諾頓 (NLOK) 2012 Q1 法說會逐字稿

Good day and welcome to the Symantec first-quarter 2012 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.

Good afternoon and thank you for joining our call to discuss fiscal first-quarter 2012 financial results. With me today are Enrique Salem, Symantec's President and CEO; and James Beer, Symantec's Executive Vice President and CFO.

In a moment I will turn the call over to Enrique who will discuss Symantec's execution during the quarter. Then James will provide highlights of our financial results as well as discuss our guidance assumptions as outlined in the press release.

This will be followed by a question-and-answer session. Today's call is being recorded and will be available for replay on Symantec's Investor Relations website.

A copy of today's press release and supplemental financial information are posted on our website as well. And, a copy of today's prepared remarks will be available on the Investor Relations website shortly after the call is completed.

Before we begin, I would like to remind you that we will review our financial results focusing on year-over-year constant currency growth rates unless otherwise stated. Sequential growth rates are based on as-recorded results.

For the June 2011 quarter the actual weighted exchange rate was $1.44 per euro and the end of period rate was $1.45 per euro compared to our guided rate of $1.42 per euro. Day for June 2010 quarter the actual weighted average rate was $1.26 per euro and the end of period rate was $1.26 per euro.

We have included a summary of the year-over-year constant currency and actual growth rates in our press release tables and in our supplemental information which can be accessed on our Investor Relations website. We made modifications to our segment reporting this quarter.

Managed Security Services were moved to the Security and Compliance Segment from the Services segment. Total MSS revenue of $72 million and $71 million moved in fiscal 2011 and fiscal 2012 respectively.

Historical compares for our fiscal years 2011 and 2010 reflecting our modified segment reporting are available on our website and in our supplemental financial information. Some of the information discussed on this call including our projections regarding revenue, operating results, deferred revenue, cash flow from operations, amortization of acquisition-related intangibles and stock-based compensation for the coming quarter contain forward-looking statements.

These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. Additional information concerning these risks and uncertainties can be found in the Company's most recent periodic reports filed with the US 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 would like to introduce our CEO Mr. Enrique Salem.

Thank you, Helen, and good afternoon, everyone. Our team executed very well, delivering record June quarter results. We had a great start to our fiscal year, continuing the momentum we've been building over the past four quarters.

Our third consecutive quarter of double-digit bookings growth resulted in the strongest June quarter revenue, deferred revenue and operating cash flow in Symantec's history. Performance was driven by strength in backup, data loss prevention, managed security services and consumer as well as ongoing stabilization of our storage and availability management business.

In addition, our authentication business once again exceeded expectations and delivered its fourth consecutive quarter of better-than-expected results. Now let's take a closer look at some of the highlights for the quarter.

I'm very pleased with our sales team's performance this quarter. Focused execution combined with industry-leading security, backup and data center solutions helped us deliver strong results across all regions.

Customers are expanding their commitment to Symantec as our sales force successfully cross sells the entire product portfolio. During the June quarter, 48% of our deals over $1 million included sales from both our Security Compliance and Storage and Server Management segments as compared to 26% for the year ago period.

License revenue grew for the second consecutive quarter driven by Data Loss Prevention and Backup as well as ongoing stabilization in the Storage and Availability Management business. Our Storage and Availability Management business posted its third consecutive quarter of year-over-year bookings growth driven by increased penetration on the Linux and Windows platforms.

Customers are recommitting to our storage management products as we differentiate ourselves from native tools. Our ability to help organizations accelerate the utilization of virtualization, cloud adoption, and reduced storage costs are helping us win competitive deals.

We are pleased with the success we are having with our partnership with Red Hat as we help organizations migrate to Linux. Furthermore we are gaining traction with our new ApplicationHA solution which was jointly developed with VMware.

This product helps organizations virtualize their business-critical applications with confidence and reduce costs as they virtualize their infrastructure. During the quarter, we had major storage management wins in the telecommunications and financial services verticals.

One of the largest cable and Internet service providers increased their investments in Symantec beyond security and expanded their commitment to our storage management products. Moving on to our backup and archiving business, effective backup and recovery continues to be a high priority for organizations as they seek to better manage information growth and maximize operational efficiency.

