諾頓 (NLOK) 2007 Q4 法說會逐字稿

Good day, and welcome to Symantec fourth quarter and year-end 2007 earnings conference call. Today's call is being recorded. At this time, I would like to turn the call over to Ms. Helyn Corcos, Vice President of Investor Relations. Please go ahead, ma'am.

Good afternoon, and thank you for joining us. With me today are John Thompson, Chairman of the Board and Chief Executive Officer of Symantec, and James Beer. Executive Vice President and Chief Financial Officer. In a moment, I will turn the call over to John. He will provide comments on the fiscal year 2007 results, which ended March 30, 2007, as well as highlights of our results for the fiscal fourth quarter. He will then turn it over to James who will provide financial details for the fourth quarter and review our guidance as discussed in the press release. John will conclude by outlining our plans and objectives for fiscal year 2008. 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 home page at symantec.com/invest. 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.

As mentioned in our press release, Symantec adopted Staff Accounting Bulletin 108, considering the effects of prior misstatements when quantifying misstatements in current year financial statements during the March quarter. As such, our GAAP and non-GAAP results for the fiscal year and the fiscal fourth quarter include the adoption of SAB 108. SAB 108 also impacted our previously reported quarterly results for first three quarters of fiscal year 2007. We believe the resulting changes to the previously-reported amounts for the quarter and the fiscal year are immaterial. Our filings with the SEC will provide a detail explanation of the impact of our adoption of SAB 108. We have also provided the impact of SAB 108 in this quarter's supplemental financial package, which is available on our website.

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

And now I'd like to introduce our CEO, Mr. John Thompson.

Thanks, Helyn. Symantec ended fiscal year 2007 with a solid March quarter. Our performance represents a combination of strong demand for our products and services and a much improved operational focus to optimize revenue yield. As a result, a greater proportion of the largest contract signed by customers included terms and conditions that drove higher end-period revenue. The performance included solid results in a number of our key enterprise product areas, including NetBackup, Storage Foundation, Email/Messaging, IT Compliance and Services, as well as another great quarter for our market-leading consumer suite, Norton Internet Security. In addition to better-than-expected revenue and EPS results, we are pleased with the growth of our deferred revenue and our strong cash flow generation during the March quarter. We continue to believe that these are two important metrics to consider in evaluating the strength of our underlying business.

The breath of our security availability and services solutions continues to drive the number of large transactions for Symantec. In the March quarter, we generated a total of 376 transactions valued at more than $300,000 each compared to 384 in the March quarter of 2006, and 99 deals worth more than $1 million each compared to 91 in the March quarter of 2006. In addition, 77% of the large transactions included multiple products or services, which underscores the success of our solution-selling approach. During the quarter, we signed a multi-million dollar multi-year extension of a federal government contract, which included a variety of our market-leading including Antivirus, Antispam, Endpoint Compliance, Policy Compliance, Storage, Backup, Message Management, as well as business critical services offerings. Other large multi-million dollar customer wins included a large U.S. for Storage Foundation, NetBackup, Cluster Server, and Enterprise Vault, and a global financial institution for Storage Foundation, NetBackup, and Enterprise Security Manager.

The market trend of customers interested in doing business with fewer vendors is becoming more evident every quarter in our results, and our global scale and our deep product portfolio is central to their decision and purchase process. The March quarter was a strong finish to what was unquestionably a challenging year. Fiscal year 2007 was a transition year for Symantec, marked by the implementation of several major, but necessary changes in our operations, as we continue to evolve our business. One of the most significant changes was implemented on the first day of fiscal 2007 when we integrated our enterprise sales force. We aligned our model to a more typical industry approach of having a single account manager supported by individual product or solution specialist. We're pleased with the structure, as it allows for better account and opportunity coverage while leveraging our broad product portfolio.

We also undertook a major business process and systems consolidation project. Project Oasis integrated our two ERP systems into a single enhanced system, allowing us to implement new buying programs, drive operational efficiencies, and create a platform to improve the ease of transacting business with our customers and partners. This project is important as it provides the foundation for scaling our business and lowering our cost over time. We believe many of the major challenges we faced are now behind us and our efforts are now directed toward the continuous improvement process so essential for a business of our scale. We also undertook action to better align our operating expenses with our revenue expectations and implemented several initiatives that we believe will result in annualized savings of at least $200 million. James will outline our progress in this area in a few minutes.

Also, last June, we took a series of actions to optimize our capital structure with the issuance of a $2.1 billion convertible subordinated note. In addition, during fiscal year 2007, we repurchased a total of $2.8 billion of our common stock. And finally, we fortified our strength at the end point with the addition of Altiris. Our customers know that they can't have true end-point security without the configuration management and software distribution capabilities so necessary to protect them. We believe the combination of Symantec and Altiris will enable our customers to better manage and enforce security policies at the end point, identify and protect against threats, as well as remediate and manage their IT assets. We were pleased with how swiftly we were able to close the transaction and with the progress we've made towards integrating Altiris into Symantec. While we are not providing specific financial details about the Altiris quarter, it did perform solidly and well within the range of our expectations.

