Symantec Corporation — Form 10-Q Summary
Entity note: The supplied filing identifies the registrant as Symantec Corporation, while the request metadata names Gen Digital Inc. This summary reflects the filing as provided.
Business context and reporting period
Symantec reported its fiscal 2010 first quarter, the three months ended July 3, 2009. The company provided security, storage, systems-management and related services to consumer and enterprise customers. The quarter comprised 13 weeks, versus 14 weeks in the comparable 2008 period; prior-year figures were retrospectively adjusted for convertible-debt accounting.
Key financial metrics
| Metric | Quarter ended July 3, 2009 | Comparable 2008 quarter |
|---|---|---|
| Revenue | $1.432 billion | $1.650 billion |
| Gross profit / margin | $1.120 billion / 78% | $1.338 billion / 81% |
| Operating income / margin | $152 million / 10.6% | $278 million / 16.8% |
| Net income | $73 million | $172 million |
| Diluted EPS | $0.09 | $0.20 |
| Operating cash flow | $371 million | $414 million |
- Cash and cash equivalents were $2.192 billion and short-term investments were $24 million at quarter-end. Management reported approximately $3.2 billion of net liquidity, including unused revolving-credit availability.
- Total assets were $10.529 billion; total liabilities were $6.417 billion. Convertible senior notes were recorded at $1.792 billion, with $2.1 billion principal outstanding. The $1 billion revolving facility had no borrowings; the company said it was covenant-compliant.
- Cash from investing activities was $116 million, principally reflecting $183 million of securities-sale proceeds, partly offset by $54 million of capital spending and a $16 million equity investment. Financing activities used $128 million, including $123 million of share repurchases.
- Current liabilities were $3.392 billion, including $2.581 billion of current deferred revenue. Management said cash, operating cash generation and borrowing capacity should meet working-capital and capital-expenditure needs for at least 12 months.
Material changes versus the prior comparable period
- Revenue fell $218 million, or 13%. Licenses revenue declined 38% to $223 million; content, subscriptions and maintenance revenue fell 6% to $1.209 billion.
- Management attributed the decline to the global slowdown and customers buying smaller volumes, foreign-exchange effects that reduced international revenue by approximately $75 million, and the extra week in the prior-year quarter.
- Revenue decreased across all segments and geographic regions. Storage and Server Management revenue declined 17% to $553 million; Consumer fell 5% to $447 million; Security and Compliance fell 15% to $336 million; Services fell 20% to $96 million.
- Net income fell to $73 million. Lower revenue and the shorter quarter were principal factors, partly offset by cost discipline. Gross margin declined three percentage points, while operating expenses fell to $968 million from $1.060 billion.
- Operating cash flow declined to $371 million from $414 million, with the current period benefiting from receivables collections but affected by reductions in deferred revenue and accrued compensation.
- Segment reporting was revised to align with the operating structure: Enterprise Vault and certain SaaS offerings moved between segments, and prior-period segment data was recast.
Outlook, commentary, risks and unusual items
- No quantified revenue or earnings guidance was provided. Management warned that continued or worsening economic conditions could lead to slower or negative revenue growth and said it would continue aligning costs with revenue expectations.
- Foreign-exchange movements remain a risk because international sales are significant. Management also highlighted risks involving product demand and development, competition, key personnel, legal and regulatory developments, and potential impairment of goodwill or other assets.
- Restructuring expense was $34 million, including $23 million of restructuring charges and $11 million of transition and transformation costs. Management estimated $20–$50 million of remaining 2008 Plan costs and approximately $30 million of remaining outsourcing-related transition costs.
- The company recorded a $3 million impairment on properties held for sale; properties with estimated fair value less selling costs of approximately $56 million were expected to be sold by no later than the third quarter of fiscal 2010.
- Adoption of convertible-debt accounting added $25 million of noncash debt-discount amortization to interest expense in the quarter; the filing retrospectively adjusted prior-period results.
- A Ninth Circuit ruling on stock-based compensation in R&D cost-sharing arrangements led to a $7 million tax expense and a $30 million reduction in additional paid-in capital. A separate IRS dispute concerning Veritas’s 2000–2001 taxes remained before the Tax Court: the amount at issue was stated as $545 million, excluding interest, after an earlier $867 million IRS claim; the IRS had agreed to waive penalties.
- The filing also disclosed an appeal concerning attorneys’ fees in a previously approved $21.5 million Veritas securities-litigation settlement. Management said other proceedings were not expected to have a material adverse effect.
Important facts for investors to verify
- Confirm the issuer and corporate-entity match: this filing is for Symantec Corporation, not an issuer identified in the text as Gen Digital Inc.
- Assess the underlying revenue trend after accounting for the shorter quarter, foreign-exchange impact and prior-year extra week; review segment performance, particularly Storage and Server Management.
- Track deferred-revenue movements, receivables collections and operating cash flow to evaluate cash conversion and the durability of reported liquidity.
- Review the status and potential exposure of the Veritas tax litigation, along with the tax effects of the R&D cost-sharing ruling.
- Evaluate the $2.1 billion principal balance and 2011/2013 maturities of the convertible notes, as well as remaining restructuring and property-sale costs.