Our market-leading information management portfolio is helping organizations protect and manage their data. Our recently announced V-Ray technology further extends our information management leadership in virtualized environments.

V-Ray is embedded into our backup products and gives IT administrators increased visibility into backup images across physical and virtual environments. We generated growth in our backup and archiving solutions in all regions, specifically NetBackup posted another quarter of year-over-year double-digit revenue growth driven by strength in virtualization and de-duplication.

We are beating our competition worldwide and gaining share in the backup software market. Increased customer adoption for our integrated backup and de-duplication appliance is driving better-than-expected results.

We signed a multiyear agreement with one of the world's largest logistics services companies for the deployment of our archiving and backup solutions. Additionally, we are expanding Backup Exec into new delivery models by introducing SaaS and appliance offerings. Both will be available later this year.

Our market-leading archiving product, Enterprise Vault, posted double-digit bookings growth driven by strong execution across all geographies. At the end of the June quarter, we closed our acquisition of Clearwell, a recognized leader in the eDiscovery market.

Together, Symantec and Clearwell are well positioned to provide customers the most comprehensive information management solution by bringing together the industry's leading eDiscovery, archiving and backup products. Now, moving on to Security and Compliance.

The current threat environment is driving increased awareness for information security. Customers recognize the value of having an information-centric solution that protects their confidential and proprietary data.

Our approach as protecting information and identities makes us the strategic advisor for CSOs worldwide. We continue to expand our encryption, authentication, data loss prevention and compliance solutions in the enterprise segment.

In particular, our DLP solution generated another quarter of strong year-over-year double-digit revenue growth, driven by one of the largest US retailers and one of the largest semiconductor companies becoming Symantec DLP customers. Our VeriSign security business once again exceeded expectations across all financial metrics.

Both our premium and value SSL offerings gained market share, driving double-digit installed base growth for the fourth consecutive quarter. We continue to differentiate our premium VeriSign brand from the competition with unique features such as daily malware scans and Seal-in-Search.

With the anticipated launch of our SSL certificate discovery and automation service later this year, we will help organizations increase their visibility and better manage the growing number of SSL certificates across their environment. No other SSL provider offers this feature.

In the user authentication business which includes soft tokens and PKI, we recently hit an important milestone, issuing more than 0.25 billion certificates verifying user and device identity. Our user authentication business has benefited from increased interest in our solutions as a result of the more toxic and targeted threat landscape.

To help in managing today's targeted threats, we launched Symantec Endpoint Protection 12 and Symantec Endpoint Protection Small Business Edition 12 in early July. Independent tests conducted by Dennis Labs, the Talley Group, AV-TEST.org and PassMark showed that our Endpoint Security solution outperforms the competition in performance and effectiveness in both virtual and physical environments.

SEP 12 is optimized for performance on virtual environments, reducing the load on virtual servers and is integrated with VMware's security APIss. In addition, our products include behavioral and cloud-based reputation technologies known as SONAR and Insight that detect and block new threats earlier and more accurately than any other competitor.

Many organizations lack the in-house security expertise and infrastructure required to address the rapidly changing threat landscape that is driving increased demand for outsourced security services. Symantec's Managed Security Services provide experienced specialists to help customers manage their security operations.

As a result, our MSS business realized its third consecutive quarter of double-digit bookings growth. More and more customers are relying on us to provide a cost effective 24/7 service to protect their information assets. We are again positioned as a leader in Gartner's Magic Quadrant, highlighting Symantec's objective of reducing overall security risk.

Moving on to Consumer, our Consumer business delivered its 11th consecutive quarter of year-over-year revenue growth driven by our ability to attract and retain more customers through our online store and the strength of our products and services. Ongoing enhancements to our e-commerce platform continue to maximize customer spend and improve close rates.

Customer satisfaction with e-storage transactions is at its highest ever, benefiting our cross-selling and renewal efforts. Our Norton Security products continue to be the fastest and lightest security products in the market.

Over the last year, our Norton 2011 and Norton 2012 products have won more than 130 awards. We are extending our leadership beyond the PC to protect people and information through a variety of offerings such as Norton Live services, online backup and family safety services.

