Symantec: Fiscal 1Q11 Financial Results

Symantec Corp. reported the results of its first quarter of fiscal year 2011, ended July 2, 2010.

Highlights:

• GAAP Revenue of $1.433 billion
• Non-GAAP Operating Margin of 26.5 percent
• Non-GAAP Earnings Per Share of $0.35
• GAAP Deferred Revenue of $2.998 billion
• Cash Flow from Operations of $335 million

GAAP revenue for the fiscal first quarter was $1.433 billion, flat versus the comparable period a year ago and up 2 percent after adjusting for currency.

"This quarter, we saw lengthening of procurement cycles driven by continued cautiousness among IT buyers. In particular, this affected our storage management results," said Enrique Salem, president and chief executive officer, Symantec. "We are optimistic about the strength we saw in the public sector as well as with our Data Loss Prevention solutions. In addition, our Software-as-a-Service offerings posted double-digit growth as we continue to expand our leadership in this high-growth market."

"On a constant currency basis, we saw year-over-year revenue growth across all of our geographies and solid deferred revenue performance," said James Beer, executive vice president and chief financial officer, Symantec. "We also saw continued growth in our Consumer business as we finalized the successful transition to our in-house eCommerce platform."

GAAP Results: GAAP operating margin for the first quarter of fiscal year 2011 was 13.5 percent. GAAP net income for the fiscal first quarter was $161 million compared with net income of $74 million for the same quarter last year. GAAP diluted earnings per share were $0.20 compared with $0.09 for the same quarter last year.

GAAP deferred revenue as of July 2, 2010, was $2.998 billion compared with $2.973 billion as of July 3, 2009, up 1 percent year-over-year. After adjusting for currency, deferred revenue increased 3 percent year-over-year. Cash flow from operating activities for the first quarter of fiscal year 2011 was $335 million. Symantec ended the quarter with cash, cash equivalents and short-term investments of $2.739 billion.

Non-GAAP Results: Non-GAAP operating margin for the first quarter of fiscal year 2011 was 26.5 percent. Non-GAAP net income for the first quarter was $284 million compared with $277 million for the year-ago period, an increase of 3 percent year-over-year. Non-GAAP diluted earnings per share were $0.35 compared with earnings per share of $0.33 for the year-ago quarter, an increase of 6 percent year-over-year.

As previously announced, beginning with this fiscal quarter, Symantec is no longer reporting revenue and deferred revenue on a non-GAAP basis.

During the first quarter of fiscal year 2011, Symantec repurchased approximately 14 million shares for $200 million at an average price of $14.49. Symantec has $547 million remaining in the current board authorized stock repurchase plan.

Business Segment and Geographic Highlights
For the quarter, Symantec’s Consumer segment represented 33 percent of total revenue and increased 6 percent year-over-year (increased 7 percent after adjusting for currency). The Security and Compliance segment represented 24 percent of total revenue and increased 1 percent year-over-year (increased 2 percent after adjusting for currency). The Storage and Server Management segment represented 36 percent of total revenue and declined 5 percent year-over-year (declined 3 percent after adjusting for currency). Services represented 7 percent of total revenue and was flat year-over-year (increased 2 percent after adjusting for currency).

International revenue represented 50 percent of total revenue in the first quarter of fiscal year 2011 and decreased 1 percent year-over-year (increased 3 percent after adjusting for currency). The Europe, Middle East and Africa region represented 28 percent of total revenue for the quarter and decreased 6 percent year-over-year (increased 2 percent after adjusting for currency). The Asia Pacific/Japan revenue for the quarter represented 16 percent of total revenue and increased 7 percent year-over-year (increased 2 percent after adjusting for currency). The Americas, including the United States, Latin America and Canada, represented 56 percent of total revenue and increased 2 percent year-over-year on an actual and currency-adjusted basis.

Acquisition Highlights
Symantec completed the acquisitions of PGP and GuardianEdge in early June. The acquisitions generated June quarter revenue of $4 million and diluted earnings per share by half a cent, as expected. With a focus on swift integration, joint selling is occurring in the field and generated stronger than expected bookings in the June quarter. The integrated PGP and GuardianEdge product roadmap is complete and the functional integration is progressing smoothly across the company.

Second Quarter Fiscal Year 2011 Guidance
Guidance assumes an exchange rate of $1.26 per Euro for the September 2010 quarter versus the actual weighted average rate of $1.44 per Euro for the September 2009 quarter, approximately a 13 percent currency headwind. The end of period rate for the September 2009 quarter was $1.46, approximately a 14 percent headwind versus the $1.26 per Euro assumption for the September 2010 quarter.

For the second quarter of fiscal year 2011, ending Oct. 1, 2010, revenue is estimated between $1.445 billion and $1.465 billion, down 1 to 2 percent year-over-year and up 1 to 3 percent after adjusting for currency.

GAAP diluted earnings per share are estimated between $0.09 and $0.10. Non-GAAP diluted earnings per share are estimated between $0.27 and $0.28.

Deferred revenue is expected to be in the range of $2.830 billion and $2.860 billion, down 2 to 3 percent year-over-year and up 2 to 3 percent after adjusting for currency.