諾頓 (NLOK) 2008 Q1 法說會逐字稿

Good day, and welcome to Symantec's first quarter 2008 earnings conference call. Today's call is being recorded. At this time, I'd like to turn the conference over to Ms. Helyn Corcos, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you, and good afternoon, everyone for joining us today. 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'll provide highlights of the fiscal first quarter results which ended June 29, of 2007, then James will provide financial details and review our guidance as outlined in the press release. Then we 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, a copy of today's press release and supplemental financial information are also 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 mention I understand our press release, Symantec adopted FASB interpretation Number 48, Accounting for Uncertainty and Income Taxes during the June quarter. As such, our GAAP and non-GAAP results for the fiscal first quarter include the adoption of FIN-48. Also during the June quarter we made several adjustments to our business segment. We have recast maintenance revenues for each quarter of fiscal year 2007 and 2006. In addition, we have added a new business segment called Altiris and have moved a few products from our Security and Data Management unit into our services and Altiris segment. We have provided historical comparative information for these adjustments in this quarter's supplemental financial package 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, operating results, deferred revenue, cash flow from operations, amortization of acquisition-related intangibles, 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 these 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 our forward-looking statements. In addition, to reporting financial results in accordance with Generally Accepted Accounting Principles or GAAP, Symantec reports non-GAAP financial results. Investor are 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 as well as on our Website supplemental information. And now, with that, I'd like to introduce our CEO, Mr. John Thompson.

Thanks, Helen. I'm very pleased with our teams ability to execute our operating plan and deliver solid June quarter results. The performance for the quarter was driven by strong demand for many of our core and emerging technology solutions as well as solid execution by our services, consumer and Altiris groups. We focussed on improving our day-to-day business operations, which contributed to better than expected revenue yield and lower expense growth in our core businesses. The higher in period revenue was partially offset by a lower deferred revenue balance, as we recognize a greater portion of revenue in the quarter. While 70% of our large deals included multiple Symantec products in the June quarter, we experienced a year-over-year decline in our large transaction volumes. This decline is primarily attributable to weaker than expected business in the Americas. We believe this was a Symantec specific issue and as such took action to address the issues earlier this month. We expect our America's performance to improve over time. We are pleased; however, with the performance of our Altiris business unit. The team moved quickly to leverage Symantec's powerful go-to-market model to fuel geographic expansion.

As a result, Altiris recorded its largest transaction ever outside the U.S. and the pipeline for the business looks stronger than ever. While our direct sales force is focussed on developing relationships with large enterprises, we've also built an ecosystem of over 60,000 channel partners and resellers. Over the past two quarters we have implemented significant enhancements in our systems environment all focussed on improving the ease of doing business with Symantec. We continue to make progress with our licenses portal and buying programs which resulted in stronger revenue gains in our channel-based business.

Now, I'd like to take minute to discuss a few miles from each of our business units. The Data Center Management group posted a strong quarter and backup -- NetBackup performed well and Storage Foundation products produced record revenue results. Once again, these results were driven by our customers' desire to standardize and simplify their data center infrastructure.

During the quarter, we launched our next-generation data protection solution, NetBackup 6.5, which will start shipping in a couple of weeks. NetBackup provides a single platform to unify recovery management across all protection technologies, and delivers innovative new disk-based data protection capabilities. Within our Security and Data Management group, our core windows-based data recovery solution, Backup Exec returned to solid levels driven by strength in the new product, and the success of our channel initiatives. We also continued to see solid growth in the emerging product areas of compliance and enterprise messaging. Specifically, our compliance products, control compliance suite and Enterprise Security Manager, as well as our AntiSpam products, showed strong year-over-year growth. In June, we launched our next-generation enterprise endpoint protection solution, formerly known as Hamlet. We remain on track to ship the product towards the end of this year quarter. Symantec endpoint protection lowers the total cost of ownership through centralized management, ease of deployment and seemless integration of several market leading securities functions. Furthermore, we believe our customers will appreciate the smaller footprint and improved resource utilization of this product.

After a record March quarter, our services group posted another solid quarter of double-digit growth. The June quarter results were driven by strong contributions from Company I, a U.K. consultancy we acquired last December. Company I, is a great example of how a strategic acquisition of a services company can provide tremendous leverage for Symantec in certain vertical or geographic markets. Our services team is building a focussed complementary services business that helps customers address their IT risk management challenges. By pulling together our portfolio products with services, we have the unique opportunity to assist our customers in an area of growing importance and complexity.