These new services offerings grew 37% in the June quarter as we expanded distribution of these offerings through our multichannel network. The value of our Norton services has helped us expand and build new partner relationships.

In addition to the existing Norton Online Backup partnership with Acer, we expanded our relationship to include Norton Online Family on their Acer branded PCs. Acer will also include Online Backup and family safety services along with Norton Internet Security on their Gateway, eMachines and Packard Bell PCs.

Furthermore, we won a competitive deal at AOL to offer Norton Internet Security to their large installed base of customers. We launched two new mobile beta products to enhance our consumer mobile offerings.

Norton Mobile Security for Android 2.0 includes anti-phishing technology to protect users who access e-mail on their smartphones. Norton Mobile Security has already been downloaded from the Android market over 600,000 times. Norton Online Family added a new mobile application that allows parents to view their children's online activities from their Apple and Android devices.

Partner interest in our new mobile offerings is growing and gaining traction around the world. We expanded our OEM relationship with Toshiba and Lenovo to provide Norton Mobile Security with their tablets.

On the carrier side, [Riche Telecom] in France will also offer our mobile security solution for Android devices. Additionally, our Norton DNS offering is providing value to a new audience.

Three major WiFi providers will include Norton DNS with in-store wi-fi for a major US food and beverage retail chain. We are making solid progress in providing consumers the best online experience that allows them to securely access their information from any device.

I'm very pleased with our record June quarter performance. Our sales team continues to execute cross-selling our industry-leading portfolio and capturing new customers by aggressively pursuing competitive displacements.

We will continue to focus on a few key priorities. We're energizing our core businesses by helping customers deal with the challenges of rapid information growth and new more targeted and sophisticated attacks.

Specifically, we are paying more attention to the SMB market. We've created a new SMB team that's working across the organization to tailor more of our solutions and go-to-market efforts to the unique needs of the SMB customer.

We are capitalizing on new growth opportunities in cloud, mobile, and virtualization and will continue to deliver new solutions to help both consumers and enterprises securely access and use information across multiple devices and platforms. And with that, I'll turn the call over to James for a detailed review of our financial results.

Thank you, Enrique, and good afternoon. We posted better-than-expected first-quarter results for each of our key financial metrics, driven by solid bookings across all segments and geographies.

Our strong performance resulted in record June quarter revenue, deferred revenue, and cash flow from operations. GAAP revenue totaled $1.65 billion, an increase of 9% versus the June 2010 period.

License revenue grew 4% year-over-year driven by strength in our backup, archiving and data loss prevention businesses as well as ongoing stabilization in our storage and availability management business. Content subscription and maintenance revenues continued to grow, increasing 10% year over year.

Increasing subscription sales from our consumer, software as a service and authentication businesses accounted for approximately 39% of total revenue, up from 36% in the year ago period. The US dollar weakened 14% against the euro as compared to the year ago period.

Overall, foreign currency movements positively impacted revenue growth by 6 percentage points year over year and approximately 1.5 percentage points sequentially. However, foreign currency movements negatively impacted operating expenses by 6 percentage points year over year and approximately 1 percentage point sequentially. Net income of $309 million resulted in fully diluted non-GAAP earnings per share of $0.40 driven by the team's solid sales execution.

The consumer business generated revenue of $525 million, up 5% year over year, driven by improving renewal rates, up-selling customers to our premium suites and cross-selling of our new service offerings. Turning now to the enterprise business, solid sales execution continued this quarter.

We generated a total of 281 transactions valued at more than $300,000 each, up 15% year over year. 57 of these transactions were valued at more than $1 million, up 54% year over year.

All our deals valued at more than $300,000, 74%, included multiple products. The Storage and Server Management segment generated revenue of $597 million, an increase of 7% as compared to the June 2010 quarter.

Revenue from the Information Management business which includes our backup and archiving offerings increased 10% year over year driven by our differentiated de-duplication and virtual machine protection features. In addition, we realized $3 million of revenue from the Clearwell acquisition which closed earlier than expected on June 24.

