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Symantec Q2 2011 Earnings Call Transcript

Symantec Q2 2011 Earnings Call Transcript

Symantec (SYMC)

Q2 2011 Earnings Call

October 27, 2010 5:00 pm ET


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Enrique Salem - Chief Executive Officer, President and Director

James Beer - Chief Financial Officer and Executive Vice President

Helyn Corcos - Vice President of Investors Relations


Robert Breza - RBC Capital Markets Corporation

Philip Rueppel

Keith Weiss - Morgan Stanley

Heather Bellini - ISI Group Inc.

Katherine Egbert - Jefferies & Company, Inc.

Brent Thill - UBS Investment Bank

John DiFucci - JP Morgan Chase & Co

Philip Winslow - Crédit Suisse AG

Neil Herman - Soleil Securities Group, Inc.

Steven Ashley - Robert W. Baird & Co. Incorporated

Walter Pritchard - Citigroup Inc

Brad Zelnick - Macquarie Research

Todd Raker - Deutsche Bank AG

Sarah Friar - Goldman Sachs Group Inc.



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Good day, and welcome to Symantec's Second Quarter 2011 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the call over to Ms. Helyn Corcos, Vice President of Investor Relations. Please go ahead.

Helyn Corcos

Good afternoon, and thank you for joining our call to discuss fiscal second quarter 2011 financial results. With me today are Enrique Salem, Symantec's President and CEO; and James Beer, Symantec's Executive Vice President and CFO. In a moment, I'll turn the call over to Enrique. He will discuss how Symantec executed during this quarter, then James will provide highlights of our financial results, as well as discuss our guidance assumptions as outlined in the press release. This will be followed by a question-and-answer session. Today's call is being recorded and will be available for replay on Symantec's Investor Relations website. A copy of today's press release and supplemental financial information are posted on our site, and a copy of today's prepared remarks will be available on the site shortly after the call is completed.

Before we begin, I'd like to remind everyone that we will review our financial results focusing on year-over-year constant currency growth rates, unless otherwise stated. Sequential growth rates are based on as-reported results. For September 2010, the actual weighted average exchange rate was $1.30 per euro, and the end of period rate was $1.38 per euro compared to our guided rate of $1.26 per euro. For the September 2009 quarter, the actual weighted average was $1.44 per euro and the end of period rate was $1.46 per euro. We've included a summary of the year-over-year constant currency and actual growth rates in our press release tables and in our supplemental information.

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 stock-based compensation for the coming quarter contain forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. Additional information concerning these risks and uncertainties can be found in the company's most recent periodic reports 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 Principles or GAAP, Symantec reports non-GAAP financial results. Investors are encouraged to review the reconciliations 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.

And now, I would like to introduce our CEO, Mr. Enrique Salem.

Enrique Salem

Thanks, Helyn, and good afternoon, everyone. The team's solid execution during the September quarter resulted in better-than-expected results. Our performance was driven by strength in backup and archiving and continued growth in hosted services and Data Loss Prevention. We closed a majority of the enterprise deals that had slipped last quarter and finished the September quarter on a strong note. In addition, I'm pleased with the better-than-expected results for PGP, GuardianEdge and the VeriSign Security business.

Now let's take a closer look at some of the highlights from the quarter. Our Consumer business benefited from the strength of our eCommerce platform and our market-leading products, Norton Internet Security and Norton 360. Our new eCommerce platform completed its first anniversary of operations and now serves 230 countries in 18 languages and supports 24 currencies. Our ability to develop more targeted programs is benefiting renewals, as well as our upselling and cross-selling efforts.

According to Internet Retailer, Symantec ranked number one in software online sales and is one of the top five consumer brands. Last month, we successfully launched the 2011 version of Norton Internet Security and Norton AntiVirus, which further improve consumers' online safety without sacrificing performance. Consumers benefit from our innovative technologies such as reputation-based security, which harnesses results from over 100 million systems in over 200 countries to expose threats other security vendors miss. Features like Safe Web, Proactive PC Performance Alerts and integration with Norton Online Family further differentiate Norton from the competition.

According to independent research from PassMark, AV-Test, AV Comparatives and DennisLabs, Norton Internet Security has ranked number one in online threat detection and number one in overall performance. In addition, PC Magazine awarded Norton Internet Security its Editor's Choice Award for the fourth consecutive year and Norton AntiVirus, its Editors Choice Award, for the first time since 2006.

Over the past two quarters, the growth rate of the Consumer revenue has declined as PC units have shifted towards low-end devices, which have lower conversion rates. Having said that, we expect growth rates to stabilize as we benefit from growth in overall PC unit shipments in our ongoing efforts to drive higher conversion rates. As part of these efforts, we are continuing to enhance the trial experience by improving the design and messaging of trial activation reminders. We're also working with our partners to further integrate the trial and purchase experience into the initial PC set-up.

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