Now, let me spend a moment on our new Altiris business unit. I couldn't be more pleased with how the business unit and management team are integrating with the Symantec team. Last year, Dell launched a software management strategy based on an open platform, and they chose Altiris' unified architecture. This relationship remains quite strong and contributed meaningfully to the team's June quarter results. In addition, we're integrating and leveraging our technologies on several fronts. For example, we developed a special connector that provides the ability for us to synchronize the database between Symantec endpoint protection and the Altiris configuration management database, helping to reduce the cost and complexity of software migration. This also provides an opportunity for us to upsell customers to our patch management solution by selling the Altiris client management suite, our total management suite.

Our consumer business posted another strong quarter of double-digit growth led by sales of Norton Internet Security. Growth was particularly strong in the Amaya region. Having experienced a full quarter of contribution from Norton 360 sales, we are now quite pleased with its initial uptake. Norton 360 has been the most successful consumer product launch in Symantec's history. Earlier this month, the consumer team launched another new product called Norton AntiBot. According to our latest Internet security threat report, both-infected computers grew by 29% during the second half of 2006, to more than 6 million infected means. These bot's are covertly installed on users machines in order to allow an unauthorized user to control the computer remotely. This allows a remote attacker to take control of a large number of compromised machines and create a bot network which can then be used to launch a coordinated attack. In addition, later this quarter, the consumer team will launch the new 2007 -- I'm sorry, 2008 versions of Norton Internet Security and Norton Antivirus. These products will look to continue our focus on delivering market leading functionality and further enhance the recognition of our Norton brand.

In summary, I'm pleased with the progress we've made over the past few quarters and believe many of the initiatives we implemented last year are beginning to bear fruit. With a solid first quarter behind us, we are w ell-positioned for the balance of fiscal 2008. We will continue to take steps to drive our competitive differentiation in the marketplace through continued new product innovation, improve our internal cost structure and improve our relationships with customers and partners around the world. And with that, I'd like to hand the call over to James.

Thank you, John and good afternoon everyone. Solid performance in the June quarter is a good indication of the progress we are making towards our FY '08 targets. GAAP revenue for our June 2007 quarter was $1.4 billion. Non-GAAP revenue grew 10% versus the June 2006 period to $1.42 billion. As we did a good job of converting our sales activity into recognized revenue. Excluding the addition of the revenue we acquired from Altiris, non-GAAP revenue grew by 6% year-over-year. Foreign currency movements positively impacted non-GAAP revenue by $38 million in the June 2007 quarter, as compared to June 2006. Sequentially, foreign currency movements had approximately a $15 million positive impact on revenue. The June quarter's diluted GAAP earnings per share were $0.10. Non-GAAP diluted earnings per share for the quarter were $0.29, up 21% compared to the June 2006 results. This significant percentage increase is an illustration of the value we can create for our shareholders as a result of the substantial buyback activity totaling $7 billion in the last two years that we have completed.

International non-GAAP revenue for the June quarter grew 12% to $727 million, versus the year-ago period. And represented 51% of total non-GAAP revenue. The Europe, Middle East, Africa region grew 15% and Asia-Pacific, including Japan, grew 8%. The Americas grew 8% year-over-year, holding currency constant international revenue grew 7% year-over-year.

Now I'd like to move to revenue by segment in the June 2007 quarter. Consumer revenue generated $424 million, up 11% versus the June 2006 quarter. Electronic distribution channels represented 72% of consumer revenue and grew 19% versus the June 2006 quarter. Norton Internet Security revenue grew 31%, and remains the single largest product contributor to our consumer category, generating approximately 63% of consumer revenue. Moving now to our enterprise segments, during the June 2007 quarter we defined the new Altiris business unit as made up of the acquired Altiris products plus our Ghost, pcAnywhere and LiveState Delivery products. These three products moved over from the Security and Data Management segment in order to enhance our go-to-market activities around endpoint management. We also moved our managed security services and deep-site business lines to the services segment from the Security and Data Management segment in order to create a single area of focus for our service-related activities.

In addition, following our ERP implementation during the December 2006 quarter, we completed an analysis of how maintenance revenues were being allocated among other enterprise segments. Maintenance analysis largely benefits the Data Center Management group so the offsetting detriment of the Security and Data Management segment. These initiatives have resulted in us recasting our segment data, both for this fiscal year and for the prior two fiscal years. We have provided historical comparative data for these reclassifications in the supplemental information which is posted on our investor relations Website.

