Code Section 382. activities was $131 million and was com- on the financial results, liquidity or capi- revenues during fiscal 1998, 1997 and 1996. previously accrued by the Company. Interest expense was approximately Symantec projects the effective tax prised of the Company’s net income of tal resources of the Company. General and administrative expenses Restructuring Expenses. In fiscal 1997, $1 million in fiscal 1998, 1997 and 1996. rate to be 32% in fiscal 1999. This rate is $85 million, non-cash related expenses of If Symantec were to sustain significant increased in fiscal 1998 as compared to the Company recorded a charge of Interest expense is principally related to lower than the expected U.S. federal and $21 million and a net decrease in assets losses, the Company could be required to fiscal 1997 at a rate proportionate to net approximately $3 million for costs related Symantec’s convertible subordinated state combined statutory rate of 40% due and liabilities of $25 million. reduce operating expenses, which could revenue growth as the result of increased to the restructuring of certain domestic debentures. (See Note 6 of Notes to primarily to a lower tax rate from the Net trade accounts receivable increased result in product delays; reassess acquisi- personnel expenses associated with the and international sales and research and Consolidated Financial Statements in Company’s Irish operations. However, $20 million to $65 million at the end of tion opportunities, which could negatively growth of the Company. development operations, certain legal Part IV, Item 14 of this Form 10-K.) this projection is subject to change due to fiscal 1998 from $45 million at the end of impact the Company’s growth objectives; The fiscal 1997 increase in general settlements and other expenses. In fiscal Other income (expense) is primarily fluctuations in and the geographic alloca- fiscal 1997, primarily due to increased and/or pursue further financing options. and administrative expenses, as compared 1996, the Company incurred approxi- comprised of foreign currency exchange tion of earnings. (See further discussion in operating activities during fiscal 1998. With The Company believes existing cash and to fiscal 1996, is primarily the result of mately $2 million for equipment and gains and losses from fluctuations in cur- Item 7: Management’s Discussion and the growth of international sales to 32% short-term investments and cash generated management consulting expenditures, personnel relocation costs related to the rency exchange rates. Analysis of Financial Condition and Results of net revenues in fiscal 1998 from 29% from operating results will be sufficient offset by benefits from the elimination of consolidation of certain research and of Operations - Fluctuations in Quarterly of net revenues in fiscal 1997, Symantec to fund operations for the next year. duplicative general and administrative development activities. The restructuring Income Taxes Operating Results; Foreign Operations.) is carrying an increased accounts receiv- expenses as a result of the acquisition of plans have been completed. The effective income tax provision rate able balance with longer average standard BUSINESS RISKS Delrina by Symantec in fiscal 1996. Other Expenses. In fiscal 1997, Symantec for fiscal 1998 was 24%, which compares LIQUIDITY AND CAPITAL payment terms, as such longer payment The preceding discussion contains forward- recorded an approximately $2 million to an effective income tax provision rate RESOURCES terms are standard business practice in cer- looking statements that are subject to risks Acquisition, Restructuring and charge in connection with the write-off of 14% in fiscal 1997 and an effective tax Cash, short-term investments and long- tain international markets. At March 31, and uncertainties. There are several impor- Other Expenses of an equity investment and an approxi- benefit rate of 10% in fiscal 1996. The 1998 term investments increased $100 million to 1998, international days sale outstanding tant factors that could cause actual results No acquisition, restructuring and other mately $3 million charge for the write- income tax provision rate of 24% is lower $260 million at fiscal 1998 year-end from was 48 days, as compared to 32 days for to differ materially from those anticipated expenses were incurred in fiscal 1998. off of certain in-process research and than the U.S. statutory rate primarily due $160 million at fiscal 1997 year-end. This North America. by the forward-looking statements con- Acquisition Expenses. In connection with development acquired by the Company. to the utilization of previously unbene- increase was largely due to cash provided During fiscal 1998, the Board of tained in the following discussion. Readers the acquisitions completed in fiscal 1997 In fiscal 1996, Symantec incurred a fitted losses and tax credits and a lower from operating activities, net proceeds Directors of Symantec authorized the should pay particular attention to the and 1996 (see Summary of Significant $3 million loss on the sale of the assets of statutory tax rate for the Company’s Irish from the exercise of stock options and repurchase of up to 1,500,000 shares of risk factors set forth within this section. Accounting Policies and Note 3 of Notes Time Line Solutions Corporation, a operations. In addition, fewer unbenefit- net proceeds from the sales of common Symantec common stock. At the end of Nothing in this report shall impose upon to Consolidated Financial Statements in wholly-owned subsidiary. Additionally, ted losses were available in fiscal 1998, stock under the Company’s Employee fiscal 1998, a total of 1,000,000 shares were Symantec or any person a duty to update Part IV, Item 14 of this Form 10-K), in fiscal 1996, the Company recorded which caused the fiscal 1998 tax rate to Stock Purchase Plan. repurchased at prices ranging from $16.57 any forward-looking statement. Symantec incurred significant acquisition- $3 million for estimated legal fees and be higher than the fiscal 1997 tax rate. In addition to cash, short-term invest- to $26.81 per share. The authorized repur- Fluctuations in Quarterly Operating related expenses. other expenses. (See Note 15 of Notes to Realization of the $20 million of net ments and long-term investments of chase period has expired for the remaining Results and Stock Price. Due to the fac- Symantec recorded total acquisition Consolidated Financial Statements in deferred tax assets is dependent upon the $260 million, the Company has $59 million 500,000 shares. The repurchased shares have tors noted below, the Company’s earnings charges of approximately $1 million in Part IV, Item 14 of this Form 10-K.) Company’s ability to generate sufficient of restricted investments related to collat- been reissued under the Company’s em- and stock price have been and may con- fiscal 1997 in connection with the acqui- Remaining acquisition, restructuring future U.S. taxable income. Management eral requirements under lease agreements ployee stock purchase and option programs. tinue to be subject to significant volatility, sition of Fast Track. and other expense accruals as of March 31, believes that it is more likely than not that entered into by Symantec during fiscal The Company recently renewed its particularly on a quarterly basis. Symantec In connection with the acquisition of 1998 were approximately $3 million. the asset will be realized based on fore- 1997. Symantec is obligated under certain $10 million line of credit to expire in has previously experienced shortfalls in Delrina in fiscal 1996, Symantec recorded casted U.S. earnings. The net deferred tax lease agreements for two existing office May 2000. The Company was in com- revenue and earnings from levels expected total acquisition charges of $22 million. asset includes a valuation allowance of buildings, one parcel of land and one pliance with the debt covenants for this by securities analysts and investors, which These acquisition expenses primarily approximately $25 million. Approximately office building under construction in line of credit as of April 3, 1998. At the has had an immediate and significant

24 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 25 adverse affect on the trading price of the future net revenues and operating results Dependence on the Internet. Critical effective in competing with integrated or write-offs and could adversely affect however, net revenues may still be mate- Company’s common stock. This may would be materially adversely affected. issues concerning the commercial use of suites either currently in the market or operating results of the Company. rially affected favorably or adversely by occur again in the future. Microsoft has incorporated advanced the Internet, including security, reliabil- introduced in the future. New Distribution Channels. Symantec the effects of channel fill, particularly in Rapid Technological Change and utilities including , ity, cost, ease of use, accessibility, quality Quarterly Buying Patterns; Absence of may not be able to develop an effective periods where a large number of new Development Risks. The Company par- facsimile and data recovery utilities in of service and potential tax or other gov- Backlog. Most customers tend to make method of distributing its software prod- products are simultaneously introduced. ticipates in a highly dynamic industry Windows 95 and may include additional ernment regulation, remain unresolved the majority of their purchases at the end ucts utilizing each of the rapidly evolving Channels may also become filled sim- characterized by rapid change and uncer- product features in Windows 98 or and may affect the use of the Internet as of the fiscal quarter, in part because they software distribution channels, including ply because the distributors do not sell tainty related to new and emerging techno- future releases of Windows NT that may a medium to support the functionality of are able, or believe that they are able, to the Internet. The presence of new channels their inventories to retail distribution or logies and markets. The recent trend to- decrease the demand for certain of the the Company’s products, as well as to negotiate lower prices and more favorable could adversely impact existing channels end users as anticipated. If sell-through ward server-based applications in networks Company’s products, including those distribute software. Should the Company terms. This is particularly true of large and/or product pricing, which could does not occur at a sufficient rate, dis- and applications distributed over the Inter- currently under development. be unable to incorporate changes in the corporate customers that negotiate large have a material adverse impact on the tributors will delay purchases or cancel net could have a material adverse affect on Additionally, as hardware vendors incor- Internet environment successfully or site licenses near the end of each quarter. Company’s new revenues and profitability. orders in later periods or return prior sales of the Company’s products. Future porate additional server-based network timely into its business operations and This end-of-period buying pattern means Site Licenses. Symantec sells volume purchases in order to reduce their inven- technology or market changes may cause management and security tools into net- product development strategy, the that forecasts of quarterly and annual license programs (corporate site licenses) tories. While such order delays or certain of Symantec’s products to become work operating systems, the demand Company’s future net revenues and oper- financial results are particularly vulnerable through the distribution channel and cancellations can cause fluctuations in obsolete more quickly than expected. may decrease for certain of the Company’s ating results may be adversely affected. to the risk that they will not be achieved, through corporate resellers. Average site net revenues from one quarter to the The use of a Web browser (running products, including those currently Price Competition. Price competition is either because expected sales do not occur license revenue per unit is lower than the next, the impact is substantially mitigated on either a PC or network computer) to under development. Also, Symantec’s sometimes intense for certain products in or because they occur at lower prices or average revenue per unit from retail ver- by the Company’s deferral of revenue access client/server systems is emerging competitors may license certain of their the microcomputer software market and on less favorable terms to the Company. sions shipped through the retail distribu- associated with inventories estimated to as an alternative to the traditional desktop products to Microsoft and OEMs for is expected to continue to increase and The Company operates with relatively tion channel. Symantec may increase unit be in excess of appropriate levels in the access through operating systems resident inclusion in their operating systems, become even more significant in the little backlog; therefore, if near-term sales under volume licensing programs in distribution channel. on personal computers. Should the func- which may reduce the demand for certain future, resulting in reduced profit margins. demand for the Company’s products the future, which could have a material Product Returns. Product returns can tionality associated with such system access of the Company’s products. Should competitive pressures in the weakens in a given quarter, there could be adverse impact on the operating results of occur when the Company introduces reduce the need for Symantec’s products, Microsoft Windows 98. With the antici- industry continue to increase, Symantec an immediate, material adverse affect on the Company. Additionally, Symantec’s upgrades and new versions of products or the Company’s future net revenues and pated introduction of Microsoft’s may be required to reduce software net revenues and on the Company’s products may not be effective in competing when distributors have excess inventories. operating results may be adversely affected. Windows 98 operating system, the prices and/or increase its spending on operating results, which would likely with products either currently in the Symantec’s return policy allows its dis- Personal Computer and Hardware Company’s ability to generate revenue sales, marketing and research and devel- result in a precipitous drop in stock price. market or introduced in the future, and tributors, subject to certain limitations, Growth Rates. Fluctuations in customer from many of its current products will opment as a percentage of net revenues, Retail Distribution Channel. The the Company’s failure to compete effec- to return purchased products in exchange spending from software to hardware as depend on its ability to develop new ver- resulting in lower profit margins. These Company’s retail distribution customers tively could have a material adverse impact for new products or for credit towards the result of technological advancements sions and enhancements of those products actions may not be sufficient to offset also carry the products of Symantec’s on the operating results of the Company. future purchases. End users may return in hardware or price reductions of hard- in a timely manner for the Windows 98 the impact of price competition in the competitors. These retail distributors may Channel Fill. The Company’s pattern of products through dealers and distribu- ware have in the past, and may in the operating system. Because the Department Company’s business and net revenues. have limited capital to invest in inven- net revenues and earnings may be affected tors within a reasonable period from the future, result in reduced revenues which of Justice and various state entities have Integrated Suites. In the future, tory, and their decisions to purchase the by “channel fill.” Distributors may fill date of purchase for a full refund, and would have a material adverse affect on filed lawsuits against Microsoft which Symantec and/or its competitors may Company’s products is partly a function of their distribution channels in anticipation retailers may return older versions of operating results. may delay the introduction of Windows move toward providing integrated suites pricing, terms and special promotions of price increases, sales promotions or products. The Company estimates and Operating System. The release and sub- 98 or change the interfaces or feature set of products. The price of integrated offered by Symantec, as well as by its incentives. Inventories may be decreased maintains reserves for product returns. sequent customer acceptance of current that will be incorporated into Windows 98, suites could be less than the sum of the competitors over which the Company has between the date Symantec announces a However, future returns could exceed the or enhanced operating systems are par- the Company’s ability to develop appro- prices of individual products included in no control and which it cannot predict. new version or new product and the date reserves established by the Company, which ticularly important events that increase priate products for Windows 98 may be these suites when such products are sold Agreements with distributors are of release, because distributors, dealers could have a material adverse affect on the uncertainty and volatility of impeded, and consumers may delay pur- separately. The sales volume contribu- generally nonexclusive and may be ter- and end users often delay purchases, cancel the operating results of the Company. Symantec’s results. Should the Company chases of the Company’s products or tion to Symantec from integrated suites minated by either party without cause. orders or return products in anticipation Foreign Operations. A significant portion be unable successfully or timely to otherwise change purchase plans in a may not be sufficient to offset the gross Certain distributors and resellers have of the availability of the new version or of Symantec’s revenues, manufacturing develop products that operate under manner that could adversely affect the margin impact of selling individual prod- experienced financial difficulties in the new product. The impact of channel fill costs and operating expenses is transacted existing or new operating systems, or Company and its financial results. ucts at a reduced price using integrated past. Distributors that account for sig- is somewhat mitigated by the Company’s in foreign currencies. As a result, the should the functionality of such operat- Adverse effects related to these events product suites. Additionally, integrated nificant sales of the Company may deferral of revenue associated with inven- Company’s results may be materially and ing systems reduce the need for could become apparent as early as the suites may not achieve market acceptance experience financial difficulties in the tories estimated to be in excess of appro- adversely affected by fluctuations in cur- Symantec’s products, the Company’s June quarter of 1998. and the Company’s products may not be future, which could lead to reduced sales priate levels in the distribution channel; rency exchange rates, as well as increases