Revenue from the Storage and Availability Management business grew 3% year over year as we further diversified our platform penetration beyond Sun Solaris and other UNIX platforms into Linux and Windows environments. The Security and Compliance segment generated revenue of $468 million, up 24% year over year driven by strength in authentication services, data loss prevention, compliance, and Managed Security Services as well as continued growth in our SaaS business.

The former VeriSign security business performed better than expected across all metrics, generating revenue of $74 million versus our expectations of $70 million and a $0.005 of EPS accretion, beating our forecast of $0.01 of dilution. Our services business generated revenue of $63 million as we continue to transition our consulting practice to specialized partners.

Turning now to total Company margins, non-GAAP gross margin was 86% for the June 2011 quarter, up 50 basis points from the year ago period. Non-GAAP operating margin was 27%, down 30 basis points compared to the June 2010 quarter driven by the acquisition related deferred revenue write-down.

We generated another quarter of strong operating cash flow. Cash flow from operating activities for the June quarter totaled $503 million.

We exited the June quarter with $2.3 billion in cash, cash equivalents and short-term investments. During the quarter, we utilized domestic cash to repay the remaining $600 million principal balance of our convertible senior notes which matured on June 15.

We also used domestic cash to pay $364 million for Clearwell and $198 million to repurchase 10 million of our shares at an average price of $18.98. This cash expenditure resulted in approximately 33% of our cash balance residing in the US as we exited the June quarter.

GAAP deferred revenue at the end of June 2011 was $3.69 billion, up 17% year over year. Approximately half of the deferred revenue growth was related to acquisitions.

Now I would like to spend a few minutes discussing our guidance for the September 2011 quarter. We are assuming an exchange rate of $1.43 per euro versus the weighted average rate of $1.30 and the end of period rate of $1.38 per euro in the September 2010 quarter.

Our guidance assumes an effective tax rate before consideration of any loss from our joint venture of 28% and a common stock equivalents total for the quarter of approximately 763 million shares. Our CSE guidance does not include the potential for an increase in the share count from an accounting as opposed to an economic perspective associated with our 2013 convertible notes in the event that our average stock price is at or above $19.12 during the quarter.

Thus, for the September 2011 quarter we expect GAAP revenue to be in the range of $1.655 billion to $1.675 billion as compared to revenue of $1.48 billion during the September 2010 quarter. We expect year-over-year revenue to be up 12% to 13% on an as reported basis.

74% or $1.23 billion of our September quarter revenue is estimated to come from the balance sheet. The Clearwell business is expected to contribute between $8 million and $12 million to our September quarter revenue.

As a reminder, we will complete a full year of operations for our VeriSign security business in the September quarter and as such, we will no longer be breaking out guidance for this business. GAAP earnings per share are estimated to be between $0.21 and $0.22 as compared to $0.17 in the year ago period.

Non-GAAP earnings per share are estimated to be between $0.38 and $0.39 as compared to $0.34 in the year ago period. As previously mentioned, we expect $0.01 of dilution as a result of our Clearwell acquisition during the quarter.

GAAP deferred revenue is estimated to be between $3.485 billion and $3.515 billion compared to $3.1 billion at the end of September 2010. We are expecting deferred revenue to be up 12% to 13% on an as reported basis.

It's important to note that as we anniversary the VeriSign security transaction, our deferred revenue growth rate will begin to normalize. Consistent with the strength of our business, we expect deferred revenue to continue to grow and be subject to normal seasonal trends which drive a sequential decline in deferred revenue between the June and September quarters.

Last year, the combined effect of foreign exchange and acquisitions masked this trend. On a year-over-year basis we expect to realize mid to high single digit deferred revenue growth in the second half of our fiscal year.

As I mentioned earlier, we are pleased by the consistent strength of our cash flow from operations. While the September quarter typically produces the lowest operating cash flow of any other quarter, we expect our cash flow generation in the first half of fiscal year 2012 to be up approximately 20% year over year.

In conclusion, we were pleased with our strong performance across all of our business units, geographies, and financial metrics. We will continue to focus on consistent execution and expense management in order to continue to drive both top and bottom-line growth. Now I will turn it over to Helen so that we can start taking some of your questions.