The June quarter performance for the recasted segments is as follows. Our Security and Data Management revenue, $424 million, grew by 4% versus the June 2006 quarter. The Data Center Management group produced revenue of $404 million, and grew 5% from the year-ago period. And our services unit posted another strong performance, increasing revenue to $81 million, up 13% from the June 2006 quarter. Services represented 6% of our total revenue during the June2007 quarter. The Altiris business unit, generated non-GAAP revenue of $89 million, of which the three Symantec products produced $36 million of the segment revenue, and the former Altiris products contributed the remaining $53 million. Altiris' non-GAAP revenue includes the impact of $16 million worth of deferred revenue lost on a GAAP basis as a result of the purchase accounting method related to the acquisition of Altiris.

Non-GAAP gross margin increased to 84.8% for the June 2007 quarter, compared to 83.9% for the year-ago period, driven by the divestiture last year of the Symantec-built appliances business, and by the movement of the consumer OEM fees from the cost of goods sold line to operating expenses, as we discussed on our May conference call. Non-GAAP operating expenses of $841 million for the June 2007 quarter, were flat sequentially, and up 16 % year-over-year. Expenses grew primarily due to three factors. Altiris added $31 million, foreign exchange movements added $21 million, and the OEM issue I just mentioned added $42 million to our operating expense base. However, we were able to offset a portion of this expense growth by accelerating the pace of our cost-reduction activities ahead of plan this quarter. Therefore, operating expenses grew only 3% year-over-year after adjusting for exchange rates, OEM fees, and Altiris. GAAP net income was $95 million for the June 2007 quarter. Non-GAAP net income equaled $263 million, up nearly 4% as compared to June 2006.

Symantec adopted FIN48 the new standard related to Accounting for Uncertainty in Income Taxes during the June 2007 quarter. As a result, we performed a comprehensive reevaluation of our tax risks which resulted in a net decrease to our tax reserves of $18 million. As a result, goodwill was reduced by $11 million, retained earnings increased by $6 million, and stockholders' equity increased by $1 million. Symantec exited June with a cash and short-term investments balance of $2 billion. A decline of $953 million versus the end of the March quarter. The decline is attributable to our purchase of Altiris, which reduced our cash and short-term investment balance by $810 million, and our repurchase of $500 million of our outstanding shares. During the June quarter, we repurchased 25 million shares at an average price of $19.76. Our net accounts acceptable balance at the end of the June 2007 quarter was $569 million. Days sales outstanding or DSO, was 36 days in line with normal seasonally trends. Cash flow from operating activities for the June 2007 quarter is expected to be between 345 and $350 million. This is lower than our original expectation. Year-over-year, our cash flow from operations were impacted by higher fees paid to consumer OEMs, and by the weakness in the Americas that John noted. GAAP deferred revenue at the end of the June 2007 quarter was approximately $2.665 billion. Non-GAAP deferred revenue at the end of the quarter was $2.709 billion, up 16% compared to the June 2006 quarter. Deferred revenue at the end of the June quarter is typically lower than at the end of the March quarter, due to seasonally trends. In addition, deferred revenue was impacted by the stronger than expected recognized revenue yield that we generated during the June quarter.

Lastly, foreign exchange rates had a positive benefit on deferred revenue of approximately $61 million versus June 2006. During the September quarter we expect about $905 million of our non-GAAP deferred revenue balance to convert into recognized revenue. This is 7% higher than the equivalent June 2007 quarter amount, and 17% higher than the year-ago period. We continue to benefit from an increasing volume of predictable revenue rolling off the balance sheet driven by our deferred revenue model.

Now I'd like to spend a few minutes discussing our guidance. Given the current business environment and an exchange rate of EUR$1.33 per, our forecast for the September quarter is as follows. GAAP revenue is estimated to be between 1.35 and $1.38 billion. Non-GAAP revenue is estimated to be between 1.37 and $1.4 billion. GAAP earnings per share are forecasted between $0.07 and $0.09. Non-GAAP earnings per share are estimated between $0.24 and $0.26. GAAP deferred revenue is estimated to be between $2.53 and $2.58 billion. We expect non-GAAP deferred revenue to be in the range of $2.55 to $2.6 billion. The September quarter cash flow from operating activities is expected to be the lowest quarterly figure for the year, following normal seasonally patterns. September quarter operating cash flow is expected to be below the $276 million we recorded in the September 2006 quarter. The lower cash flow estimate is primarily due to the payment of higher consumer OEM fees year-over-year and to the weak Americas activity noted in the June quarter.