At the beginning of the new fiscal year, I reorganized the senior leadership structure. We have a strong leadership team and the goal of these changes was to ensure that every executive has the necessary cross-functional experience to better position the Company for long-term success. And now I'd like to take a few minutes to discuss some of the highlights of our business units performance during the March quarter. We were pleased with the Data Center Management group's March quarter performance and with the sequential improvement in revenue. We saw strength primarily in our Storage Foundation Solutions and NetBackup product family. Results were driven by customers' desire to standardize and simplify their data center infrastructure. The complexity of enterprise IT environments is making it exceedingly difficult for organizations to keep up with the growing performance and availability demands for key applications while at the same time keeping cost under control.

Earlier this year, we introduced a customized ROI tool that clearly demonstrates how our solutions can improve the performance and availability of data centers, as well as drive dramatic direct cost improvements, in several cases well over $100 million over a three-year period. While our data center standardization and ROI program was primarily focused on Storage Foundation in clustering areas, we have now expanded this approach to include NetBackup, as well. An example of our success in this area is the opportunity we won with Sun Microsystems during the March quarter. Sun displaced a Symantec competitor in order to standardize on NetBackup throughout its enterprise. Sun will use NetBackup and Backup Reporter to streamline its IT operations and provide better data protection reporting. Overall, we feel confident that standardization and the growing adoption of new data protection, storage, and server management technologies will help drive revenue growth in this segment during fiscal year '08.

Our Security and Data Management group posted in-line results with our expectations. We continue to see solid growth in the emerging product areas where we are investing, such as Compliance Solutions and Enterprise Message Management. For example, we achieved record results in our BindView and Enterprise Security Manager compliance products. Companies face increasing challenges with IT compliance,,especially in highly-regulated industries. These products help our customers manage their internal, as well as external regulatory compliance requirements and reduce the growing cost of doing so. We also achieved record revenue with our message management offerings, with strong growth coming from our Antispam products and Enterprise Vault, our e-mail archiving and retrieval solution. These two product categories are leaders and we continue to gain traction in the marketplace with them.

Many of these represent technologies we acquired over the past few years. Our technology and companies acquisitions are an important part of our strategy to diversify our revenue mix in the security arena towards segments of higher growth. Most of you are familiar with Project Hamlet. Hamlet will integrate technology components from our leading antivirus, antispam, end-point firewall, zero-day protection, and network access compliance offerings, all to be managed by a single management platform. The solution will not only deliver a more advanced approach to end-point protection, but address the all important issue for customers of agent proliferation and systems resource consumption. We plan to launch the product at our Vision conference next month. Given the phenomenal success we experienced with Norton 360's extended beta program, we decided to expand the scope of the Hamlet beta prior to full-scale release of such an important product.. Like Norton 360, this will ensure a higher quality release for a very, very important product launch.

Our Services group performed solidly during the March quarter. Our focus on helping customers manage IT risk to their infrastructure is really starting to gain traction. With more than 1,100 consultants around the world, we have the skills to deliver more complete solutions for protecting and managing business-critical assets. We are also happy with the launch of our beta of the Symantec Protection Network, our first software as a service offering. The protection network is a SaaS platform designed to deliver easy-to-use security and availability offerings to small and mid-sized companies. The online backup service will enable cost effective reliable back-up and restoration of business critical data from the convenience of a web browser. We expect this new service to go live later this year, and you should expect to us announce additional SaaS offerings throughout fiscal year '08.

Our Consumer Business posted another strong quarter. While the online threat landscape and competitive environment continued to evolve, there has been one constant; Symantec's Norton products are the clear market leader. We couldn't be more pleased with the launch of Norton 360, as the industry and market reaction have been very positive. Our continued focus on technology, leadership, and product quality has clearly shown through in many of the published reviews on Norton 360.. It has already garnered the prestigious Editor's Choice Awards for both CNET and PC Magazine. The OEM channel continues to be an important route to market for our consumer products. During the quarter, we announced the extension of our relationship with HP with a new multi-year agreement. We also announced that Acer will be shipping a Vista-compatible version of Norton Internet Security 2007. And at Dell, Symantec will be positioned as the default solution in North America from May through July.

So all in all, it was a very solid March quarter to cap off a challenging fiscal year. I believe we've taken the necessary steps to improve our global operations, and our results in FY '08 will benefit from these actions. After James provides your details on financials, I'll come back and talk about our specific focus areas for fiscal-year 2008.

James?

