Symantec Corporation (SYMC)

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Symantec Corp. (SYMC)

F3Q09 Earnings Call

January 28, 2009 5:00 pm ET


Helyn Corcos – Vice President, Investor Relations

John Thompson – Chairman and Chief Executive Officer

James Beer – Executive Vice President and Chief Financial Officer

Enrique Salem – Chief Operating Officer


Sarah Friar - Goldman Sachs

Adam Holt - J. P. Morgan

Brent Thill - Citigroup

John DiFucci – J. P. Morgan

Phil Winslow - Credit Suisse

Heather Bellini - UBS

[Unidentified Analyst] - Pacific Crest Securities

Todd Raker - Deutsche Bank

Walter Pritchard – Cowen & Company

Daniel Ives - Friedman Billings Ramsey

Matt Hedberg - RBC Capital Markets

Katherine Egbert - Jefferies & Company



Good day and welcome to Symantec's third quarter 2009 earnings conference call. (Operator Instructions)

At this time, I'd like to turn the call over to Helyn Corcos, Vice President of Investor Relations. Please go ahead.

Helyn Corcos

Thank you. Good afternoon and thank you for joining our fiscal third quarter 2009 earnings conference call. With me today are John Thompson, Chairman of the Board and Chief Executive Officer of Symantec, Enrique Salem, Chief Operating Officer, and James Beer, Executive Vice President and Chief Financial Officer.

In a moment I will turn the call over to John, who will provide high level comments on the company, James will review the financials and our guidance as outlined in the press release, and Enrique will wrap it up with quarterly highlights. This will followed by a question-and-answer session.

Today's call is being recorded and will be available for replay on Symantec's Investor Relations homepage. A copy of today's press release and supplemental financial information are available on our website and a copy of today's prepared comments will be available on the Investor Relations website shortly after the call is completed.

Before we begin I would like to remind everyone that some of the information discussed on this call, including our projections regarding revenue, operating results, deferred revenue, cash flow from operations, amortization of acquisition-related intangibles, and share-based compensation for the coming quarter contain forward-looking statements. These statements involve risks and uncertainties and may cause actual results to differ materially from those set forth in these statements.

Additional information concerning these risks and uncertainties can be found in the company's most recent periodic report filed with the U.S. Securities and Exchange Commission. Symantec assumes no obligation to update any forward-looking statements.

In addition to reporting financial results in accordance with generally accepted accounting principals or GAAP, Symantec reports non-GAAP financial results. Investors are encouraged to revenue the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in the press release and on our website.

Now I would like to introduce our CEO, John Thompson.

John Thompson

Thank you, Helyn, and good afternoon, everyone.

We're pleased to report stronger than expected December quarter results against the backdrop of a challenging global economy. More importantly, I'm quite pleased that our financials are reflecting our team's commitment to improving our execution. Solid sales activity, coupled with our ongoing focus on managing our cost structure, drove the over performance for the quarter.

We were able to deliver revenue above our forecast despite our customers' continued scrutiny of their IT budgets. Customers tell us that they will allocate funds to areas of storage optimization, data loss prevention, and enterprise security. Furthermore, their attention is turned to initiatives that will drive immediate cost savings rather than longer-term investment programs. I'm pleased that our sales force has been able to successfully illustrate the positive impact our solutions can have on our customers' operating cost.

Our enterprise business benefits from a large recurring revenue base, particularly in the Storage segment, where more than half of our revenue comes from maintenance contracts.

In our Consumer segment we were able to leverage our existing customer base, a very strong customer base, to continue the migration to Norton 360. In addition, our recent acquisitions of PC Tools and SwapDrive are important elements of our strategy to expand into emerging geographic markets and the online backup segment.

Our higher-than-expected non-GAAP earnings this quarter are the result of our very effective cost management programs. The combination of our top line growth, our cost and expense management programs, and our ongoing share repurchases has enabled us to achieve seven consecutive quarters of double-digit earnings growth.

Looking forward to our March quarter - the final quarter of our fiscal year - we expect the market environment to remain challenging; however, we're confident in the competitiveness of our products and services and the determination of our team. We will maintain our focus on execution, striking the right balance between achieving efficiency and sustaining strong business performance without compromising our ability to serve our customers.

In an environment where revenue growth may be the greatest uncertainty, our goal is to grow our earnings and emerge from the economic downturn a stronger company, positioned for ever-greater success in the next economic cycle.

With that, I'll turn the call over to James for financial details.

James Beer

Thank you, John, and good afternoon, everyone.

I'm pleased that our company wide focus on execution drove over performance in each of our key financial metrics during the December quarter. In particular, our ongoing focus on managing costs has resulted in significant operating margin expansion and earnings growth.

I'll start by reviewing the financial details of the December 2008 quarter. GAAP revenue was $1.51 billion. Non-GAAP revenue grew 1% over the December 2007 period to $1.54 billion, driven by growth in our Consumer, Storage, Data Loss Prevention and Services businesses. Foreign currency movement negatively impacted non-GAAP revenue by approximately 4 percentage points year-over-year. Had the quarter's exchange rates equaled our guided value of $1.25 per euro rather than the actual weighted average rate of $1.32 per euro, our non-GAAP revenue would have totaled $1.505 billion, still above the top end of our guided range.

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