While we are pleased with our June quarter results and with the prospects for the September quarter, we plan to update our guidance one quarter at a time. We do not plan to revisit our full-year guidance until the beginning of the March quarter on our January earnings call. And with that, I'll turn the call back over to Helyn so that we can take some of your questions.

Thanks, James. Will you please begin polling for questions?

Yes, ma'am. (OPERATOR INSTRUCTIONS)

While Tom is polling for questions, I'd like to announce that Symantec plans to attend the Citigroup conference on September 6. We will be reporting our fiscal second quarter results on October 24. This information will also be posted on our events calendar on the Website. For a complete list of these events, please feel free to visit the investor relations Website. Tom, we're ready for our first question.

We'll take our first question from Todd Raker with Deutsche Banc.

Hi guys, nice quarter.

Thanks, Todd.

So John, I just want to focus on the new desktop client you guys are about to ship, some of your competitors have been describing it as a forklift upgrade and in positioning it as a potential opportunity to take some shares from you guys. I have two questions. One, how do you see the profit in terms of upgrading the client, how challenging will it be for a customer to roll this out? And two, what do you think it potentially does to your growth profile of your Security and Data Management business? Should we see an acceleration as this product comes into the market?

First off, you should not believe what competitors say about our technology. They have a agenda of their own which may not necessarily be consistent with what we intend to deliver. That said, we don't expect the new endpoint protection solution to be any more difficult to go from, let's say, version 9 to version 10 and in this case, version 10 to version 11. Clearly if you have a very large tens of thousand client network there is a significant amount of planning that goes on in that process. And we have a series of pools that we will deliver with both the endpoint product itself, and through our Altiris business unit that will help our customers through the migration process. So I think Dave and his team need to go find someplace else to play.

Okay. And then the second part of my question in terms of should we see an acceleration as the product starts to hit the market?

I don't think there's an acceleration that should be expected out of the chute. As you may recall, Todd, our customers take advantage of what we call upgrade insurance. So as the product is made available, they are entitled to the base product. Where the opportunity lies for us is in two places. First, in the network admission control component, which is a new modular that represents a net upsell opportunity and quite frankly for competitive take-outs where we think the combination of our Altiris capability and a much, much better client than is available currently in the marketplace certainly should give us great opportunities for revenue growth.

Okay. Thanks guys, good quarter.

Thank you.

We'll take our next question from Heather Bellini with UBS.

John a couple questions, first you mentioned some changes in the Americas, I was wondering if you could comment about what changes you're making, if you could go into a little more detail. The second question is really for James, if you could update us on the new buyback initiative that you announced at the analyst day. Thank you.

Heather, we made a change in the leadership at the top of the Americas organization as we started the September quarter. That change was precipitated by, quite frankly, our recognition that morale in the Americas team was declining, and attrition was rising. And we felt that we needed to make changes to address that right away and we did. We brought in a very, very experienced leader, one who's well-known to the Americas team, has led and produced terrific results for us in Asia-Pacific and we know that Bill Robins will get the Americas back on track.

Are there any account-level changes, though, when you say changes in the Americas, is it senior leadership or --

This is about senior leadership.

Not about the people covering the accounts?

There are always account changes that go on all the time. That's kind of a normal part of running an enterprise sales force. We saw some instability in that regard in the western region in particular, but beyond that, I think this is just normal Q4 to Q1 kind of transition stuff that goes on.

Okay. And then just James on the buyback, please?

On the buyback, obviously in the June quarter we finished off the previous billion dollar buyback program completing $500 million of buyback activity. And so now we're pleased that our board announced the new $2 billion program that we discussed at the analyst day. Our thinking with regards to executing on the $2 billion program is much as was the case with the previous billion dollars program. We're going to be proceeding on an opportunistic basis. Obviously, that makes it a very hard to necessarily predict with any precision the accretion dilution impact of the program. Obviously, it very much driven by, when you buy, at what price, and factors such as that. So I guess I would say that I've been a little bit surprised as to some of the estimates that I've seen out there as to how accretive this would be. Some of those estimates look a little high. The other thing I would say about buybacks generally, is of course that we've got 7 billion done now over the last couple years and that was a big driver to that 21% EPS growth that we were able to record during the quarter. So it was good to see some of the fruits of that activity.

So is there anything factored into the September quarter guidance, then, in terms of buybacks?

We're not offering specific direction. Our approach is that as we proceed through a quarter, we'll -- the end of that quarter, just provide everyone with status and so forth. So again, it will really be very much driven by how we roll out this opportunistic approach.

Great. Thank you.

Thanks.

We'll take our next question from Walter Pritchard with Cowen.

