Symantec

(SYMC) - Get Report

finally swatted away a nagging patent issue, but doing so will cost the Internet security software company.

The Cupertino, Calif., company trimmed first-quarter earnings and fiscal 2004 guidance Monday to reflect a legal settlement that includes the purchase and licensing of patents for security technology.

After the bell, Symantec said it would buy one patent and license additional patents from Monroe, Mich.-based Hilgraeve Inc. for $62.5 million. Hilgraeve sued Symantec in September 1997, alleging that unspecified Symantec products infringed a Hilgraeve patent. The court dismissed the case in March 2000 but that decision was reversed on appeal and the case was returned to the district court in September 2001.

In a statement, Symantec CEO and Chairman John W. Thompson said the patent purchased from Hilgraeve is fundamental to several security technology defenses and an essential part of providing comprehensive protection against a growing number of security threats.

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"In-transit scanning of multiple security signatures is a must-have component of an effective security solution and by purchasing this patent, we are making sure that Symantec's products, technologies and customers are protected today and in the future," he said.

The purchase will reduce Symantec's net income for the fiscal first quarter, which ended July 4, by $9.5 million, or 5 cents a share. Including the change, first-quarter net income was $59 million, or 36 cents a share.

Symantec did not change its guidance for the second quarter but did reduce full-year guidance. Symantec said it expects earnings to total $1.75 a share, down 7 cents from previous the previous goal. The company said its target for so-called non-GAAP earnings, excluding one-time events, remains intact at $1.96 a share on revenue of $1.67 billion.

The company recorded about $13.9 million of the settlement cost in the July 2003 quarter because an independent third party found that those costs were related to benefits received by Symantec before that time, the company said in a

Securities and Exchange Commission

filing. Symantec will record about $48.6 million in the September 2003 quarter, which will be amortized to cost of goods sold over the remaining life of the primary patent, which expires in June 2011.

Shares of Symantec rose 43 cents to close Monday at $49.14. Shares declined to $49 in after-hours trading.