Thank you, John, and good afternoon, everyone. I'm encouraged by the progress we've made as evidenced by the March quarter results. Over the past 12 months, a lot of change impacted our operations and financial performance, as John mentioned in his opens remarks. And although we have faced challenges, I believe we have emerged stronger and better positioned for future growth. We grew our fiscal year non-GAAP revenue by 5% to more than $5.25 billion compared to the prior fiscal year, and generated $1.01 in non-GAAP earnings per share. Given the recurring nature of our business model, deferred revenue and cash flow from operations are also important metrics in measuring the overall strength of our business. In fact, we generated operating cash flow of approximately $1.67 billion during fiscal year '07.

In addition, during the fiscal year we grew non-GAAP deferred revenue to approximately $2.8 billion. Our financial results will benefit from this strong deferred revenue balance during fiscal 2008. The contribution from our Consumer business to deferred revenue growth is moderating, consistent with the now rateable revenue recognition policy, while the Data Center Management group's contribution has grown in line with our business model evolution that emphasizes long-term customer relationships. But before I get into the new fiscal year, I'd like to spend a minute reviewing the financial details of the March 2007 quarter.

GAAP revenue for our March 2007 quarter was $1.357 billion. Non-GAAP revenue grew 5% over the March 2006 period to $1.365 billion. Foreign currency movements positively impacted non-GAAP revenue by almost $48 million in the March 2007 quarter as compared to March 2006. Sequentially, foreign currency movements had approximately a $9 million positive impact on revenue. The March quarter's fully-diluted GAAP earnings per share was $0.07. Non-GAAP fully diluted earnings per share for the quarter were $0.24. During the March quarter, GAAP earnings per share were impacted by a $51 million restructuring charge related to our recent reduction in force and further facilities consolidation activities. International non-GAAP revenue for the March quarter grew 9% versus the year-ago period to approximately $706 million and represented 52% of total non-GAAP revenue. Year over year, the Americas grew 3%, the Europe, Middle East, Africa region grew 7%, and Asia Pacific including Japan, grew 9%. Excluding currency effects, the Europe, Middle East, Africa revenue declined by 2% year over year.

Now I'd like to move on to non-GAAP revenue by segment for the March 2007 quarter. Consumer revenue came in at $408 million, up 11% versus the March 2006 quarter. Electronic distribution represented nearly 73% of Consumer revenue and grew 25% compared to March 2006, driven primarily by strong activity from our online store, subscription renewals, and upgrades. From a product perspective, Norton Internet Security revenue grew nearly 40% year over year and represents more than 60% of total Consumer revenue. Moving on to our enterprise segments, our Security and Data Management group generated revenue of $520 million, up 2% from the March 2006 quarter. The Data Center Management business generated revenue of $368 million. This was flat with the March 2006 results and up 8% sequentially. Our Services group generated revenue of $69 million, up 31% year over year and represented 5% of our total revenue. The Services business was positively impacted by the reversal of one-time administrative challenges that occurred during the December quarter, as well as from revenue generated by or team of consultants from the recently acquired Company-i.

Non-GAAP gross margin was 84% for the March 2007 quarter, compared to 83.2% in December 2006. Gross margin was higher than expected sequentially because of a change in accounting for certain consumer OEM relationships. We have negotiated new contract terms with various OEM partners, which solidify our relationships for an extended period of time. The revised terms also drive an accounting change that has the effect of moving our OEM payments from cost of goods sold to operating expenses. Our total in-period expenses will increase since they will now reflect the average economic cost of each relationship over the term of the agreement rather than the cash impact to Symantec in a particular fiscal year. Our segment reporting for the Consumer business unit will reflect this change during FY '08.

Non-GAAP operating expenses were $842 million for the March 2007 quarter. This includes approximately $55 million of expenses incremental to our previous guidance related to the OEM item that I just mentioned. Foreign exchange rates negatively impacted operating expenses during the March quarter by approximately $23 million as compared to March 2006. GAAP net income was $61 million for the March 2007 quarter. Non-GAAP net income was $227 million compared to $279 million for the March 2006 quarter. Symantec exited March with a cash and short-term investments balance of almost $3 billion. However, our current cash balance is considerably lower as a result of closing the Altiris acquisition on April the 6th for an effective cost of $815 million. Approximately two-thirds of our cash balance resides overseas.

As you may recall in January, we announced a new $1 billion share buy back program. During the March quarter, we repurchased $500 million worth of the new program as an average share price of $17.41. Our net accounts receivable balance at the end of the March 2007 quarter was $667 million. Days sales outstanding, or DSO, was 45 days, in line with normal seasonal trends. Cash flow from operating activities for the March quarter was expected to be between $560 million and $570 million. This is higher than cash flow from operations of $484 million in the March 2006 quarter, primarily due to strong collections and to the timing of tax payments. As I already mentioned, we generated approximately $1.67 billion in cash flow from operations during FY '07. This is in line with our original guidance issued a year ago.