26 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 27 in duty rates, exchange or price controls tion with the services rendered may not employee and facility related expenditures (“VAR”) and independent software ven- success will depend in part on its ability ticular period (See Note 15 of Notes to or other restrictions on foreign currencies. be favorable. In the event of customer comprise a significant portion of the dor (“ISV”) customers whereby to recruit and retain highly skilled man- Consolidated Financial Statements in The Company expects that its non-U.S. dissatisfaction, future product and up- Company’s operating costs and expenses. Symantec’s products are included with agement, marketing and technical Part IV, Item 14 of this Form 10-K). dollar denominated sales activities may grade sales to that customer base may be The Company’s expense levels are based, hardware products prior to sale through personnel. Symantec believes that it Intellectual Property Rights. Symantec increase in the future. Symantec utilizes negatively impact-ed. Fee-based techni- in a large part, on projections of future retail channels. VAR and ISV licensing must provide personnel with a competi- regards its software as proprietary and natural hedging to mitigate Symantec’s cal support services did not generate revenue levels. Given the fixed nature of agreements are generally non-exclusive tive compensation package, which relies on a combination of copyright, transaction exposures and hedges certain material revenues in any fiscal year pre- these expenses over the short term, if rev- and do not require the VAR or ISV to necessitates the continued availability of patent and trademark laws and license residual balance sheet positions through sented and are not expected to generate enue levels fall below expectations, make minimum purchases. If the stock options which requires ongoing agreements in an attempt to protect its the use of one-month forward contracts. material revenues in the near future. Symantec’s operating results are likely to Company is not successful in maintain- stockholder approval. rights. Despite these precautions, it may These strategies may not continue to be Uncertainty of Research and be adversely affected. ing its current relationships and securing Business Disruption. A disruption in be possible for unauthorized third parties effective, and the Company may not be Development Efforts. Symantec believes Management of Expanding Operations. license agreements with additional VARs communications between the to copy aspects of Symantec’s products successful in minimizing or accurately significant research and development Symantec continually evaluates its product and ISVs, or if the Company’s VAR and Company’s geographically dispersed or to obtain and use information that forecasting transaction gains or losses. expenditures will be necessary in order to and corporate strategy and has in the ISV customers are not successful in sell- order entry and product shipping cen- Symantec regards as proprietary. All of The Company’s international opera- remain competitive. While the Company past and will in the future undertake ing their products, the Company’s future ters, particularly at the end of a fiscal Symantec’s products are protected by tions are subject to certain risks common performs extensive usability and beta organizational changes, product and net revenues and operating results may quarter, would likely result in an unex- copyright, and Symantec has a number to international operations, such as gov- testing of new products, any products marketing strategy modifications which be adversely affected. pected shortfall in net revenues and of patents and patent applications pend- ernment regulations, import restrictions, currently being developed by Symantec are designed to maximize market pene- Acquired Companies. Symantec has could result in an adverse impact on ing. However, existing patent and currency fluctuations, repatriation restric- may not be technologically successful, tration, maximize use of limited corporate completed a number of acquisitions and operating results. Disruptions in com- copyright laws afford limited practical tions and, in certain jurisdictions, reduced resulting products may not achieve mar- resources and develop new products and may acquire other companies in the munications and Internet connectivity protection. In addition, the laws of some protection for the Company’s copyrights ket acceptance, and the Company’s product channels. These organizational future. Acquisitions involve a number of may also cause delays in customer access foreign countries do not protect and trademarks and economic volatility. products may not be effective in compet- changes increase the risk that objectives special risks, including the diversion of to Symantec’s Internet-based services or Symantec’s proprietary rights in its prod- Sales and Marketing. Symantec believes ing with products either currently in the will not be met due to the allocation of management’s attention to assimilation product sales. A business disruption ucts to the same extent as do the laws of substantial sales and marketing efforts market or introduced in the future. valuable limited resources to implement of the operations and personnel of the could occur as a result of natural disas- the United States. Symantec’s products are essential to achieve revenue growth Length of Product Development Cycle. changes. Further, due to the uncertain acquired companies in an efficient and ters or the interruption in service by are not copy protected. and to maintain and enhance Symantec’s The length of Symantec’s product develop- nature of any of these undertakings, timely manner, the retention of key communications carriers, and may cause As the number of software products competitive position. There can be no ment cycle has generally been greater these efforts may not be successful, and employees, the difficulty of presenting a delays in product development that in the industry increases and the func- assurance that these sales and marketing than Symantec originally expected. the Company may not realize any benefit unified corporate image, the coordina- could adversely impact future net rev- tionality of these products further efforts will be successful. Although such delays have undoubtedly from these efforts. tion of research and development and enues of the Company. overlap, Symantec believes that software Technical Support. Consistent with had a material adverse affect on Symantec’s Reliance on Joint Business Arrangements. sales efforts and the integration of the Litigation. Symantec is involved in a developers will become increasingly sub- many companies in the software industry, business, Symantec is not able to quan- Symantec has entered, and may in the acquired products. In addition, because number of judicial and administrative ject to infringement claims. This risk is technical support costs comprise a signif- tify the magnitude of net revenues that future enter, into various development or the employees of acquired companies proceedings incidental to its business potentially greater for companies, such as icant portion of the Company’s operating were deferred or lost as a result of any joint business arrangements for the purpose have frequently remained in their exist- (See Note 15 of Notes to Consolidated Symantec, that obtain certain of their costs and expenses. The Company’s particular delay because Symantec is not of developing new software products or en- ing, geographically diverse facilities, the Financial Statements in Part IV, Item 14 products through publishing agreements technical support levels are based, in a able to predict the amount of net revenues hancements to existing software products. Company has not realized certain of this Form 10-K). The Company or acquisitions, since they have less large part, on projections of future sales that would have been obtained had the Depending on the nature of each such economies of scale that might otherwise intends to defend and/or pursue all of direct control over the development of levels. Over the short term, the Company original development expectations been arrangement, the development, distribu- have been achieved. these lawsuits vigorously and, although those products. may not be able to respond to fluctuations met. Delays in future product develop- tion, sale or marketing of the resulting Symantec typically incurs significant an unfavorable outcome could occur in In addition, an increasing number of in customer demand for support services ment are likely to occur and could have a product may be controlled either by expenses in connection with acquisi- one or more of the cases, the final resolution patents are being issued that are poten- or modify the format of the Company’s material adverse affect on the amount Symantec or its business partner. Resulting tions, which have a significant adverse of these lawsuits, individually or in the tially applicable to software, and support services to compete with changes and timing of future revenues. Due to products from joint business arrangements impact on the Company’s profitability aggregate, is not expected to have a allegations of patent infringement are in support services provided by competi- the inherent uncertainties of software may not be technologically successful, and financial resources. Future acquisi- material adverse affect on the financial becoming increasingly common in the tors. While the Company performs development projects, Symantec does may not achieve market acceptance and tions may have a significant adverse position of the Company. However, software industry. It is impossible to extensive quality control review over its not generally disclose or announce the may not be effective in competing with impact on the Company’s future prof- depending on the amount and timing of ascertain all possible patent infringement technical support services provided by specific expected shipment dates of the products either currently in the market itability and financial resources. an unfavorable resolution of these lawsuits, claims because new patents are being corporate personnel and, to a lesser Company’s product introductions. or introduced in the future. Employee Risk. Competition in recruit- it is possible that the Company’s future issued continually, the subject of patent extent, over support services outsourced Operating Leverage. Consistent with Symantec distributes certain of its ing personnel in the software industry is results of operations or cash flows could applications is confidential until a patent to third-party vendors, customer satisfac- many companies in the software industry, products through value-added reseller intense. Symantec believes that its future be materially adversely affected in a par- is issued, and it may not be apparent