Hi guys. I'm wondering if you can just talk a bit about the perpetual ratable mix or the in-period revenue, as you call it. What drove that during the quarter? I assume it was more license, less maintenance renewals and then also how that tied into the large deal count, was that part of the deal where you had large maintenance renewals in the year-ago period and you didn't see as much of that activity this year?

I'll make comments and I'll let James talk. I think the real difference we saw this water was our channel-based business, particularly Backup Exec, did very, very well. That business had been significantly impacted by our ERP systems change that occurred right at the same time that we launched a new product. And so fundamentally, once the dust settled on our licensing portal and our new buying programs, what we saw was real strength in Backup Exec, which is a product that has the profound impact of being able to deliver great in-quarter revenue results as compared to some of the large deals that we do that tend to go to the balance sheet, if you will. What we saw in big deals was a decline in big deals, not so much in the context of maintenance deals, because most of those get booked in our fiscal third and fourth quarter, but we saw weakness in the Americas in particular, in large deal sizes, and we felt that some of that had to do with the stability or lack thereof of the team. And as I mentioned in Heather's question, we've taken action to fix that.

And the only thing I'd add, I was very pleased during the quarter with the degree of coordination between the folks in the sales force and everyone in the back office, if you will. I think we had a good execution quarter and that assisted us. Obviously, that's a trend we're very much working hard to continue.

Great. Thanks a lot.

And we'll take our next question from Adam Holt with JP Morgan.

Good afternoon. My first question is around the DCM business. The year-on-year growth was the best we've seen in a couple quarters. I was wondering if maybe you could talk a little bit about what the drivers were there particularly given that the NetBackup 6.0 release is not in the market yet. Is it possible to give what the apples to apples growth rate would have been on the old accounting or segment definition?

I don't have a clue, Adam, what it would be on an apples, to apples basis. I'll let Helyn and the team see if they can hundred with that at a later point. What did happen for DCMG this quarter is NetBackup 6.0 is a much more stable product now, and NetBackup 6.5 is clearly on path to be delivered here very shortly. But underpinning all of that was very strong performance in the Storage Foundation product family, that's what set the business up for 5% revenue growth. That said, we should lap the model change that we made in the DCMG business this quarter, so it's our expectation that we will see continued acceleration in DCMG's business as we move through the fiscal year.

And I guess that leads me to my second question, which is around the deferred revenue guidance for the next quarter down sequentially, I just wanted to make sure I understood what sort of the thinking was around that. Does that mean that you're being a little bit more conservative with respect to larger deals that closed in the quarter or is it a function of the fact that you do expect more revenue to come off the balance sheet in-quarter?

Well, Adam, one of the charts you may recall that I showed at analyst day split the deferred revenue history over the last several quarters up into year halves, first half versus second half. That showed that we tended to have much less growth flat down a little bit between the first quarter and the second quarter, and then we would see stronger deferred revenue in the third and the fourth quarter. Now, of course we're starting off with a lower balance as a result of the activity that ended up in recognized revenue in the June quarter, and so I think those are the factors that have fed us through to the guidance that we've offered this afternoon.

Terrific. Thank you.

And again, ladies and gentlemen, we do ask that you limit yourself to one question, and one follow-up. We'll go next to Sarah Friar with Goldman Sachs.

Good Afternoon, guys, good quarter. Very nice bring back in your operating margins. Could you maybe give us an update on where we are in terms of your cost reduction activities? And in particular, is there still l ow-hanging fruit out there to get the organization back to those levels you were at a couple of years back?

Well, I'd just say, as you are that we feel as though we're ahead of schedule with regard to our $200 million program that we announced back in January. So obviously that's been a lot of hard work by the team here. And we're going to stay very focussed on operating margins, obviously.

I would also add, Sarah that the business today is a very different business than the one a few years ago when we had 30-plus point operating margins. That business was 50-plus percent to consumer with very, very high operating margin content, and that's not the way's the Company's is profiled today.

Okay. That's fair enough. Then fixed just follow-up on your comment on NetBackup 6.5, similar to Todd's question around the endpoint 11.0 release, what is the upside potential there, John? Is it getting new customers, is it new add-on feature functionality that you can upsell?

Well, the first upside opportunity is around what we all NAC or Network Admission Control. We have the market-leading product with the sigh gate solution, it will be much more tightly integrated and easy to install out of the box. So our expectation is that our sales teams and our channel partners will work very hard to upsell, if you will, base customers to the NAC solution. And beyond that, it's the opportunity to combine our Altiris team with our endpoint protection team to really go have a lot of fun with competitive take-outs. And so while some may view this as a forklift, we view this as an opportunity to stick a fork in a fat cat right here in the valley.