Consistent with the past several quarters, deferred revenue increased substantially as we continue to move our business model to one that generates significant recurring maintenance activity and thus more predictable cash flow. GAAP deferred revenue at the end of the March 2007 quarter was approximately $2.75 billion. Non-GAAP deferred revenue at the end of the March 2007 quarter reached a record $2.77 billion. Sequentially, deferred revenue grew $187 million or 7%. Foreign exchange rates had a positive impact of approximately $105 million versus the balance as of March 2006, and a $19 million benefit versus the December 2006 balance. Our year-end deferred revenue balance exceeded the high end of our guided range of $2.65 billion as provided in January.

Now I'd like to spend a few minutes discussing our guidance. Our FY '08 plan has revenue and earnings growing at a faster pace than FY '07. Specifically, we expect GAAP revenue for the fiscal year to be between $5.59 billion and $5.69 billion. Non-GAAP revenue is expected to be between $5.65 billion and $5.75 billion, as compared to $5.253 billion in FY '07. This includes the revenue contribution from the Altiris acquisition on a non-GAAP basis, reflecting the impact of deferred revenue lost due to the purchase accounting method associated with acquisitions. During fiscal year 2008, gross margins will come under some pressure as we continue to grow our services businesses, while the change in accounting for our consumer OEM fees will have the opposite affect. We expect the net result to be an improvement in gross margins year over year.

Our operating expenses during the year will benefit from the results of our cost savings initiative. We have clearly-defined budgets in place that will achieve the $200 million annualized savings target during FY '08. The largest element of this plan is represented by an approximate 5% reduction in force. This has been completed in the Americas and Asia, while the Europe, Middle East, Africa region implementation is underway. The addition of the OEM fees to our operating expense base will, however, create a situation in which total operating expenses increase substantially year over year. That said, we do believe that operating margins will improve during FY '08 as compared to FY '07 as a result of our revenue growth, the expansion of our gross margins, and the benefits of our cost-reduction program. GAAP diluted earnings per share is expected to be between $0.45 and $0.50. Non-GAAP diluted earnings per share is expected to be between $1.10 and $1.15 as compared to $1.01 in FY '07. This guidance assumes a common stock equivalence total for the year of approximately 925 million shares. We have assumed an exchange rate of $1.27 per euro for the fiscal year.

Continuing the trend seen throughout FY '07, we expect FY '08 to be another year in which deferred revenue growth outpaces our recognized revenue growth, particularly in the first half of the fiscal year. We expect annual cash flow from operating activities to continue to grow versus fiscal year 2007 levels. Our strong cash flow generation will underpin our ongoing share buy back activity, which will in turn support improvements in our earnings per share growth. We expect revenue during the first half of the fiscal year to represent approximately 45% of the non-GAAP FY '08 revenue forecast. Diluted earnings per share during the first half of the fiscal year are expected to represent approximately 35% of the non-GAAP FY '08 earnings per share forecast. For the June 2007 quarter, we expect our core business to exhibit similar seasonal patterns to those we've seen in prior years. We typically experience a sequential decline in revenue, earnings, and deferred revenue from the March to June quarter. This year the impact of the Altiris acquisition will grow our revenue base while the accounting for our new OEM agreements will put additional pressure on earnings per share.

As such, our guidance for the June 2007 quarter is as follows. GAAP revenue is estimated the be in the range of $1.275 billion and $1.305 billion. Non-GAAP revenue is estimated to be in the range of $1.295 billion and $1.325 billion as compared to $1.288 billion in June 2006. GAAP earnings per share are forecasted to be in the range of $0.00 and $0.02. Non-GAAP earnings per share are estimated to be in the range of $0.18 and $0.20 as compared to $0.24 in June 2006. For the June quarter, we expect GAAP deferred revenue to be between $2.71 billion and $2.75 billion. We expect non-GAAP deferred revenue to be between $2.75 billion and $2.79 billion as compared to $2.34 billion in June 2006.

During the June quarter, we expect about $840 million of our deferred revenue balance will convert to -- into recognized revenue. This is approximately 10% higher than the equivalent figure from the March quarter, continuing to illustrate how our business model is now generating increased volumes of predictable recognized revenue. We expect cash flow from operations to exceed the June 2006 result of $368 million. This guidance assumes a common stock equivalence total for the quarter of 920 million shares. We have assumed an exchange rate of $1.32 per euro for the June quarter. We plan to continue to work on our current $1 billion share repurchase program during the June quarter. Fiscal 2008 will also be a year in which we further evolve our capital structure in order to create a balance sheet that is consistent with the strong cash flow generation capability of Symantec.

Finally, in fiscal year 2008, our segment reporting will include the new Altiris business segment and our recently reorganized Security and Data Management and Services segments. To better align our business units with our go-to-market activities, all of our services-related offerings, including managed securities services, Symantec security response, and our new software as a service initiative will become part of the Services business segment. These services have different margins and capital requirements than those of the software business, but were previously included in the Security and Data Management group. We will provide you with a historical view of the new business segments on our next earnings announcement. We're enthusiastic about the competitiveness of our product set, the capabilities of our sales force and distribution partners, and our focus on executing on our plans quarter by quarter.