28 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 29 even from a patent that has already been ware viruses specifically designed to this lawsuit, it is possible that the issued whether it is potentially applicable impede the performance of the Company’s future results of operations

to a particular software product. This Company’s products, there can be no or cash flows could be materially Annual Financial Statements increases the risk that Symantec’s products assurance that such viruses will not be adversely affected in a particular period. See Part IV, Item 14 of this Form 10-K. may be subject to claims of patent in- created in the future. (See Note 15 of Notes to Consolidated

fringement. Although such claims may The Company’s license agreements Financial Statements in Part IV, Item 14 Selected Quarterly Data ultimately prove to be without merit, with its customers contain provisions of this Form 10-K.) Symantec has a 52/53-week fiscal accounting year. Accordingly, all quarterly fiscal they are time consuming and expensive designed to limit the exposure to poten- The Year 2000 – Corporate Systems. periods presented comprised 13 weeks, with the exception of the quarter ended to defend. Symantec has been involved tial product liability claims. It is Company has completed an assessment June 30, 1997, which comprised 14 weeks. in disputes claiming patent infringement possible, however, that the limitation of of its computer systems and software and in the past, is currently involved in a liability provisions contained in such is modifying or replacing portions of its

number of such disputes and litigation, license agreements may not be valid as a software so that its operating systems will (In thousands, except net income per share; unaudited) and may be involved in the future in such result of federal, state, local laws or ordi- function properly with respect to dates Fiscal 1998 Fiscal 1997 disputes and/or litigation. If Symantec is nances or unfavorable judicial decisions. in the Year 2000 and thereafter. The Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, alleged to infringe one or more patents, A successful product liability claim could Company is currently evaluating system 1998 1997 1997 1997 1997 1996 1996 1996 it may choose to litigate the claim and/or have a material adverse affect on the interfaces with third-party systems, such Net revenues $ 156,092 $ 148,240 $ 139,013 $ 135,016 $ 129,706 $ 124,081 $ 109,178 $ 109,218 seek an appropriate license. If litigation Company’s business, operating results as those of key suppliers, distributors and Gross margin 134,561 125,649 116,624 114,096 100,352 102,105 88,448 87,734 were to commence and a license were not and financial condition. financial institutions, for Year 2000 Acquisition, restructuring and other expenses * — — — — — — 7,290 1,295 available on reasonable terms or if another Year 2000 – Product Liability. While functionality. The Year 2000 project cost Net income ** 24,138 21,836 20,580 18,535 8,269 13,852 882 3,035 party were found to have a valid patent the Company believes that most of its is not expected to be material. The pro- Net income per share - basic $ 0.43 $ 0.39 $ 0.37 $ 0.33 $ 0.15 $ 0.25 $ 0.02 $ 0.06 claim against Symantec, such a result could currently developed and actively mar- ject is estimated to be significantly diluted $ 0.40 $ 0.37 $ 0.35 $ 0.32 $ 0.15 $ 0.25 $ 0.02 $ 0.06 have a material adverse affect on Symantec’s keted products are Year 2000 compliant completed during the 1998 calendar year. * See Note 13 of Notes to Consolidated Financial Statements. business, operating results and financial for significantly all functionality, these The Company believes that, with modi- ** Quarterly operating results for the period ended March 31, 1997 include revenue and charges related to the sale of Symantec’s networking business unit condition (See Note 15 of Notes to software products could contain errors or fications to existing software and (see Note 12 of Notes to Consolidated Financial Statements). Consolidated Financial Statements in defects related to the Year 2000. conversions to new software, the Year Part IV, Item 14 of this Form 10-K). Versions of the Company’s products 2000 issue will not pose significant oper- Software Defects and Product Liability. which are not the most currently released ational problems for its computer Software products frequently contain or which are not currently being devel- systems. However, if such modifications errors or defects, especially when first oped may not be Year 2000 compliant. and conversions are not made, or are not introduced or when new versions or The Company sells some of its older completed timely, the Year 2000 issue enhancements are released. In the past, product lines, which are not being could have a material adverse impact on for example, Symantec’s anti-virus soft- actively developed and updated, as such the operations of the Company. ware products have incorrectly detected products are not necessarily Year 2000 Additionally, the systems of other com- viruses which do not exist. Although the compliant. Symantec is currently party panies with which Symantec does None. Company has not experienced any mate- to a lawsuit related to the alleged inabil- business may not address any Year 2000 rial adverse effects resulting from any ity of pre-version 4.0 Norton AntiVirus problems on a timely basis, which could such defects or errors to date, defects and products to function properly in respect have an adverse affect on Symantec’s sys- errors could be found in current ver- to Year 2000. Symantec believes that this tems or business transactions. As testing sions, future upgrades to current lawsuit has no merit and intends to of Year 2000 functionality of the products or newly developed and defend itself vigorously. The final resolu- Company’s systems must occur in a sim- released products, despite testing prior to tion of this lawsuit is not expected to ulated environment, the Company will release. Software defects could result in have a material adverse affect on the not be able to test full system Year 2000 delays in market acceptance or unex- results of operations and financial condi- interfaces and capabilities prior to Year pected reprogramming costs, which tion of the Company, although it is not 2000. The Company believes that its could have a material adverse affect on possible to estimate the possible loss. exposure on Year 2000 issues is not the Company’s operating results. While However, depending on the amount and material to its business as a whole. Symantec has not been the target of soft- timing of an unfavorable resolution of

30 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 31 sioned officer in the United States Navy Associates. Mr. Calisi holds a Bachelor as Vice President, Worldwide Sales of from 1970 to 1979 serving in the Nuclear of Science degree from the State Symantec and prior to that, Vice President, Submarine Force. Mr. Eubanks is a University of New York at Empire State Worldwide Services of Symantec. Mr. Information required by this Item with respect to Directors may be found in the sec- member of the IEEE and ACM. and has received executive training at the Siebert joined Symantec in September Information with respect to this Item tion captioned “Election of Symantec Directors” appearing in the definitive Proxy Howard A. Bain III is currently Vice Wharton School. Mr. Calisi holds several 1987. From 1985 to 1987, he was a Sales may be found in the section captioned Statement to be delivered to stockholders in connection with the Annual Meeting of President, Worldwide Operations and copyrights for software innovations from Manager at THINK Technologies where “Executive Compensation” appearing in Stockholders to be held on September 17, 1998 (the “Proxy Statement”). Such infor- CFO, at Symantec Corporation. 1981 through 1986 and is an associate of the he was responsible for U.S. corporate, the definitive Proxy Statement to be mation is incorporated herein by reference. Information required by this Item with Mr. Bain has over twenty-five years of IEEE Committee. Mr. Calisi became an OEM and international sales. Previously, delivered to stockholders in connection respect to compliance with Section 16(a) of the Securities Exchange Act of 1934, as experience in all phases of corporate executive officer of Symantec in May 1996. he held a number of sales management po- with the Annual Meeting of amended, may be found in the section captioned “Section 16(a) Beneficial operations and challenges. Prior to join- Dieter Giesbrecht is Vice President, sitions in high technology companies in- Stockholders to be held on September 17, Ownership Reporting Compliance” appearing in the Proxy Statement. ing Symantec in October 1991 as Vice EMEA (Europe, Middle East and Africa) cluding Computerland Corporation, 1998. Such information is incorporated Executive Officers of the Registrant: President, Finance, he was CFO for sev- of Symantec. Mr. Giesbrecht joined Wang Laboratories, and Burroughs Cor- herein by reference. eral private venture financed technology Symantec in September 1996. From 1995 poration. Mr. Siebert is a member of the THE EXECUTIVE OFFICERS OF THE COMPANY ARE AS FOLLOWS: companies (RTP semiconductor manu- until joining Symantec, he was Vice Board of Directors of TimeLine Solutions facturing equipment, BiCMOS SRAMs, President of Attachmate Europe based in and Percon, Inc. Mr. Siebert holds a Name Age Position laser-based large screen projection sys- Paris, France and was responsible for the Bachelor of Science degree in Business Gordon E. Eubanks, Jr. 51 President and Chief Executive Officer tems for HDTV and computer graphics EMEA region. From 1991 to 1995, he Administration from the University of Howard A. Bain III 52 Vice President, Worldwide Operations applications, and high performance disk held several executive functions within New Hampshire and is a member of the and Chief Financial Officer drives for personal computers) where he Lotus Development Europe including Software Publishers Association. Information with respect to this Item Christopher Calisi 38 Vice President, assisted those management teams in Managing Director UK and Managing Derek Witte is Vice President, General may be found in the section captioned Remote Productivity Solutions Business Unit growing their businesses through raising Director Central Europe. He has a Counsel and Secretary of Symantec. Mr. “Security Ownership of Certain Dieter Giesbrecht 54 Vice President, Europe, Middle East and Africa over $50 million in and degree in Electronics Engineering from Witte joined Symantec in October 1990. Beneficial Owners and Management” (“EMEA”) controlling hyper-growth. His previous the Technical University of Furtwangen From October 1987 until joining appearing in the definitive Proxy Enrique T. Salem 32 Vice President, Security and Assistance Business Unit and Chief Technical Officer experience includes senior financial and located in Germany. Mr. Giesbrecht is a Symantec, Mr. Witte was Associate Statement to be delivered to stockhold- Dana E. Siebert 38 Vice President, Americas accounting management positions with member of the Institute of Directors. General Counsel and later Director of ers in connection with the Annual Fairchild Camera and Instrument is Vice President, Legal Services for Claris Corporation, a Meeting of Stockholders to be held on Derek Witte 41 Vice President, General Counsel and Secretary Enrique T. Salem Corporation and as a consultant with Security and Assistance Business Unit software subsidiary of Apple Computer, September 17, 1998. Such information is Arthur Andersen & Company. Mr. Bain and Chief Technical Officer. Mr. Salem Inc. Between January and October 1987, incorporated herein by reference. Executive officers are chosen by and serve at the discretion of the Board of Directors. is a CPA and holds a B.S. from joined Symantec in April 1990 and has Mr. Witte was Assistant General Counsel There is no family relationship between any director or executive officer of Symantec California Polytechnic University. held numerous positions including at Worlds of Wonder, Inc. Previously, and any other director or executive officer of Symantec. Christopher Calisi is Vice President, Director of Development and General Mr. Witte practiced law with the San Remote Productivity Solutions Business Manager of Advanced Utilities Group. Francisco-based law firms of Brobeck, Gordon E. Eubanks, Jr. is the President ucts. He left Digital Research, Inc. in Unit of Symantec. From 1992 to 1996, Previous to joining Symantec, he was Phleger & Harrison and Heller Ehrman and Chief Executive Officer of September 1983. Mr. Eubanks founded Mr. Calisi held several positions within Vice President in Security Pacific White and McAuliffe during the periods Information with respect to this Item Symantec. He has served as a director of Compiler Systems, Inc. and authored its Symantec’s Remote Access Business National Bank, Merchant Bank Division, between 1981 and 1983 and 1983 and 1987, may be found in the section captioned Symantec since November 1983 and as products: CBASIC, one of the first suc- Unit, including Development Manager, where he was responsible for the develop- respectively. Mr. Witte holds a law degree “Executive Compensation - Certain the President and Chief Executive cessful languages on personal computers, Director of Development, General ment and deployment of a global trading and a Bachelor of Arts degree in Economics Transactions” appearing in the definitive 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 from the University of California at Proxy Statement to be delivered to Mr. Eubanks also served as Symantec’s SIC. Compiler Systems, Inc. was President, Communication Products. Arts degree in Computer Science from Berkeley. Mr. Witte has been a member stockholders in connection with the Chairman of the Board from November acquired by Digital Research, Inc. in Mr. Calisi joined Symantec in 1992 from Dartmouth College. He is a member of of the California bar since 1981. Annual Meeting of Stockholders to be 1983 to October 1986 and from August of 1981. Mr. Eubanks received his Unify Corporation, a relational database the Board of Directors of the Software held on September 17, 1998. Such infor- November 1990 to January 1993. Bachelor of Science degree in Electrical and 4GL tools vendor where he served as Council of Southern California and a mation is incorporated herein by reference. Previously, Mr. Eubanks was Vice Engineering from Oklahoma State the Manager of Sales Engineers. Prior to member of the IEEE. Mr. Salem became President of Digital Research, Inc.’s University. He received his Masters Unify Corporation, Mr. Calisi held an executive officer of Symantec in commercial systems division where he degree in Computer Science from Naval development positions with several rela- October 1996. was responsible for the development and Postgraduate School in Monterey, tional database vendors, including Dana E. Siebert is Vice President, marketing of all system software prod- California. Mr. Eubanks was a commis- Britton Lee, Oracle and Computer Americas. Previously, Mr. Siebert served