Okay. Let me leave it there because I was actually asking more around the NetBackup 6.5.

Oh, NetBackup. Oh, I'm sorry. I'm all excited about this, I can't help it.

That's okay.

NetBackup 6.5 is clearly a terrific upgrade from the 6.0 product. It includes our disk space backup capability and starts to move NetBackup to become a storage management platform, if you will. So rather than it just being a backup product, we will use it as the foundation to deliver a range of incremental services, if you will, into existing accounts. And I think the team has done a really really nice job in the rearchitecture, if you will, of that product.

I think we got particularly warm reception at our vision user conference a month or so back to the news of 6.5 and its capabilities.

Terrific. Thanks a lot, guys.

We'll take our next question from Ed Maguire with Merrill Lynch.

Yes, good afternoon. I was wondering if you could just comment on the trends in the consumer, whether you're seeing any impact from Vista and how the uptake has been so far on Norton 360 overall?

Well, as I said in my prepared remarks, Ed, Norton 360 has been the single most successful product we ever launched in the consumer business out of the chute. Volumes have been just tremendous. And while Norton Internet Security continues to be the largest product revenue contributor, if you will, it, too, grew at 31% last quarter. So the business is performing quite well. On the Vista front, we think we saw in the June quarter activity that may have adversely affected our consumer business just a little bit around some of the Vista upgrade activity that -- and rebates that were going on in the marketplace. But that appears to have abated and the consumer business is doing quite well. But we're going to continue to watch our products are all Vista-compatible and are shipping, if you will, on the OEM machines that we have relationships with, but Vista is not a big revenue-based opportunity for us beyond any other windows platform, quite frankly.

Great. And a follow-up for James. It looks like for your September quarter guidance here you're assuming a, I guess, a slightly higher operating run rate. Could you help us understand where you'd had some offsets in the first quarter, whether particularly on the OEM side, whether some of those may be continuing into the second quarter?

Yes, I would certainly expect the OEM costs to continue on into the second quarter. As you may recall, many of those contracts are now structured on a per-PC-per laptop shipped by the OEM. And I think you've seen quite a bit of strong data from the computer manufacturers as to demand for those types of products. So certainly I would expect that to continue on into the year. And obviously we're very focussed and interested in what happens at the end of the 60-day trial that the customer has. And we're very busy in that regard.

We'll take our next question from Tom Klasell with Thomas Weisel partners.

I want to jump over to the consumer business, you mentioned a particular strength in Europe. Can you sort of walk us through that? Was there a particular product or just economic conditions improving over there? Or currency? Can you walk us through what's driving the business in Europe?

Well, it was in reference to our consumer business, and I think the answer in Europe is better balance across all of the channels than we saw in any of the other regions. The retail channel for our EMEA team held up stronger if you will than the retail channel and other regions around the world. Online continues to be strong of us but it was the balance if you will that we saw in Europe that made the difference.

Okay, good. Then sort of a high-level question. With the consumer business appearing to be pretty steady, that does throw off a lot of cash like you mentioned earlier, have you guys given any further thought to capital structure? Obviously you guys have capacity to go to a more traditional large company capital structure. What's the thinking?

Yes, I wouldn't say that anything has changed in our thinking at all. Versus the comments that we've made in recent quarters. So we're being very thoughtful about that issue. Obviously, the markets have certainly become a bit choppier in recent days and weeks here so this is a topic that we spend a lot of time thinking about.

Okay. Very good. Thank you.

Your next question from Daniel Ives with Friedman, Billings, Ramsey.

Can you talk about year-end guidance again in regards to not giving, I mean, are you like withdrawing the former guidance? How should we look at the year, especially just given the strength this quarter and the buyback? Can you just maybe speak to that anecdotally, as I know you're not giving guidance?

Yes, we're very much just taking the perspective that at the start of the year we'll outline to everyone our perspective on how the year could play out. And then we'll really focus our business, our efforts quarter-by-quarter and we feel as though it makes sense to give detailed guidance on a quarterly basis. So that's all it is. It's just a tuning of the philosophy as to what level volume of guidance we should be offering in the marketplace.

Okay. And to that point, so do you still maintain your year-end guidance that you gave on top and bottom line? Originally?

Well, you say a gain, just restate what I said. We issued that guidance this time, 90 days or so ago, and we are just going to leave it there. We wouldn't plan to update annual guidance one way or another.

Okay.

So that's the approach.