Now, I'd like to hand the call back to John.

Thanks, James. We believe we've entered fiscal 2008 with the most difficult part of our transformation behind us, and more importantly, we are much better positioned to deliver our market-leading security and availability products to our customers and partners around the world. We're placing much greater emphasis on managing our diverse portfolio products and striving for a better balance between revenue growth, operating costs, and margin expansion. There are several areas of focus for FY '08 that should lead to better operating returns. Perhaps the most significant ones are: Stronger alignment between sales and marketing; tighter alignment between product delivery activities and our market readiness plans; increasing our internal operating efficiencies; and continuing to realign our capital structure.

First, on sales force alignment. We are satisfied with the structure implemented in 2007. As a result, we enter this fiscal year with a sales team better trained on the breath of our product portfolio and our major marketing campaign initiatives. We will make slight modifications in the compensation model to ensure a better balance between growing our annuity revenue stream that drives cash flow growth and growing new license sales. We also intend to tighten the linkage between our marketing campaign actions and the key geographic sales activities around the world. The October launch of our new brand and product marketing platform is a great starting point, particularly, given the strong feedback we've received on overall aided and unaided recognition.

Next, we intend to leverage a combination of the Hamlet product launch and the integration of Altiris as a significant proof point to the strength of our M&A strategy. Customers continue to tell us they see value in operating with fewer vendors supporting their IT initiatives and they'd like to see the real benefits of our integration actions. In the security and compliance arena, the combination of Altiris, a significant new end-point security product, and an integrated compliance offering, which combines the strength of ESM and BindView will be proof positive. In the storage arena, a refresh of our market-leading offering should strengthen our competitive position. And finally, our consumer team will focus its efforts on outexecuting the competition in both product initiatives as well as with our key channel partners. .

Next, with the implementation of Project Oasis behind us, we intend to shift our focus to areas that should yield improve operation effectiveness and overall Company efficiencies. Many of the important customer and partner-facing activities associated with our quote to cash process will be the target of our reengineering efforts. We have teams in place and some of the work has already begun and is starting to bear fruit. And finally, we took our first step in 2007 to move the Company toward -- fiscal 2007, that is -- to move the Company toward a capital structure more fitting a company with the strength of our cash flow generation. We clearly think more can be done and expect to make additional progress in that direction during this fiscal year. We will spend considerably more time on our plans in these areas at our analyst day event next month.

With the tremendous number of changes implemented during fiscal 2007, we're looking forward to fiscal 2008 to be a year of greater stability and growth. I believe Symantec is a much stronger Company today, largely due to the broad portfolio of a award-winning technologies and our diverse base of enterprise and individual customers around the world. More than ever, our customers and partners are looking to Symantec for IT risk management solutions across a broad spectrum of operating platforms and we look forward to delivering on those expectations.

And now I'll turn the call back to Helyn so we can take some

Thank you, John. Allen, will you please begin polling for questions?

Absolutely. (OPERATOR INSTRUCTIONS)

While Allen is polling for questions, I'd like to announce that Symantec plans to attend the JPMorgan conference on May 22nd. In addition, we will be hosting our annual analyst meeting on June 14th in Las Vegas. This event is by invitation only and registration is required. If you would like to take advantage of the special hotel rate for this event, we encourage you to register by this Friday, May 4th. A live webcast and replay of the event will be available on the investor home page for those who cannot attend in person. Lastly, starting now and on a go-forward basis, we will announce our next quarterly earnings date on the current earnings call. As such, we will be reporting our fiscal first quarter 2008 results on July 25th. This information will also be posted on our events calendar. For a complete list of the investor-related events, please visit our events calendar on the investor relations website. Allen, we are ready for our first question.

Thank you. We'll take our first question from Sarah Friar with Goldman Sachs.

Good afternoon, guys. Nice to see the stability coming back here. John, if I could ask you a question on the Storage business the Data Center business, since that was where we saw a lot of the weakness last quarter. You talked about refreshing the product set. Is that enough to get you back to a market growth rate of mid single-digits and what are some of the key things we should watch for, other than just product refresh?

Well, clearly the team, both in the development lab as well as in the field, is executing very, very well. And last quarter's performance, that is the March quarter's performance, was a reflection of tighter focus on transactions as they work their way through the pipeline, and I think that improved the yield quite substantially of revenue in the period. Now, that being said, we are still going through a transition of that business, where today more of the revenue goes to the balance sheet than the P&L. And I think as we complete that transition about mid year this fiscal year, you'll start to see much improved performance in that business, independent of what we will do on the product front. On the product front, we will launch a new NetBackup product, NetBackup 6.5, and we will always do more, if you will, in the storage management arena because that is an area of great investments by our customers, and therefore, we have to follow suit by making significant investments, ourselves. So I feel that the team has sharpened its in-period market execution and the engineering team is moving a terrific set of products through the pipeline, and I think that will bode well for us in this fiscal year.