32 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 33 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 Statement dated October 17, 1995.) Exhibit 10.17 filed with the Registrant’s 10.27 Office building lease dated as of April 19, fiscal year. All requests should be sent to: Shelley Wilson 10.11* Symantec Corporation 1996 Equity Annual Report on Form 10-K for the 1995, between the Registrant and 10.01 Amended Agreement Respecting Certain Incentive Plan, as amended. year ended March 28, 1997.) CIGNA Property and Casualty Investor Relations Rights of Publicity. (Incorporated by ref- (Incorporated by reference to Insurance Company regarding property Symantec Corporation 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. 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 Cupertino, California 95014-2132 June 13, 1990.) Company and Symantec Corporation. Annual Report on Form 10-K for the 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- Annual Report on Form 10-K for the 10.28 Office building lease, as amended, Norton and Ronald Posner. erence to Exhibit 10.11 filed with the year ended March 28, 1997.) dated as of December 1, 1995 between (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 1. Consolidated Financial Statements Page Number 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- Registration Statement on Form S-4 Escrow Instructions of 10201 Torre erty located in Toronto, Canada. Report of Ernst & Young LLP, Independent Auditors 37 (No. 33-35385) initially filed June 13, 1990.) 10.13 Participation Agreement dated as of Avenue, Cupertino, CA. (Incorporated (Incorporated by reference to October 18, 1996, by and among Consolidated Balance Sheets as of March 31, 1998 and 1997 38 by reference to Exhibit 10.19 filed with Exhibit 10.01 filed with the Registrants 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 Consolidated Statements of Operations for the Years Ended amended to date. (Incorporated by refer- Leasing and Financing, Inc., The 10-K for the year ended March 28, 1997.) quarter ended December 29, 1995.) March 31, 1998, 1997 and 1996 39 ence to Exhibit 4.02 filed with the Sumitomo Bank, Limited, San Francisco 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 March 31, 1998, 1997 and 1996 41 Exhibit 10.01 filed with the Registrants Registrant’s Annual Report on Form Form S-1 (No. 33-28655) originally filed 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 Summary of Significant Accounting Policies and Notes to ence to Exhibit 4.01 filed with the quarter ended September 27, 1996.) thereto filed June 21, 1989, which Consolidated Financial Statements 42 Registrant’s Registration Statement on 10.22 Loan Agreement dated as of October 18, 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.) 2. Financial Statement Schedules December 20, 1996.) Master Lease, Lease Supplements Loan and Finance, Inc., Various Financial The following financial statement schedule of Symantec Corporation for the years ended Agreements, Pledge Agreement, Lessor Institutions Identified Herein and The 10.30* Full Recourse Promissory Note and 10.05* Form of Stock Option Agreement and March 31, 1998, 1997 and 1996 is filed as part of this Form 10-K and should be read in Mortgages, and Guaranty. (Incorporated Sumitomo Bank, Limited, San Francisco Pledge Agreement between the Company Form of Stock Option Exercise Request, conjunction with the Consolidated Financial Statements of Symantec Corporation. by reference to Exhibit 10.02 filed with Branch. (Incorporated by reference to and Gordon E. Eubanks, Jr. 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 II Valuation and Qualifying Accounts 57 September 27, 1996.) year ended March 28, 1997.) Annual Report on Form 10-K for the to Exhibit 10.10 filed with the year ended April 2, 1993.) Schedules other than that listed above have been omitted since they are either not Registrant’s Registration Statement on 10.15 Master Lease and Deed of Trust, as 10.23 Construction Agency Agreement dated required, not applicable, or the information is otherwise included. 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 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 Registrants Quarterly Report on Form year ended March 28, 1997.) 10.33 Note Purchase Agreement, dated April 2, 3.02 The Registrant’s Bylaws, as currently 4.04 Plan of Arrangement and Exchangeable 10.08* Form of Stock Option Grant and Stock 10-Q for the quarter ended 1993, among Symantec Corporation, in effect. (Incorporated by reference to Share Provisions related to the acquisi- Option Exercise Notice and Agreement September 27, 1996.) 10.25 Office building lease dated as of April 10, Morgan Guaranty Trust Company of 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 Exhibit 10.06 filed with the Registrants 10.26 Office building lease dated as of 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 Quarterly Report on Form 10-Q for the February 27, 1991, between the year ended April 2, 1993.) Statement on Form S-4 (No. 33-35385) Management Information Circular and Registration Statement on Form S-8 quarter ended September 27, 1996.) Registrant and Kim Camp No. VII initially filed June 13, 1990.) Proxy Statement dated October 17, 1995.) (No. 33-60141) filed June 9, 1995.) * Indicates a management contract or compensatory * Indicates a management contract or compensatory plan or arrangement. plan or arrangement.

34 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 35 10.34* The Registrant’s Section 401(k) Plan, as 10.43 Asset Purchase Agreement dated as of INDEX TO CONSOLIDATED REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS 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 Annual Report on Form 10-K for the reference to Exhibit 2.01 filed with the The Board of Directors and Stockholders year ended March 31, 1995.) Registrant’s Current Report of Form 8-K Page Symantec Corporation filed September 26, 1996.) 10.35* Form of Executive Compensation Agreement between the Company and 10.44 Asset Purchase Agreement, as amended, Report of Ernst & Young LLP, certain executives. (Incorporated by ref- dated as of March 28, 1998, by and We have audited the accompanying consolidated balance sheets of Symantec Corporation as of March 31, 1998 and 1997, 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 10-K for the year ended March 31, 1995.) 10.45 Asset Purchase Agreement, as amended, Consolidated Balance Sheets ended March 31, 1998. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial dated as of March 27, 1997 by and as of March 31, 1998 and 1997 38 statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on 10.36 Assignment of Copyright and Other between Hewlett-Packard Company and Intellectual Property Rights. Symantec Corporation. (Incorporated by these consolidated financial statements and schedule based on our audits. (Incorporated by reference to appendix reference to Exhibit 10.43 filed with the Consolidated Statements of 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 the Registrant’s Registration Statement 10-K for the year ended March 28, 1997.) perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An on Form S-4 (No. 33-35385) initially filed March 31, 1998, 1997 and 1996 39 audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit June 13, 1990.) 10.46 Master agreement, dated May 18, 1998, 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. among Symantec Corporation, Symantec (Confidential treatment has been requested Stockholders’ Equity for the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 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 to Exhibit 10.32 filed with the 10.47 Class action complaint filed by the law 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 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 10-K for the year ended April 1, 1994.) Lerach in Superior Court of the State of Consolidated Statements of Cash (Confidential treatment has been granted California, County of Santa Clara our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a against the Company and several of its Flow for the years ended March 31, 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 Exhibit 10.29 filed with the Registrants March 31, 1996.) Accounting Policies 42 Annual Report on Form 10-K for the year ended March 31, 1995.) 21.01 Subsidiaries of the Registrant. Notes to Consolidated 10.39 Authorized Distributor Agreement 23.01 Consent of Ernst & Young LLP, Financial Statements 44 between Symantec Corporation and Independent Auditors. 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). with respect to portions of this exhibit.) E RNST & YOUNG LLP 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. reference to Exhibit 10.35 filed with the April 30, 1998, except for Note 17, as to which the date is May 19, 1998. Registrant’s Quarterly Report of Form 10-Q for the quarter ended July 1, 1994.) (c) Exhibits: The Registrant hereby files (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. (Incorporated by reference to Registrant hereby files as part of this Exhibit 10.02 filed with the Registrants Form 10-K the schedule listed in Quarterly Report on Form 10-Q for the quarter ended December 29, 1995.) Item 14(a)2, as set forth on page 57.

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 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 37 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 ASSETS Net revenues $ 578,361 $ 472,183 $ 445,432 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) Accrued compensation and benefits 21,332 16,241 Net income (loss) per share - diluted $ 1.42 $ 0.47 $ (0.76) 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 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 39 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY CONSOLIDATED STATEMENTS OF CASH FLOW