Thanks. Good quarter. Thanks.

Thank you.

We'll go next to Phil Winslow with Credit Suisse First Boston.

Hi guys, I just want to spend a little bit of time on the consumer side again, just wondering what trends you saw from a seasonality perspective during Q2 here. Obviously you've gone to more of a deferred model so it shows up more on the balance sheet, wondering if you could go trends there, any impact you think from Vista shipping earlier this year on customer buying patterns or is this sort of a typical June quarter?

Well, I'd say this is a fairly typical June quarter for the consumer business. It is traditionally seasonally down in June. It starts to build momentum in the month of September based upon the shipment of new products that we make. And then it peaks in the fiscal third and fourth quarter for us. And so I don't think that we could point to anything that would say June was abnormal from a pattern point of view, normal pattern. And I'll stand on my comments of a bit ago, Phil, which is Vista is really not an event for us in the consumer markets. As the OEMs preload Vista on their machines, our business is to create a Vista-compatible product to go along with that. And we've done that. It's been in the marketplace since the OEMs have been shipping Vista. So there is no unique opportunity in the consumer segment driven by the Vista migration. There is; however, an opportunity for us in the mid market as we look at the combination of our Altiris products and the endpoint protection suite that we will be delivering. And we think, given the strength of Altiris in mid market activities, they're real strong relationship with many of the OEMs, that represents a unique opportunity for us around Vista that doesn't exist necessarily in the consumer segment.

Great. And then James, as far as the September quarter, you discussed a little bit about the deferred revenue guidance being down sequentially. Is that related to any specific segment, consumer, Security and Data Management, et cetera?

No. It's really not. I'd say nothing unusual in that regard.

Okay. Thanks guys.

We'll take our next question from Kevin Buttigieg with A.G. Edwards.

Just going back to the consumer business for a moment, now that you have a full quarter of Norton 360 behind you, I was wondering if you could talk about what you're seeing there in terms of the dynamics, in terms of is the business attracting new customers to Symantec? Is it driving upgrades from Norton Internet Security or perhaps Norton Antivirus given the continuing declines in that business? And just sort of what -- you've talked in the past about the consumer business being a low double-digit type of growth business or a low teens type of growth business. Does the Norton 360 opportunity perhaps because of an ASP perspective or for new subscribers that you might get through it, influence that number to the positive? How should we think about revenue growth in the consumer business post-Norton 360?

Well, we haven't given specific segment growth guidance for this year and we're not going to change that stance just because we're having great success with Norton 360. That said, what Norton 360 appears to be doing is taking some opportunity away from Norton Internet security, and upselling some customers from Norton antivirus. Both of which represent price up for us. Because the Norton 360 product is priced at a higher price point. So our sense is that this is the right way to have, if you will, good, better, best in the marketplace, and customers will choose the price point and the functional mix that they want. And as they move to higher function, we should yield higher average selling prices.

And then any comment on in terms of new subscribers that you might be getting through --

No, we don't tend to talk about subscriber growth, that is not something that's a part of the way we manage our activities in the consumer business. Clearly, we monitor it and track it, but we don't disclose it.

Thank you.

John Walsh from Citigroup.

Good afternoon. If you could talk about just the high level macro environment, what you see on the enterprise specifically North America versus Europe for the current quarter, and then what you saw last quarter?

Well, I think our guidance reflects a sense of continued strength and momentum. If anything, slightly better performance in the Americas than we saw in the fiscal first quarter. Clearly our APJ business is doing very, very well. EMEA seems to be holding with Germany still an economic challenge but or business in Germany having stabilized quite a bit from what we saw over a year ago. Our issues now are focussed on bringing our new Americas leader on board, making sure that he's got the right footing under him and the right set of metrics in place for how he wants to manage his team but he's off to a good start. Hopefully it will only improve from here.

Okay. On the consumer side, any pushback you're hearing from the channel or from consumers about the auto renewal feature?

No, not at all.

Okay. Thank you very much.

Next to Rob Owens with Pacific Crest.

Good afternoon. I wanted to focus a little bit on pricing within the enterprise security market. On 10.2, I believe you guys raised price, I'm curious what the customer response has been, have you seen any pushback on that front?

Quite frankly, I can't say that I have. I mean clearly our challenge right now is to get 11.0 out the door, and to get it seated into the marketplace. And that's where the team is very, very much focussed. Our expecting is that it should be a fairly rapid uptake for current users of Symantec 10.0 or prior releases and we'll see whether or not we can upsell, therefore, get some price yield on the Mac solutions or some of the competitive take-out programs we have planned.