Got it. One quick follow-up on that, and maybe it's a James question. Can you tell us what portion of total bookings are now rateable and what you think the steady state percentage might be, just to give us a sense of where we're moving from today to that mid-year stability point?

Well, I mentioned in my remarks about the volume of business in the June quarter that we would expect to see coming straight off the balance sheet. And we offered an absolute dollar statistic in this call. because we really wanted to emphasize the point as to how that absolute figure is rising quarter by quarter. And I would expect that to continue for the foreseeable future, so I think the rateable percentage, if you will, can climb some more. I would not expect it to trend towards 100%, however, so I think that there will be some incremental improvement from -- incremental increase from where we are right now. But we're pretty comfortable with the general direction of the 60% to 70% range that we're in.

Okay. Great. Thanks a lot.

And we'll go next to Heather Bellini of UBS.

Hi, thank you. I was just wondering, John, I noticed in the U.S, that your results here show that you guys grew 1% year over year. I'm just wondering if you could tell us what you're seeing from buyers in this market? The types of hesitations you're seeing? What you're factoring in for June? And then also for James, I didn't believe I caught, and maybe you didn't disclose it, what you're expecting for an Altiris revenue contribution for fiscal year '08?

Yes, I think one of the things that you have to factor in, Heather, about the U.S. business in particular is it is the largest and strongest business for our Data Center Management group. And so if you were to peel underneath that group's performance, what you'll find is a larger portion of the transactions, big transactions occur in the Americas. More of that revenue is moving to the balance sheet than the P&L. And hence, in the near term, the U.S. business may look weaker than it actually is performing in true activity, market-based activity. And so I'm not all concerned what's going on in the Americas. It's executing as we would expect, particularly related to the large deals that we see coming out of the Data Center Management group product portfolio.

So that's not -- you're not seeing any weakness in terms of decision makers pulling the trigger? It's more of a function of it going to the balance sheet, is that --?

That's exactly right. If you look at our large deal flow, we had more large deals above $1 million this quarter than we did a year ago. And while we had a slight down tick in deals above $300,000, that was not particularly alarming to me at all.

Okay. Great. And just a question on the Altiris revenue contribution for fiscal year '08?

Well, we're not going to break out a projection for fiscal year '08 by business unit.

Well, just since it's an acquisition so people could get a sense for organic, is $200 million a decent ballpark figure for Altiris? That's what I'm getting a lot of questions on.

Well, I'd rather not be, frankly, pressed on a particular figure. Obviously the segment reporting in our K and Qs as we go through the year will give you a very clear sense to how Altiris is doing. As John mentioned, we're very comfortable with where the first quarter was and we think we've got a very good series of opportunities in front of us, so we're working hard on that.

Thank you.

We'll go next to Gene Munster of Piper Jaffray.

Hey, good afternoon. Can you talk a little bit about Norton 360? Obviously that's a whole new game-changing platform for the Consumer business and the online backup is something no one's really targeted. I guess just how the adoption's been and any sort of metrics we can get our arms around some more details on that?

Yes, Gene, we were very, very pleased with Norton 360's performance in the quarter. As you may recall, it was released late in the quarter, or near the end of the quarter I think would be a better phrase. And so its contribution from a revenue perspective is quite small, but its contribution to the deferred revenue bill was quite surprising and quite pleasing. I think it would be fair to say with over one million units shipped so far, it is the single most significant product release we've ever made in the Company. So the team just did a bang-up job, both engineering team as well as the marketing team. And our sales teams now around the world are really, really having a lot of fun with Norton 360. And that's evident in all of the positive press we've gotten.

Have you seen any consumers starting to, I guess, pay up for more storage? I guess how's the -- specifically the storage side of Norton 360 coming together?

Gene, quite frankly, I can't answer that. I don't know that I've looked that closely.

Okay, great. And then just one for question. In terms of the earnings for the first quarter, a little bit below what the analyst expectations were. Is there any shift in terms of timing of expense that might have impacted that?

Well, certainly, this OEM fee issue that I referred to a few times in my remarks will certainly impact the bottom line. I have a sense that that'll incur about $0.015 at the bottom line. So that's probably the single largest issue. And again, that's very much an accounting issue rather than an economic issue, just based upon the fact that the accounting rules require us to utilize the average rate that applies over the multi-year deal versus the current year economic rate.

Okay. So there's no incremental initiatives that you're spending more money in the first quarter? It's just more kind of shift in accounting?

No, in fact, in the first quarter, we'll really see the full effect for the first time of the $200 million cost reduction activities. As I've mentioned the reduction in force is complete at this stage in the Americas and in Asia, and so that will help us.

I think also, Gene, it's not clear to us that all the models reflect the typical seasonality of our business. As a matter of fact, we would view that the seasonality is not reflected in many of the consensus view models that are out there today.

Our next question comes from Walter Pritchard of Cowen and Company.