Notes Year Ended March 31, (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 Delrina net loss for the quarter cash provided by operating activities: ended June 30, 1995 — — — — 4,834 4,834 Depreciation and amortization of equipment and 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 2,021 shares under stock plans and other 20 21,101 — — — 21,121 Write-off of equipment and leasehold improvements 1,225 4,010 3,403 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 Translation adjustment — — — (378) — (378) Inventories 1,040 3,432 1,450 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) Net income — — — — 26,038 26,038 Other assets (556) 2,720 2,465 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) Acquired company’s accumulated deficit — — — — (445) (445) Income taxes payable 17,051 5,031 1,211 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: Translation adjustment — — — 11 — 11 Capital expenditures (26,339) (27,195) (35,767) 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) Net income — — — — 85,089 85,089 Proceeds from sales of marketable securities 174,087 203,098 168,681 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 1 715 — — — 716 Net proceeds from sales of common stock and other 33,108 11,703 20,295 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 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 41 SUMMARY OF SIGNIFICANT April 3, 1998, March 28, 1997 and accrued at the time of the sale and is Inventories Basic net income (loss) per share is short collection terms and the geographi- ACCOUNTING POLICIES March 29, 1996, respectively. The fiscal included in sales and marketing expense. Inventories are valued at the lower of computed using the weighted average cal dispersion of sales transactions. The year ending on April 3, 1998 is comprised Royalty revenues are recognized as cost or market. Cost is principally deter- number of common shares outstanding Company generally does not require col- Business of a 53-week period. earned unless collection of such revenues mined using currently adjusted during the periods. Diluted net income lateral and maintains reserves for potential Symantec Corporation (“Symantec” or is not assured. When collection is not standards, which approximate actual cost (loss) per share is computed using the credit losses and such losses have been the “Company”) develops, markets and Use of Estimates assured, revenues are recognized as pay- on a first-in, first-out basis. weighted average number of common within management’s expectations. supports utility software for business and The preparation of financial statements ments are received. shares outstanding and potentially dilu- personal computing. Symantec’s products in conformity with generally accepted Equipment and Leasehold tive common shares during the periods. Impairment of Long-Lived Assets are currently organized into the following accounting principles requires management Cash Equivalents, Investments and Improvements Diluted earnings per share includes the Statement of Financial Accounting three business units: Security and to make estimates and assumptions that Restricted Investments Equipment and leasehold improvements assumed conversion of all of the out- Standards (SFAS) No. 121, “Accounting Assistance; Remote Productivity Solutions; affect the amounts reported in the financial Symantec considers investments in highly are stated at cost, net of accumulated standing convertible subordinated for the Impairment of Long-Lived Assets and Internet Tools, Royalties and Other. statements and accompanying notes. Actual liquid instruments purchased with an depreciation and amortization. debentures, if dilutive in the period. and for Long-Lived Assets to be Customers consist primarily of individ- results could differ from those estimates. original maturity of 90 days or less to be Depreciation and amortization is pro- Disposed of,” applicable for the fiscal ual users, corporations, higher education cash equivalents. All of the Company’s vided on a straight-line basis over the Concentrations of Credit Risk year beginning April 1, 1996, did not institutions and government agencies, Foreign Currency Translation cash equivalents, short-term investments, estimated useful lives of the respective The Company’s product revenues are have a material affect on the Company’s which are mainly located in North The functional currency of the long-term investments and restricted assets, generally the shorter of the lease concentrated in the personal computer consolidated financial condition or America, Europe, Asia/Pacific, Latin Company’s foreign subsidiaries is the investments are classified as available-for- term or three to seven years. software industry, which is highly com- results of operations. America and South America. local currency. Assets and liabilities sale as of the balance sheet date. These petitive and rapidly changing. Significant denominated in foreign currencies are securities are reported at fair market Capitalized Software technological changes in the industry or Recent Accounting Pronouncements Principles of Consolidation translated using the exchange rate on the value and any unrealized gains and losses Purchased product rights are comprised customer requirements, or the emergence In June 1997, the Financial Accounting The accompanying consolidated finan- balance sheet dates. The cumulative are included in stockholders’ equity. of acquired software (“product rights”) of competitive products with new capa- Standards Board issued SFAS No. 130, cial statements include the accounts of translation adjustments resulting from Realized gains and losses and declines in and are stated at cost less accumulated bilities or technologies, could adversely “Reporting Comprehensive Income,” which Symantec Corporation and its wholly- this process are shown separately as a value judged to be other-than-temporary amortization. Amortization is provided affect operating results. In addition, a establishes standards for reporting and owned subsidiaries. All significant component of stockholders’ equity. are included in interest income. The cost on the greater of the straight-line basis significant portion of the Company’s displaying comprehensive income and its intercompany accounts and transactions Revenues and expenses are translated of securities sold is based upon the spe- over the estimated useful lives of the revenue and net income is derived from components in a full set of general-purpose have been eliminated. using average exchange rates prevailing cific identification method. respective assets, generally three to five international sales and independent agents financial statements and is required to be during the year. Foreign currency trans- years, or on the basis of the ratio of cur- and distributors. Fluctuations of the adopted by Symantec beginning in fiscal Basis of Presentation action gains and losses are included in Derivative Financial Instruments rent revenues to current revenues plus U.S. dollar against foreign currencies, 1999. Symantec is evaluating the potential During fiscal year 1998, no companies the determination of net income (loss). Symantec utilizes natural hedging to anticipated future revenues. changes in local regulatory or economic impact of this accounting pronouncement were acquired by Symantec. During mitigate the Company’s foreign currency conditions, piracy or nonperformance by on required disclosures. The Company fiscal 1997 and 1996, Symantec acquired Revenue Recognition exposures and hedges certain residual Income Taxes independent agents or distributors could anticipates that its unrealized gain and loss Delrina Corporation (“Delrina”) and Symantec recognizes revenue upon ship- exposures through the use of one-month Income taxes are computed in accordance adversely affect operating results. on investments and cumulative translation Fast Track, Inc. (“Fast Track”) in trans- ment when no significant vendor foreign exchange forward contracts. The with Statement of Financial Accounting Financial instruments that potentially adjustment balances will be included as actions accounted for as poolings of obligations remain and collection of the Company enters into foreign exchange Standards No. 109, “Accounting for subject the Company to concentrations components of comprehensive income. interests. All financial information has receivable, net of provisions for estimated forward contracts with financial institu- Income Taxes.” of credit risk consist principally of short- Additionally, the Financial Accounting been restated to reflect the combined future returns, is probable. Symantec tions primarily to minimize currency term and long-term investments, Standards Board issued SFAS No. 131, operations of Symantec. The results of offers the right of return of its products exchange risks associated with certain Net Income (Loss) Per Share restricted investments and trade accounts “Disclosures about Segments of an operations of Fast Track were not mater- under various programs. The Company balance sheet positions. Gains and losses In 1997, the Financial Accounting receivable. The Company’s investment Enterprise and Related Information,” ial to Symantec’s consolidated financial estimates and maintains reserves for on the contracts are included in other Standards Board issued Statement No. 128, portfolio is diversified and consists of which establishes standards for the way that statements, and therefore, amounts prior product returns. income (loss) in the period as gains and “Accounting for Earnings Per Share,” investment grade securities. The public business enterprises report infor- to the year of acquisition were not com- Revenues related to significant post- losses on the underlying transactions are (“SFAS 128”). SFAS 128 replaced the Company is exposed to credit risks in the mation in annual statements and interim bined with Symantec’s financial statements. contract support agreements (generally recognized and generally offset. The fair calculation of primary and fully diluted event of default by these institutions to financial reports regarding operating seg- Symantec has a 52/53-week fiscal product maintenance agreements) are value of foreign currency exchange for- net income (loss) per share with basic the extent of the amount recorded on the ments, products and services, geographic accounting year. Accordingly, all refer- deferred and recognized over the period ward contracts approximates cost due to and diluted net income (loss) per share. balance sheet. The credit risk in the areas and major customers. SFAS 131 will ences as of and for the periods ended of the agreements. The estimated cost of the short maturity periods. Accordingly, prior period net income Company’s trade accounts receivable is be effective for Symantec for fiscal 1999 March 31, 1998, 1997 and 1996 reflect providing insignificant post-contract (loss) per share have been restated in substantially mitigated by the Company’s year-end and will apply to both annual amounts as of and for the periods ended support (generally telephone support) is accordance with SFAS 128. credit evaluation process, reasonably and interim financial reporting subsequent

42 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 43 to this date. Symantec is evaluating the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3. Business Combinations and Purchased Product Rights potential impact of these accounting pro- Note 1. Balance Sheet Information During the three fiscal years ended March 31, 1998, Symantec completed acquisitions March 31, nouncements on required disclosures. of the following companies: (In thousands) 1998 1997 SFAS 131 is not expected to have a mater- Cash, cash equivalents and short-term investments: Shares of Acquired ial impact on the financial condition or Cash $ 28,236 $ 33,755 Symantec Company results of operations of the Company. Cash equivalents 110,777 62,003 Common Stock 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 — Committee (“AcSEC”) issued Statement Receivables $ 69,574 $ 49,675 Delrina Corporation (“Delrina”) November 22, 1995 13,684,174* 1,271,677 of Position (“SOP”) 97-2, “Software Less: allowance for doubtful accounts (4,416) (4,300) $ 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. Provision of SOP 97-2, Software Revenue Finished goods 2,084 2,740 Delrina exchangeable stock may be converted at any time into Symantec common stock on a one-for-one basis at each stockholder’s option. Recognition,” respectively, which provide $ 3,175 $ 4,476 Equipment and leasehold improvements: guidance on applying generally accepted Computer hardware and software $ 107,724 $ 91,533 accounting principles in recognizing Office furniture and equipment 29,407 27,706 Both acquisitions were accounted for as Note 4. Capitalized Software Note 5. Cash Equivalents, revenue on software transactions and is Leasehold improvements 21,038 17,697 poolings of interests. In connection with In fiscal 1998, capitalization of certain Investments and Fair Value of effective for Symantec’s transactions 158,169 136,936 the acquisitions of the companies listed software development costs in accordance Financial Instruments Less: accumulated depreciation and amortization (108,139) (85,326) entered into subsequent to April 3, 1998. above, Symantec incurred significant with Statement of Financial Accounting Available-For-Sale Investments and $ 50,030 $ 51,610 AcSEC is currently deliberating the Other assets: acquisition expenses (See Note 13 of Notes Standards No. 86 did not materially Trading Investments potential permanent deferral of certain Purchased product rights $ 1,358 $ 591 to Consolidated Financial Statements). affect the Company. Amortization All cash equivalents, short-term invest- provisions of SOP 97-2. Capitalized software costs 2,414 2,465 Due to differing year ends of Symantec expense for capitalized software develop- ments, long-term investments and Less: accumulated amortization of The Company does not believe that and Delrina, financial information for ment costs was approximately $0.8 restricted investments have been classi- purchased product rights (563) (55) the implementation of SOP 97-2 and Less: accumulated amortization dissimilar fiscal year ends was combined. million in fiscal 1998. fied as available-for-sale securities. SOP 98-4 will have a material adverse of capitalized software costs (1,739) (964) Delrina’s fiscal year ended June 30, 1995 In fiscal 1997, Symantec capitalized During fiscal 1998, the Company main- affect on expected revenues or earnings. Other assets 2,793 2,381 was combined with Symantec’s fiscal approximately $7.7 million of software tained a trading asset portfolio to $ 4,263 $ 4,418 However, in the event subsequent inter- year ended March 31, 1995. Accordingly, development costs, primarily related to generate returns that offset changes in Other accrued expenses: pretations are contrary to the Company’s Deferred revenue $ 25,537 $ 11,550 Delrina’s results of operations for the network administration technology, certain liabilities related to deferred revenue accounting practices, the Company Marketing development funds 12,815 12,529 quarter ended June 30, 1995 were duplicated which was sold to Hewlett-Packard in compensation arrangements. The trading believes it can change its current business Other 26,180 27,429 in the combined statements of operations March 1997, resulting in the write off of assets, which consist of marketable $ 64,532 $ 51,508 practices to comply with this guidance for fiscal 1996 and 1995 and accordingly, approximately $7.0 million of unamor- equity securities and have a fair value of and avoid any material adverse affect on Delrina’s net loss for the quarter ended tized costs during the fourth quarter of approximately $0.2 million, have been Note 2. Income Statement Information reported revenues and earnings. There Year Ended March 31, June 30, 1995 was credited to stockholder’s fiscal 1997 (See Note 12 of Notes to included in the available-for-sale tabular can be no assurance this will be the case. (In thousands) 1998 1997 1996 equity. Delrina reported net revenues of Consolidated Financial Statements). disclosure, due to immateriality. Technical support costs included $19.8 million and a net loss of $4.8 million Amortization expense for capitalized in sales and marketing $ 38,582 $ 35,111 $ 34,487 Reclassifications in the quarter ended June 30, 1995. The software development costs was approxi- Advertising expense $ 46,814 $ 39,147 $ 43,015 Certain previously reported amounts results of operations of Fast Track were mately $2.9 million in fiscal 1997. have been reclassified to conform to the not material to Symantec’s consolidated Prior to fiscal 1997, capitalization of current presentation format with no Technical support costs included in sales and marketing relate to the estimated cost financial statements, and therefore, certain software development costs in impact on net income (loss). All financial of providing insignificant post-contract support (generally telephone support) that is amounts prior to the date of acquisition accordance with Statement of Financial information has been restated to conform accrued at the time of product sale. were not restated to reflect the combined Accounting Standards No. 86 did not to this presentation. Advertising expenditures are charged to operations as incurred except for certain operations of the companies. materially affect the Company, except for direct mail campaigns which are deferred and amortized over the expected period of amounts capitalized by Delrina prior to benefit. Deferred advertising costs have not been material in all periods presented. its acquisition by Symantec in fiscal 1996. The related amortization expense was approximately $5.6 million in fiscal 1996.