With regard to that recent price increase, how should we think about growth as a function of that? Should that begin to impact that security line as we move throughout the remainder of fiscal 2008, just as a function of most revenue being deferred?

We have not given segment-specific growth guidance for this year. Our expectation; however, is that all of our businesses have been planned for growth and we would expect to see a continuation in momentum building in the SDAMG team as well.

Great, thanks.

We'll take our next question from Katherine Egbert with Jeffries.

Hi, I just have a quick question about guidance, you guys have done a really nice job the last quarters, reporting upside, now your saying you're not going to be giving annual guidance. There's been a formulation change in the last few quarters regarding the way you do guidance which made you more focussed on short-term?

Well, again, I mean I wouldn't characterize it as we're not giving annual guidance, we are going to give annual guidance, we just give it at the start of the year. So hopefully that, in combination with our quarterly updates to the coming quarter will give a lot of information to the marketplace, perhaps quite a bit more than some other companies offer these days.

There appears to be a fair amount of short-term focus amongst many of our investors as well. And so focusing on what we can deliver next quarter is very much responding to what we perceive to be the short-term interest of some of our investors as well.

Okay. Thanks for that. And one quick one, what do you make of Google buying post Genie, do you see that as a competitive threat?

We don't offer per se a hosted mail service. We have a partnership through a firm called MX Logics that does offer our AntiSpam solution through their hosted mail service. We're not completely sure of what Google's intent might be there. We view that it's much more focussed on the aggregate issue of Google Apps, not just hosted mail. And mail is just one of an array of things that they will offer through their Google Apps service. So we'll obviously monitor this quite closely. Our Symantec protection network does have plans to deliver this fiscal year a series of hosted services some that may ultimately compete with what Google's plans might be.

Thank you, John.

We'll take our next question from Shaul Eyal with CIBC World Markets.

Good afternoon, good quarter. A quick question, since you talked before on the ASP trends, as you look into the consumer business, security data management and kind of the DCM business, were the majority of ASP interest being generated from, any particular segment?

Well, I wouldn't get into specifics as to ASP by business unit, I'd echo John's earlier comments on the consumer side where we've seen a variety of new products over the last year or so that are going nicely at higher ASPs. In the enterprise side of the house, obviously, pricing becomes more complicated deal-by-deal and so forth to talk about it in any particular generalities. But it's fair to say we're quite satisfied with the overall direction here.

All right. Fair enough. Thank you.

We'll take our next question from Brian feed with Morgan Keegan.

Hi guys, great quarter. Real quick with two major products beginning shipping this quarter, 6.5 and Hamlet, how have you guys within the sales organization accounted for potential of purchasing freeze ahead of deployment and dealing with the test and eval cycles for those? Is it a function of large beta programs in place or can you comment a little more on that?

Well, we've certainly had a beta program in place for both of these offerings, we've used the feedback from that beta program not just to enhance the product itself, but to reflect that in our marketing messaging to reflect that in our services strategy, to reflect that in the advice and counsel that we give our partners as they go to move these products in the marketplace. Our forecast reflects our view of how those products will do this quarter. And as we see their performance in the marketplace, we'll update our guidance a quarter at a time, and hopefully it will reflect better than anticipated or expected results from both 6.5 and [Sef11].

We have time for one more question.

Our next question comes from Philip Rueppel with Wachovia Securities.

Thanks very much. Quickly, if you could drill down a little bit on the Backup Exec strength, you talked about the convergence of the new product and the ERP issue. Was the strength a flush of the pinup demand or could you see that carrying through continued growth going forward much as your commentary about NetBackup would be with its new product release? Thanks.

Actually it was not a flush, business in the mid market for that kind of market tends to be perishable if you're not there on the shelf and available. They pick someone else's. So it's not a function of there was this bubble of opportunity that was waiting for us to clear up our licensing portal. To the contrary. We have reflected in our forecast a view that there's likely to be some continued strength in that product as we look at this quarter. Because the 11B product is a very, very strong product. It's doing well in all channels in all markets, and I think we can continue to bill momentum there for sure -- build momentum there for sure.

Great, thank you very much.

That does conclude or question-and-answer session. At this time I'd like to turn the call back over to M r. Thompson for closing remarks.

Thank you very much for dialing in. We're awfully pleased with our team's performance in the fiscal first quarter of '08. We're off to a good start. It's one solid quarter and we're focussed on the next. Thank you very much for calling.

This does conclude today's conference call. We appreciate your participation. You may disconnect at this time.