Hi, a couple questions, John. I know last quarter the ERP systems turned out to be a pretty -- last quarter, I mean December, turned out to be a pretty big hindrance to the business. Any comment on where you are with that? Are we sort of 100% through it or is there still work to go there? And I had one sort of follow-up question.

Walter, I think we are beyond the critical stage where we're making continuous improvements in the systems environment. Clearly we saw improvements in the administrative processes around our Services business; that's reflected in the March quarter results. Our licensing portal, which was one of the challenging areas, we've had a subsequent release of software to improve that. There's yet another one coming. So as I said in my stated comments, we are in a process now of continuous improvement because we think we've got the right foundational architecture and products in place to support a business that wants the scale.

Great. And then, James, is there any way you could quantify for us the impact that -- I believe your guidance does include the penalty of purchase accounting on the Altiris business. Any way you could quantify for us how much deferred revenue you're having to write down from Altiris?

Altiris is a relatively small deferred revenue balance, so that wasn't an enormous part of the acquisition. It was of the order of $40 million or so. And we have reconciliations in the back of the press release that take you from the GAAP to the non-GAAP that include the Altiris issue.

Okay. Great. Thank you very much.

And we'll now go to Todd Raker of Deutsche Bank.

Can you hear me?

Yes, Todd.

Hey, John, how are you?

Good, and yourself?

Good. If you step back and look holisticly at the business, you've got a Data Center business that was basically flat from a revenue perspective this year. The Security business was up a little bit, Consumer continued to just be a phenomenal performer, double-digit, and deferred revenue was very nice. If I try and step back and think organically what the growth profile of the various businesses look like and what we should be thinking about the overall ability of the business to grow year over year, can you help us quantify it from a business perspective, segment by segment?

Well, it's not our intent, quite frankly, Todd, to provide segment-level details or projections. We've given you a view of what we think the aggregate business can perform at and I think that's sufficient for now. I think what people perhaps don't spend as much time on as they should is while revenue growth is certainly one measure of our performance -- and I would never want to lose a sharp eye on that -- I think the other two metrics that people should and must pay more attention to is what's going on in the deferred line and what's going on with cash flow in this Company. The success of our sales efforts are measured not just in revenue growth alone, but in free cash flow from operating activities and how we build the deferred revenue balance. And both of those last two metrics performed very, very well in fiscal '07 while we were a bit shy, admittedly, on the revenue and EPS side.

I totally agree with that, and if we look at deferred revenue --I mean, you mentioned the government transaction had a ton of products in the multi-year deal. Are we seeing contract length extend out. or can we look at deferred revenue and say. hey, this is the -- growth should start to accelerate to that type of level?. How do we segregate out annual growth in deferred revenue versus deal extension?

Well, clearly on our balance sheet, you will see current and long-term deferred revenue. So you'll be able to see what's happening in the deferred revenue lines on those two elements of our balance sheet. But I think it's fair to say that when you do deals that are over $1 million and they grow as they have grown, many of those will be multi-year deals. The average deal term is not extending very long, although you will see the episodic large transaction, like we saw one or two in the last quarter. James, you want to comment on that?

Well certainly the vast preponderance of our deferred revenue is in the short-term category. so I think that's important to remember. And then, in terms of long-term deferred revenue, one of the most important elements of that balance historically, at least going back over the last year or so, were those multi-year subscriptions that we sold in the Consumer business.

Yes.

And of course, we were very interested to do that prior to the auto renewal capability coming onstream. We're very pleased with the results of auto renewal, and so that has allowed us to rethink the pricing of our multi-year consumer subscriptions. And so not surprisingly, when the discount on those multi-year subscriptions goes down, the volume comes down. So we're very happy with that. That's exactly the balance that we were looking for based upon the strength of auto renewals. So really, I think the take away is that our deferred revenue balance is largely a one-year type time frame.

Okay. Thanks, guys.

We'll go next to Adam of JPMorgan.

Good afternoon. I guess I'll ask a follow up on the bookings and deferred revenue question. I understand you may not be prepared to give specific commentary around deferred revenue or bookings growth for the year, but if you are, that would be terrific, but if you're not, should we be thinking about bookings growth this year coming in faster than aggregate revenue growth?

Well, we don't actually provide as you well know, Adam, bookings forecast, but we do run our sales team on bookings targets. And a booking will be not just things that will show up in the P&L for this period, but it will reflect a transaction that may have a multi-year term to it. And so clearly, bookings are going to have a disproportionately higher number associated with them in the aggregate than the actual fiscal year '08 revenue that we will produce. That being said, our expectations are that bookings for FY '08 will grow faster than period revenue.

Terrific. And if I could just turn for a minute to the Security business. You mentioned in your comments that Hamlet is going to be released at the upcoming user conference. Is that a GA release and how is your -- what is your current thinking about how the Hamlet release is going to change or impact the pricing environment? In other words, can you talk to us a little bit about how you view the revenue opportunity there?