44 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 45 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 Note 8. Commitments the property under lease or arrange a third short-term investments and long-term investments consisted of the following: exchange forward contracts. The Company of $10.0 million plus 25% of cumulative Symantec leases all of its facilities and party purchase, then the Company will Cash equivalents, short and long-term investments 1998 1997 enters into foreign exchange forward net income subsequent to April 2, 1993. certain equipment under operating leases be obligated to the lessor for a guaranteed (In thousands) contracts with financial institutions pri- On April 26, 1995, convertible subor- that expire at various dates through 2026. residual amount equal to a specified per- Money market funds $ 15,685 $ 2,598 marily to protect against currency exchange dinated debentures totaling $10.0 million The Company currently subleases some centage of the lessor’s purchase price of the Corporate securities 161,848 69,326 risks associated with certain balance sheet were converted into 833,333 shares of space under various operating leases which property. Symantec would also be obligated Bank securities and deposits 41,655 20,755 positions. The fair value of foreign Symantec common stock, leaving will expire at various dates through 2001. to the lessor for all or some portion of U.S. government and government sponsored securities 12,717 33,648 exchange forward contracts are based on 1,250,000 shares of common stock reserved The future fiscal year minimum operating this amount if the price paid by the third Total available-for-sale and trading investments $ 231,905 $ 126,327 quoted market prices. At March 31, 1998, for future conversion as of March 31, 1997. lease commitments were as follows at party is below the guaranteed residual outstanding forward exchange contracts During October 1997, convertible March 31, 1998: (In thousands) amount. The guaranteed residual payment The estimated fair value of marketable securities by contractual maturity as of March 31, 1998 are as follows: had a notional amount of approximately subordinated debentures totaling $0.7 1999 $ 16,841 on the lease agreements for the two existing Cash equivalents, short and long-term investments 1998 $47.5 million, all of which mature in 35 million were converted into 59,666 shares 2000 15,305 office buildings totals approximately $38.4 (In thousands) days or less. The net liability of forward of Symantec common stock, leaving 2001 12,086 million. The guaranteed residual payment Due in one year or less $ 197,647 contracts was a notional amount of 1,190,334 shares of common stock reserved 2002 8,672 on the lease agreements for the land and Due after one year through three years 18,685 approximately $47.5 million at March 31, for future conversions as of March 31, 1998. 2003 8,169 office building under construction was Due after three years 15,573 1998. The fair value of foreign currency The estimated fair value of the $14.3 Thereafter 21,288 approximately $19.4 million at March 31, 1998 $ 231,905 exchange forward contracts approximates million convertible subordinated debentures Operating lease commitments 82,361 and will increase to approximately $31.7 cost due to the short maturity periods was approximately $32.8 million at Sublease income (3,890) million at the completion of the con- Fair values of cash equivalents, short-term investments and long-term investments and trading assets approximate cost due to one or more of the following: the and the minimal fluctuations in foreign March 31, 1998. The estimated fair value Net operating lease struction during fiscal year 1999. As short-term maturities of the investments, absence of changes in underlying interest currency exchange rates. The Company was based on the total shares of common commitments $ 78,471 security against these guaranteed residual pay- 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 As of March 31, 1998 and 1997, the estimated fair value of the restricted investments of the debentures at the closing price of Rent expense charged to operations totaled a corresponding investment in U.S. consisted of the following: Note 6. Convertible Subordinated the Company’s common stock at March 31, approximately $14.1 million, $12.4 million Treasury securities with maturities not to Restricted Investments 1998 1997 Debentures 1998, which exceeded the conversion and $11.3 million for the years ended exceed three years. Symantec is restricted (In thousands) On April 2, 1993, the Company issued price of $12 per share, plus accrued interest. March 31, 1998, 1997 and 1996, respectively. in its use of these investments per the Money market funds $ — $ 6 convertible subordinated debentures In fiscal 1997, Symantec entered into terms of the lease agreement. At March U.S. government and government sponsored securities 59,370 47,442 totaling $25.0 million. The debentures bear Note 7. Line of Credit lease agreements for two existing office 31, 1998, the investments total approxi- $ 59,370 $ 47,448 interest at 7.75% payable semiannually and The Company recently renewed its $10.0 buildings, land and one office building mately $59.4 million and are classified as The estimated fair value of restricted marketable securities by contractual maturity as are convertible into Symantec common million bank line of credit to expire in currently under construction in Cupertino, non-current restricted investments within of March 31, 1998 are as follows: stock at $12 per share at the option of the May 2000. The line of credit is available California. Lease payments are based on the financial statements. Restricted Investments 1998 investor. The debentures are due in three for general corporate purposes and bears the three-month LIBOR in effect at the The Company currently occupies a (In thousands) equal annual installments beginning in 1999 interest at the banks’ reference (prime) beginning of each fiscal quarter. Symantec portion of these office buildings and has Due in one year or less $ 54,334 and are redeemable at the option of the interest rate (8.50% at March 31, 1998), the has the right to acquire the related properties assumed the right to sub-lease income Due after one year through three years 5,036 investors in the event of a change in control U.S. offshore rate plus 1.25%, a CD rate at any time during the seven-year lease provided by the other tenants. The sub- $ 59,370 of Symantec or the sale of all or substantially plus 1.25% or LIBOR plus 1.25%, at the period. If at the end of the lease term lease agreements have terms expiring in all of the assets of the Company. Symantec, Company’s discretion. The line of credit Symantec does not renew the lease, purchase August 1999 through February 2001. 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 Note 9. Income Taxes 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 facilities in Cupertino, California. Fair During the period covered by the are entitled to certain registration rights ratios and profits. The Company was in Current: Federal $ 13,615 $ 514 $ (5,882) 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) 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 State (2,247) 126 — 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 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 47 The difference between the Company’s effective income tax rate and the federal statutory Realization of the $19.7 million of net Company contributions under the plan for issuance under this plan. As of March 31, offer to each employee with stock income tax rate as a percentage of income (loss) before income taxes was as follows: deferred tax asset that is reflected in the were $2.2 million, $2.0 million and $1.5 1998, no shares had been issued under options having an exercise price greater Year Ended March 31, financial statements is dependent upon million for the years ended March 31, 1998, this plan. than $13.10 (the “Old Options”) the 1998 1997 1996 the Company’s ability to generate suffi- 1997 and 1996, respectively. Stock Option Plans. The Company opportunity to cancel the affected grants Federal statutory rate 35.0 % 35.0 % (35.0)% cient future U.S. taxable income. Employee Stock Purchase Plan. In maintains stock option plans pursuant to and receive a new grant for the same State taxes, net of federal benefit 1.5 2.9 0.3 Management believes that it is more October 1989, the Company established which an aggregate total of approximately number of shares dated March 4, 1996 Non-deductible acquisition expenses — — 6.8 likely than not that the asset will be real- the 1989 Employee Stock Purchase Plan 20.1 million shares of common stock (the “New Options”). On the date of Impact of international operations (4.0) (9.2) — ized based on forecasted U.S. earnings. and a total of 3.4 million shares of common have been reserved for issuance as incentive grant, the New Options had an exercise Losses for which no benefit is Approximately $23.3 million of the stock have been reserved for issuance and nonqualified stock options to price equal to $13.10 and a stock price of currently recognizable — — 16.9 valuation allowance for deferred tax under this plan. Subject to certain limi- employees, officers, directors, consultants, $12.63. Under the terms of this stock Benefit of pre-acquisition losses assets is attributable to unbenefitted tations, Company employees may independent contractors and advisors to option cancellation and regrant, all of acquired entities (10.1) (16.5) — stock option deductions, the benefit of purchase, through payroll deductions of the Company (or of any parent, subsidiary options began vesting as of the new grant Other, net 1.7 2.1 0.7 which will be credited to equity when 2 to 10% of compensation, shares of or affiliate of the Company as the Board date and no portion of any regranted 24.1 % 14.3 % (10.3)% realized. The remaining $1.8 million of common stock at a price per share that is of Directors or committee may deter- options were exercisable until March 4, the valuation allowance represents net the lesser of 85% of the fair market value mine). The purpose of these plans is to 1997. Options representing a total of The principal components of deferred tax assets were as follows: operating loss and tax credit carryforwards as of the beginning of the offering period attract, retain and motivate eligible persons approximately 2.3 million shares of com- March 31, of various acquired companies that are or the end of the purchase period. As of whose present and potential contributions mon stock were canceled and regranted. (In thousands) 1998 1997 limited by separate return limitations and March 31, 1998, approximately 2.4 million are important to the success of the The weighted average fair value of these Tax credit carryforwards $ 6,821 $ 9,158 under the “change of ownership” rules shares had been issued and 1.0 million Company by offering them an opportunity New Options was $14.79. The President Net operating loss carryforwards 3,161 7,969 of Internal Revenue Code Section 382. shares remain to be issued under the to participate in the Company’s future and Chief Executive Officer, the then Inventory valuation accounts 2,806 2,327 The change in the valuation allowance Employee Stock Purchase Plan. performance through awards of stock Executive Vice President, Worldwide Other reserves and accruals not currently tax deductible 12,828 8,570 for the years ended March 31, 1998, Stock Award Plans. During fiscal 1996, options and stock bonuses. Under the terms Operations and Chief Financial Officer, Accrued compensation and benefits 3,512 2,392 1997 and 1996 was a net decrease of the Company registered 400,000 shares of these plans, the option exercise price the majority of the then members of the Deferred revenue 4,155 10,187 $15.1 million and $5.4 million, and a net to be issued under the terms of the 1994 may not be less than 100% of the fair Executive Staff, and all members of the Sales incentive programs 5,555 5,005 increase of $14.8 million, respectively. Patent Incentive Plan. The purpose of market value on the date of grant, the Board of Directors elected to exclude Allowance for doubtful accounts 1,365 984 Pretax income (loss) from interna- this plan is to increase awareness of the options have a maximum term of ten years themselves from this stock option cancel- Acquired software 1,139 2,613 tional operations was approximately importance of patents to the Company’s and generally vest over a four-year period. lation and regrant. $65.0 million, $24.9 million and business and to provide employees with On May 14, 1996, Symantec stock- Accrued acquisition, restructuring and other expenses 931 1,077 $(4.1) million for the years ended incentives to pursue patent protection holders approved the 1996 Equity Other 2,599 2,868 March 31, 1998, 1997 and 1996, respectively. for new technologies that may be valuable Incentive Plan (the “96 Plan”) which 44,872 53,150 At March 31, 1998, the Company had to the Company. The Company’s execu- superseded the 1988 Option Plan (the “88 Valuation allowance (25,195) (40,327) tax credit carryforwards of approximately tive officers are not eligible for awards Plan”) and made available approximately $ 19,677 $ 12,823 $7.0 million that expire in fiscal 1999 under the 1994 Patent Incentive Plan. As 2.7 million shares. On September 25, 1996, through 2013. of March 31, 1998, approximately 16,000 stockholders approved an amendment to shares had been issued under this plan. the 96 Plan to make available for issuance Note 10. Employee Benefits In March 1998, the Board of up to approximately 1.3 million additional 401(k) Plan. Symantec maintains a Directors approved the terms of the 1998 shares representing the number of options salary deferral 401(k) plan for all of its Star Award Bonus Plan, under which the previously granted pursuant to the 88 domestic employees. The plan allows Company may grant up to 5,000 shares Plan that had expired, were canceled or employees to contribute up to 15% of of common stock to employees who were unexercisable for any reason without their pretax salary up to the maximum perform exceptionally in a given quarter. having been exercised in full. On dollar limitation prescribed by the Directors and executive officers are not September 18, 1997, stockholders approved Internal Revenue Code. Symantec eligible to receive awards under this plan. an amendment to increase the number of matches 100% of the first $500 of Stock awards under this plan are recorded shares reserved for issuance by approxi- employees’ contributions and then 50% as compensation expense at the time of mately 2.6 million to 6.7 million shares. of the employee’s contribution up to 6% issuance. The Board of Directors During March 1996, the Board of of the employees’ eligible compensation. reserved 20,000 shares of common stock Directors authorized the Company to

