Symantec (SYMC)

Q3 2011 Earnings Call

January 26, 2011 5:00 pm ET


Enrique Salem - Chief Executive Officer, President and Director

James Beer - Chief Financial Officer and Executive Vice President

Helyn Corcos - Vice President of Investors Relations


Philip Rueppel

Adam Holt - Morgan Stanley

Michael Bauer

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.

Walter Pritchard - Citigroup Inc

Brad Zelnick - Macquarie Research

Robert Breza - RBC Capital Markets, LLC



Good day, and welcome to Symantec's Third 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

Hello to everyone. Good afternoon, and thanks for joining our call to discuss fiscal third quarter 2011 fiscal 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 will turn the call over to Enrique. He will discuss how Symantec executed during the 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 release and supplemental information are posted on the website, and a copy of today's prepared remarks will be available shortly after the call is completed.

Before we begin, I'd like to remind you that we will review our financial results, focusing on year-over-year current constant currency rate, unless otherwise stated. Sequential growth rates are based on as-reported results. For December 2010 quarter, the weighted average exchange rate was $1.35 per euro and the end-of-period rate was $1.33 per euro, compared to our guided rate of $1.35 per euro. For the December '09 quarter, the weighted average rate was $1.48 per euro and the end-of-period rate was $1.43 per euro. We've included a summary of the year-over-year constant currency and as-reported growth rates in our press release and in our supplemental information. Please note, due to recent fluctuations in currency rates, we have decided to guide to an exchange rate of $1.35 per euro for the March 2011 quarter, contrary to the original foreign currency view of $1.30 we noted on our January 12, 2011, foreign currency update.

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 contains 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 on 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 statement.

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 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, Mr. Enrique Salem.

Enrique Salem

Thank you, Helyn, and good afternoon, everyone. I'm very pleased with our double-digit bookings growth and solid performance across all product lines and regions. This led to better-than-expected results and drove record deferred revenue. We benefited from strength in Consumer, Backup and Data Loss Prevention, as well as stability in the Storage Management business. In addition, our recent acquisitions exceeded expectations and continue to deliver strong results. Now let's take a closer look at some of the highlights from the quarter.

Consumer delivered another solid quarter of mid-single-digit revenue growth, driven by the strength of our market-leading products and breadth of our multi-channel distribution. We continue to expand our free Norton Security Scan and Norton PC Checkup services into alternative channels such as DivX, W3i, Mindspark, LG Electronics, Paltalk, ICBC and Adobe. These types of new relationships allow us to reach more than 350 million consumers that may not be using traditional Norton products and introduce them to our full line of security suites and services. The trend in our trial conversion rates stabilized during the quarter, as the team continued to focus on enhancing the trial experience. Our ability to target offerings through our dynamic eCommerce platform benefited subscription renewals and helped us to upsell and cross sell consumers to our premium suites and services. Our new 2011 products offer the fastest and most effective security protection without sacrificing PC performance. The 2011 products have won 54 awards and received 329 positive reviews, more than any other competitor.

Our Backup and Archiving business, NetBackup, posted double-digit bookings growth, driven by strong demand for virtual machine protection and deduplication. We're the only company to provide deduplication at the client at the media server through either software or an appliance. Our new NetBackup 5200 appliance series is the industry's first all-in-one hardware and software backup solution with integrated deduplication. Initial customer response has been very positive. We continue to see strong customer adoption of our capacity-based pricing model, which positions us well to take advantage of the growth in unstructured information.

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