Well, our view is that we will launch Hamlet in June at our Vision conference. That is our premier customer event and it is the place where we want to showcase all the capabilities of Hamlet. Hamlet is the integration of not only many of the technologies that Symantec's had in its portfolio for a long time, but a number of the acquisitions that we've done over the last few years where we will deliver an end-point solution that literally uses far less systems resources and is a single agent on the desktop. That's something the customers have wanted for a long, long time. It comes in a base product plus extensions that should allow us to drive a higher price point. And so as customers take the base, that'll get a little bit more price, and as they add the extensions for network admission control and other things, that too should drive incrementally higher price. It's our that the combination of the way it's been packaged, both technically and the price packaging of it, should allow us to yield higher price point per seat over time.

And just to be clear, customers will be able to start buying Hamlet shortly thereafter the user conference or is GA going to lag the actual -- the official launch?

We are going to extend the beta testing for Hamlet to make sure we get it right. With more than -- oh, my goodness -- 50 million to 70 million desktops using our products around the world, I am more concerned about getting it right, as we did with Norton 360, than rushing it into the marketplace. We'll talk to you more about the release details at the June conference.

Perfect. Thank you.

We'll go next to John Walsh of Citigroup.

Good afternoon. James, you had mentioned the capital structure that you had continued to evolve or right size it. Is that assumed -- should we assume that that includes both a combination of share buy backs and potentially more debt?

Well, I don't want to get into any particular specifics, but obviously those are both important elements of a capital structure, and so they're very much the sorts of things that we're sorting through in our minds as we look to really find what is the appropriate balance sheet for a Company that has this sort of cash flow generation and this sort of predictability.

Okay. And then just a follow up again on the timing of Hamlet, or maybe if you could help us then. What's assumed in the full-year guidance as far as the impact of Hamlet from a revenue and deferred revenue perspective?

Well, I don't want to get into specifics down at the product level, but obviously our thinking in terms of the future of Hamlet is absolutely baked into our -- our fiscal year plans.

Okay, great. Thanks.

Allen, I think we have time for one more question.

We'll take our last question from Phil Winslow of Credit Suisse.

Hi, guys. Just had a quick question on Altiris and just as you plan to integrate that into the rest of your product lines how you see that evolving? Right now you're managing it as sort of a standalone, but longer term how do you see that integrating in with the core products? And when you do look at your product portfolio right now, do you feel pretty comfortable with where you stand on the systems management side or do you feel that you need more internal development or acquisitions there?

Well, first off, Altiris has their head down delivering on a solution tailored for Dell. That's a very, very important relationship and we want to make sure we deliver on the commitments that we've made to Dell for a lack of better term, a white label platform for managing the Dell, both client and server environment. Beyond that, however, we have integration plans in place already that speak to how modest overlaps between the two company's product portfolios will, in fact, be rationalized. And the team has been meeting for the last several weeks to only finalize those plans but build a roadmap that's digestible, if you will, by customers and partners around the world. As a matter of fact I was on the phone just this morning with one of our customers in Europe talking through some issues on that roadmap. I think over time there are clearly opportunities for us to look across both the Symantec portfolio and the Altiris portfolio to see where there might be leverage points. I'll give you two in particular.

On the Data Center Management group side of the house, we bought a technology, a little company called Relicore a few years ago. that has turned into the Veritas Configuration Manager. That might be a wonderful piece of technology to snap into the Altiris suite. And so the team is looking at how we might do that because it could, in fact, populate the Altiris configuration management database. Coming the other way, Altiris is looking how it can link into Project Hamlet with its current product, the Release 6 product that's in the marketplace, and clearly planning for linkage in its Release 7 product to not just Hamlet, but the other compliant solutions that we have in our portfolio. So I think, given the nature of what Altiris is and how they designed the platform, it represents wonderful cross pollination, if you will, opportunities across the two companies.

On the broader question of do we have enough or are we going to do more, I think it would be fair to say that the systems management market is full of holes from lots of vendors, and therefore there are lots of unmet needs for customers in the marketplace. And as Altiris gained a lot of traction, as we get -- gain traction in our Data Center Management group, I suspect you'll see us deliver more organically and I suspect you'll see us buy additional pieces to round out our portfolio.

And John, quickly on the Dell relationship, can you just comment on the expansion of Dell's relationship with [Landes]. Do you see that having any effect on Altiris business there?

No, not at all.

Great. Thanks.

And ladies and gentlemen, that concludes the question-and-answer session. At this time, Mr. Thompson, I'd like to turn the conference back over to you for any additional or closing remarks.

Well, thank you very much. And after what unquestionably was a very challenging fiscal year 2007, I think our Company is in terrific shape and well positioned for not only improved stabilization and operating efficiencies this year, but much stronger top-line and bottom-line growth. And thank you for your patience.

And ladies and gentlemen, that concludes today's call. Thank you for your participation. You may now disconnect.