48 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 49 Stock option and warrant activity was as follows: Weighted Employee Employee Stock four years in quarterly installments through 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 Black-Scholes option valuation model The weighted-average estimated fair has the option to tender payment in either Granted 2,681 13.90 was developed for use in estimating the values of employee stock options for fiscal cash or in registered JetForm common stock, Exercised (684) 9.89 fair value of traded options that have no year 1998 and 1997 were $13.44 and $7.81 within a contractually defined quantity Canceled (2,673) 14.21 vesting restrictions and are fully transfer- per share, respectively. The weighted-average threshold. Due to the uncertainty regarding Outstanding at March 31, 1997 9,042 13.61 able. In addition, option valuation models estimated fair value of employee stock the ultimate collectibility of these install- Granted 3,857 22.74 require the input of highly subjective purchase rights granted under the Employee ments, Symantec is recognizing the related Exercised (2,158) 12.73 assumptions, including the expected stock Stock Purchase Plan during fiscal year 1998 revenue as payments are due and collectibil- Canceled (1,413) 15.29 price volatility. Because the Company’s and 1997 were $14.71 and $7.74, respectively. ity is assured from JetForm. Symantec Outstanding at March 31, 1998 9,328 17.32 options have characteristics significantly For purposes of pro forma disclosures, recognized revenue of approximately $24.1 different from those of traded options, the estimated fair values of the options is million and $18.3 million from JetForm (In thousands) March 31, and because changes in the subjective amortized to expense over the options’ during fiscal 1998 and 1997, respectively. Balances are as follows: 1998 1997 input assumptions can materially affect vesting period (for employee stock options) In March 1997, Symantec sold the soft- Authorized but unissued 10,785 11,901 the fair value estimate, in the opinion of and the six-month purchase period (for ware products and related tangible assets Available for future grants 1,457 2,859 management, the existing models do not stock purchases under the Employee of its Networking Business Unit to Hewlett- necessarily provide a reliable single measure Stock Purchase Plan). The Company’s Exercisable and vested 3,173 4,066 Packard, resulting in the receipt of of the fair value of its options. pro forma information is as follows: 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 Number of average average Number of average Net income (loss) – Basic – Pro forma $ 68,601 $ 14,123 $ (47,015) not to exceed a present value of $27.0 shares contractual life exercise shares exercise Net income (loss) – Diluted – Pro forma 69,293 14,123 (47,015) million as of March 1997, commenced Range of Exercise Prices (in thousands) (in years) price (in thousands) price Net income (loss) per share – Basic – Pro forma 1.29 0.28 (0.89) beginning in fiscal 1998, which is solely $ 1.00 - $ 13.10 3,246 6.93 $ 11.43 1,579 $ 11.25 Net income (loss) per share – Diluted – Pro forma 1.19 0.27 (0.89) contingent on future sales of certain $ 13.13 - $ 22.63 3,252 7.87 16.13 1,454 15.83 Hewlett-Packard products. Due to the $ 22.75 - $ 39.13 2,830 9.56 25.44 140 28.03 The effects on pro forma disclosures of $16.57 to $17.00 per share. Authorization uncertainty regarding the amounts upon 9,328 8.06 17.32 3,173 14.09 applying SFAS No. 123 are not likely to be to repurchase the remaining 500,000 which these royalties will be determined, representative of the effects on pro forma shares has expired as of March 31, 1998. Symantec is recognizing these amounts as These options will expire if not exercised by specific dates ranging from April 1998 to required to be determined as if the disclosures of future years. Because Additionally, on November 24, 1997, they are reported by Hewlett-Packard. March 2008. Prices for options exercised during the three-year period ended March 31, Company had accounted for its employee SFAS 123 is applicable only to options the Board of Directors of Symantec autho- Symantec recognized royalty revenue of 1998 ranged from $0.07 to $25.25. stock options (including shares issued granted subsequent to March 31, 1995, rized the repurchase of up to 500,000 approximately $21.5 million from Pro Forma Information. The Company for use in valuing employee stock options. under the Employee Stock Purchase Plan, its pro forma effect will not be fully shares of Symantec common stock. As of Hewlett-Packard during fiscal 1998. has elected to follow APB Opinion Under APB No. 25, because the exercise collectively called “options”) granted reflected until approximately fiscal 2000. December 4, 1997 management completed In connection with the sale to Hewlett- No. 25, “Accounting for Stock Issued to price of the Company’s employee stock subsequent to March 31, 1995 under the the repurchase of 500,000 shares at prices Packard, during fiscal 1997, Symantec Employees,” in accounting for its options generally equals the market price fair value method of that statement. The Note 11. Common Stock Repurchase ranging from $25.25 to $26.81 per share. wrote off approximately $7.0 million of employee stock options because, as dis- of the underlying stock on the date of grant, fair value of options granted in fiscal On April 29, 1997, the Board of Directors unamortized software development costs cussed below, the alternative fair value no compensation expense is recognized years 1997 and 1998 reported below has of Symantec authorized the repurchase of up Note 12. Sale of Product Rights and approximately $0.6 million of accounting provided for under SFAS No. in the Company’s financial statements. been estimated at the date of grant using to 1,000,000 shares of Symantec common During September 1996, Symantec sold its unamortized purchased product rights, as 123, “Accounting for Stock-Based Pro forma information regarding net a Black-Scholes option pricing model stock by June 13, 1997. As of June 13, 1997, electronic forms software products and well as incurred approximately $2.0 mil- Compensation,” requires the use of option income and earnings per share is required assuming no expected dividends and the management completed the repurchase related tangible assets to JetForm for lion of legal, accounting and other costs valuation models that were not developed by SFAS No. 123. This information is following weighted average assumptions: of 500,000 shares at prices ranging from approximately $100.0 million, payable over associated with the transaction.

50 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 51 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 Write off of acquired in-process research Year Ended March 31, 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 During fiscal 1997, Symantec recorded a and financial advisory services; $6.4 million Consolidated Financial Statements). Shares issuable from assumed code, and (iii) requiring Network $1.8 million charge in connection with for the elimination of duplicative and excess Symantec also expensed $1.0 million, exercise of options 2,964 702 — Associates to provide Symantec and the the write-off of an equity investment in facilities and equipment; $3.7 million for which included a loss on the sale of certain Shares issuable from assumed conversion of convertible subordinated debentures 1,220 — — court with a sample of the notice to be a privately held company and a $3.1 mil- personnel severance and outplacement assets and liabilities of a subsidiary and used. On October 17, 1997, Symantec lion charge for the write off of certain expenses; and $3.1 million for the consol- other expenses, during fiscal 1996. Total shares for purpose of calculating diluted net income (loss) per share 60,281 55,407 52,664 amended its complaint to include addi- in-process research and development idation and discontinuance of certain During fiscal 1996, the Company recog- Diluted net income (loss) per share $ 1.42 $ 0.47 $ (0.76) tional claims for copyright infringement costs acquired by the Company. operational activities and other acquisi- nized a reduction in accrued acquisition, and misappropriation of trade secrets, Additionally, during fiscal 1997, the tion-related expenses. restructuring and other expenses of $2.3 For the twelve months ended March 31, plaint seeks damages in an unspecified based on additional evidence found in Company recorded a charge of $3.2 mil- During fiscal 1996, Symantec sold million, as actual costs incurred were less 1997, 1,250,000 shares of convertible amount. The complaint has been refiled the discovery process. On April 1, 1998, lion, which included $2.4 million for the assets of Time Line Solutions than costs previously accrued by the subordinated debentures and $708,000 twice in state court, most recently on Symantec amended its complaint to add personnel severance and outplacement Corporation, a wholly-owned subsidiary, Company in connection with the acqui- of interest expense were excluded from January 13, 1997, following Symantec’s claims for misappropriation of trade charges, for costs related to the restruc- to a group comprised of Time Line sitions of Central Point Software, Inc. the computation of diluted net income motions directed to previous complaints. secrets, RICO (Racketeer Influenced and turing of certain domestic and Solution Corporation’s management and and SLR Systems, Inc. in fiscal 1995. per share because the effect would have On January 7, 1997, the same plaintiffs Corrupt Organizations Act) and related international sales and research and incurred a $2.7 million loss on the sale. As of March 31, 1998, total accrued been anti-dilutive. filed a complaint in federal court based claims based on additional evidence development operations, settlement of a The Company incurred $2.2 million cash related acquisition and restructuring on the same facts as the state court com- uncovered in the litigation. Symantec lawsuit and other expenses. The restruc- for the relocation costs of moving equip- expenses were $2.5 million and included Note 15. Litigation plaint, for violation of the Securities continues to investigate the extent to turing plans were substantially ment and personnel, during fiscal 1996, $0.5 million for the elimination of duplica- On March 18, 1996, a class action com- Exchange Act of 1934. The court dismissed which Network Associates may have mis- completed during fiscal 1997. Symantec as the result of the consolidation of certain tive and excess facilities and $2.0 million plaint was filed by the law firm of that complaint, and plaintiffs served an appropriated Symantec’s intellectual recorded total acquisition charges of $0.6 research and development activities of for other acquisition related expenses. Milberg, Weiss, Bershad, Hynes & amended complaint in April 1998. property, and plans to aggressively pur- million in the quarter ended June 30, the Company’s Third Generation Lerach in Superior Court of the State of Symantec believes that neither the state sue its remedies under this lawsuit, 1996 in connection with the acquisition Language and Fourth Generation California, County of Santa Clara, court complaint nor the federal court which include both injunctive relief and of Fast Track, Inc. Language development groups. against the Company and several of its complaint has any merit and will vigor- monetary damages. In connection with the acquisition of During fiscal 1996, the Company current and former officers and direc- ously defend itself against both complaints. On May 13, 1997, Trend Micro Delrina (See Note 3 of Notes to recorded $2.0 million for estimated legal tors. The complaint alleges that On April 23, 1997, Symantec filed a Incorporated (“Trend”) filed a lawsuit in Consolidated Financial Statements) in fees expected to be incurred in connection Symantec insiders inflated the stock lawsuit against McAfee Associates, Inc., the United States District Court, fiscal 1996, Symantec recorded total with a securities class action complaint price and then sold stock based on inside which pursuant to a merger has become Northern District of California, against acquisition charges of $22.0 million, which filed in March 1996 and other legal information that sales were not going to Network Associates, Inc. (“Network Symantec Corporation and Network included $8.8 million for legal, accounting expenses (See Note 15 of Notes to meet analysts’ expectations. The com- Associates”), in the United States Associates, alleging patent infringement.

52 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 53 Trend claims that Norton AntiVirus for On February 19, 1998, a class action ously and although adverse decisions (or Information by Geographic Area Note 17. Subsequent Event Internet E-mail Gateways and Norton complaint was filed by the Milberg, settlements) may occur in one or more of Year Ended March 31, On May 19, 1998, IBM and Symantec AntiVirus for Firewalls infringe a patent Weiss, Bershad, Hynes & Lerach law the cases, the final resolution of these (In thousands) 1998 1997 1996 Corporation entered into an agreement owned by Trend. The lawsuit was settled firm in Santa Clara County Superior lawsuits, individually or in the aggregate, Net revenues: whereby Symantec will license IBM’s on April 6, 1998, on terms that were not Court, on behalf of a class of purchasers is not expected to have a material adverse U.S. operations: immune system technology and patents. material to Symantec. of pre-version 4.0 Norton AntiVirus affect on the financial condition of the North American customers $ 392,224 $ 334,210 $ 303,280 Symantec will combine this technology On August 22, 1997, Network products. A similar complaint was filed Company, although it is not possible to International customers 11,882 6,451 16,609 with its own technology to produce a Associates filed a lawsuit against in the same court on March 6, 1998 by estimate the possible loss or losses from Intercompany 52 79 6,015 range of products, including new solutions Symantec in the Superior Court of the an Oregon law firm. The complaints each of these cases. However, depending 404,158 340,740 325,904 to support IBM platforms. As part of the State of California, County of Santa purport to assert claims for breach of on the amount and timing of an unfavor- Other international operations: agreement, IBM has also assigned its Clara, alleging defamation, trade libel, implied warranty, fraud, unfair business able resolution of these lawsuits, it is Customers 174,255 131,522 125,543 existing anti-virus customer and OEM unfair competition and unjust enrich- practices and violation of California’s possible that the Company’s future Intercompany 1,380 745 11,387 contracts to Symantec and will recommend ment. The complaint alleged that Consumer Legal Remedies Act arising results of operations or cash flows could 175,635 132,267 136,930 Norton AntiVirus to its corporate cus- tomers worldwide as the anti-virus damages to Network Associates could from the alleged inability of earlier ver- be materially adversely affected in a par- Eliminations (1,432) (824) (17,402) ® ticular period. The Company has accrued solution of choice. In addition, IBM and approximate $1 billion. Network sions of Norton AntiVirus to function $ 578,361 $ 472,183 $ 445,432 Associates dismissed the lawsuit on or properly after the year 2000. The com- certain estimated legal fees and expenses Symantec intend to sell and market the Operating income (loss): about December 30, 1997. The court plaints seek unspecified damages and related to certain of these matters; however, Norton AntiVirus product line world- U.S. operations $ 69,200 $ 11,415 $ (58,296) awarded Symantec costs and attorneys’ injunctive relief. Symantec believes that actual amounts may differ materially wide. Symantec will pay IBM $16 International operations 29,649 12,931 8,201 fees in connection with this matter on these actions have no merit and intends from those estimated amounts. million in cash, plus future royalties and Eliminations 1,496 1,943 1,816 April 10, 1998. to defend itself vigorously. assume obligations of approximately $3 $ 100,345 $ 26,289 $ (48,279) On September 15, 1997, Hilgraeve In connection with the May 1998 Note 16. Segment Information million in connection with this technology Corporation filed a lawsuit in the United technology licensing agreement with Symantec operates in the microcomputer acquisition. Symantec expects to record March 31, States District Court, Eastern District of IBM (see Note 17. Subsequent Event), software industry business segment. a charge of approximately $16 million for (In thousands) 1998 1997 1996 Michigan, against Symantec previously asserted claims of patent The Company markets its products in in-process research and development Corporation, alleging that unspecified infringement asserted by IBM with North America and international coun- Identifiable assets: acquired from IBM in the June 1998 quarter. Symantec products infringe a patent respect to certain of the Company’s tries primarily through retail and U.S. operations $ 389,174 $ 281,748 $ 234,155 owned by Hilgraeve. The lawsuit products were resolved. The terms of distribution channels. International operations 87,286 57,650 48,519 requests damages, injunctive relief and resolution were not material. $ 476,460 $ 339,398 $ 282,674 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 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 55 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 AND C HIEF E XECUTIVE O FFICER) 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 (GORDON E. EUBANKS, JR .) Officer and Director 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 (HOWARD A. BAIN III) Worldwide Operations and Delrina (Germany) GmbH Germany Chief Financial Officer Delrina (UK) Corporation Limited United Kingdom Chief Accounting Officer: Delrina (US) Corporation California, USA Delrina (Wyoming) Limited Liability Company Wyoming, USA Vice President Controller and June 5, 1998 Delrina International Corporation (Barbados) Barbados

(RONALD W. KISLING) Chief Accounting Officer Fifth Generation Systems GmbH Germany 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 Director June 5, 1998 Symantec Australia Pty. Ltd. Australia

(TANIA A MOCHAEV) Symantec do Brasil Ltda. Brazil Symantec EURL (France) France Director June 5, 1998 Symantec Financing B.V. (Netherlands) Netherlands 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

(ROBERT S. MILLER) Zortech Limited (“Zortech”) United Kingdom

56 S YMANTEC C ORPORATION S YMANTEC C ORPORATION 57 Exhibit 23.01 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

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.

E RNST & YOUNG LLP

San Jose, California June 5, 1998

58 S YMANTEC C ORPORATION Financial Highlights Corporate Directory

NET INCOME* Symantec and its shareholders experienced a strong Board of Directors Corporate Officers Corporate Headquarters Rest of World fiscal 1998 with successful financial performance and achievements. We have built Mar. 31, 1998 $ 24,138 Tania Amochaev and Key Employees Symantec Corporation 13% shareholder value by implementing a long-time vision, bringing solutions to customers North America Chairman of the Executive Committee, Gordon E. Eubanks, Jr. 10201 Torre Avenue Dec. 31, 1997 $ 21,836 QRS Corporation President & Chief Executive Officer Cupertino, California 95014-2132 that meet their needs and executing our business strategy well. Europe, RESS (408) 253-9600 P Sep. 30, 1997 $ 20,580 Middle East Charles M. Boesenberg and Africa 22% Howard A. Bain, III President & CEO, Magellan Corporation Vice President, Worldwide Operations Transfer Agent 65% Jun. 30, 1997 $ 18,535 & Chief Financial Officer Walter W. Bregman Bank of Boston ATERMARK

W Chairman & Co-Chief Executive Officer, P.O. Box 644 $ 8,269 Christopher Calisi Mar. 31, 1997 Boston, Massachusetts 02102 S&B Enterprises Vice President, Remote Productivity Solutions Business Unit Dec. 31, 1996 $ 13,852 Carl D. Carman Investor Relations

NET INCOME PER SHARE – DILUTED Printing: Chairman, Symantec Corporation Thomas Darnall A copy of the Company’s Form 10-K General Partner, Hill, Carman Ventures (in thousands) Vice President, Corporate Services for the fiscal year ended April 3, 1998 REVENUE BY REGION Mar. 31, 1998 $ 0.40 AM as filed with the Securities and * Quarterly operating results for the period ended March 31, 1997 includes K Robert R. B. Dykes revenue and charges related to the sale of Symantec’s networking business (for March 1998 Quarter) Dieter Giesbrecht Exchange Commission is available Senior Vice President, unit (see Note 12 of Notes to Consolidated Financial Statements). Vice President, Europe, Middle East & Africa upon request without charge. Dec. 31, 1997 $ 0.37 Finance & Administration, ENRIK Please contact the Investor Relations H Flextronics International LTD Akihiko Narita Hotline at (800) 883-4497. Sep. 30, 1997 $ 0.35 Managing Director & President, Japan Additional investment-oriented Gordon E. Eubanks, Jr. questions may be directed to: President & Chief Executive Officer $ 0.32 Mansour Safai Jun. 30, 1997 Shelley Wilson Symantec Corporation Vice President, Internet Tools Investor Relations Photography: Business Unit Mar. 31, 1997 $ 0.15 Robert S. Miller Symantec Corporation 10201 Torre Avenue CLOSING STOCK PRICES Chairman of the Board, Enrique T. Salem Dec. 31, 1996 $ 0.25 Cupertino, California 95014-2132 Waste Management, Inc. Vice President, Security & Assistance (408) 446-8990 Business Unit Mar. 1998 $ 20.88 $ 29.00 Internet Tools, OLDSTEIN

G Outside Counsel Royalties and Other Garry Sexton Dec. 1997 $ 19.19 $ 27.00 10% Vice President, Asia Pacific Fenwick & West

Security and TEVEN Two Palo Alto Square S Sep. 1997 $ 19.44 $ 25.50 Assistance Rebecca Ranninger Palo Alto, California 94306 Vice President, Human Resources 50% Independent Auditors NET REVENUES Jun. 1997 $ 12.50 $ 20.38

40% Writing: Dana E. Siebert LLP Vice President, Americas Ernst & Young Mar. 1997 $ 12.63 $ 18.38 Remote 55 Almaden Boulevard $ 156,092 Productivity Mar. 31, 1998 San Jose, California 95113 Solutions Derek P. Witte Dec. 1996 $ 9.88 $ 16.38 Vice President, General Counsel & Secretary Dec. 31, 1997 $ 148,240 Annual Meeting RANCISCO ...... F The annual meeting of Stockholders Sep. 30, 1997 $ 139,013 $0 $5 $10 $15 $20 $25 $30 AN will be held September 17, 1998, at , S REVENUE BY BUSINESS UNIT F OOTNOTES TO P AGE 3-7: Symantec Corporate Worldwide Jun. 30, 1997 $ 135,016 (prices by Quarter) (for Fiscal Year 1998) 1 Symantec Internal Reporting Headquarters, Cupertino, California. 11 International Data Corporation, 1998 HERMAN

Mar. 31, 1997 $ 129,706 S 111 Symantec Survey, June 1997 1v PC Data Retail Report —The market share is based on the Remote Control/Remote Access category

OOK as defined by Symantec. The following products are included: Symantec pcANYWHERE, Network Dec. 31, 1996 $ 124,081 C 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

(in thousands) Design: 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. = Fiscal 1998 Other brands and products are trademarks of their respective holder/s.

= Fiscal 1997