Thank you, James. Gwen, will you please begin polling for questions?

(Operator Instructions)

While the operator is polling for questions, I would like to update you on a few upcoming events. We will be presenting at the Citi Technology Conference on September 7 in New York and the Deutsche Technology Conference on September 13 in Las Vegas.

Lastly, we will be reporting our fiscal second-quarter results on October 26. For a complete list of our investor related events, please visit our events section of the Investor Relations website. Gwen, we are ready for our first question.

Walter Pritchard, Citi.

Just two questions. One on the consumer side -- Enrique, you talked about strength in that business and I'm just curious, we've had just a dramatically weakened consumer PC environment for the last four or five quarters, and I'm wondering, what do you see just in the characteristics of your business? It sounds like bookings are still relatively strong, but I'm curious kind of how you've seen that business change with a very much weakened consumer PC environment.

What we continue to see, Walter, is that our team continues to execute very well on the ability to continue to move people to our premium suites -- Norton Internet Security and Norton 360 -- and then, it's also just great execution on our using our own in-house e-commerce platform which allows us to do a much better job of monetizing and increasing the dollars per transaction for every new user that comes into our online store.

So, that combination in the core business is performing very, very well. The other side of it is, as we move into some of our new initiatives around Norton Online Backup, Norton Live Services, those services are now starting to contribute to the growth of the business and that's a new opportunity for us that we've just started to effectively monetize. I think we talked about a 37% growth in the non-core software components being [Backup Life Services] and the other things that we're doing beyond the core products.

And then, James, just as a follow-up on the guidance, I guess if we do the math right, it looks like you are looking for buildings that are about flat year over year. And I guess it seems like the trajectory of the business right now is better than that. And I'm just curious on what you would expect that could cause things to potentially be worse than where they are right now

I think when we look at an implied billings figure, we've really got to be careful to take into account the year-over-year impact on the deferred revenue balance, both acquisitions and foreign exchange. So, as you look to adjust for all of that, I would be comfortable that we'll continue to see revenue and deferred revenue growing in the future. So, that's what I would really urge everyone to focus on around the implied billings statistics.

Okay, thanks. We'll take a look at that.

Brad Zelnick, Macquarie.

Congratulations on a nice quarter. Enrique, Europe seemed to perform a bit weaker than the Americas and Asia Pac. This is not all that surprising given some of the data points that we heard from other companies in the space. But could you maybe comment a little bit about what you're seeing specifically in the region?

Sure. As we look at -- as we look across the regions and we look specifically at Europe, it's -- you're seeing what we reported. What I feel encouraged by is we are seeing good billings that are basically driving -- will drive future revenue and this was one of the best quarters we've had probably in the last four or five coming out of Europe.

We saw good strength out of our UK business, our Central European business in Germany, Switzerland did very well. Also, some of the places where people have been very worried -- I mean, along the Mediterranean -- Spain, Italy, Greece, they all performed well for us.

So that will come through as we go forward and start recognizing the revenue coming out of the billings that we did in the quarter. So, overall, Europe actually did better than it's showing up in the revenue right now, Brad.

Thanks, Enrique. And, James, if I could just ask on the consumer business, 49% GAAP operating margins this quarter is the best that I think you've had in about eight quarters. And I'm curious, is this mostly due to weaker PC shipments or is there something else that might be changing relative to pricing or conversion rates? Is there any insight you can give us there? Thank you very much.

Well, we did see lower OEM fees during the quarter. So, that had really more to do with the structure of our agreements with the OEMs than it did any diminishment of units in the June quarter.

In fact, we saw a pretty good growth in units in the June quarter. So, there was a modest expense benefit, less than a handful of million dollars. So I was pleased with the ability to drive general execution there across the consumer business.

John DiFucci, JPMorgan.

This is Ken Talanian in for John. Just a question on your storage business.

It looked like you saw pretty decent growth this quarter. We wanted to know if that would kind of continue going forward as Oracle continues to invest in their platforms and you expand into others.

We are definitely seeing a trend. It's a couple quarters now that we've seen license improvement in that business. And that really is about our ability to drive into other platforms, into the Linux platform, specifically Red Hat; also on the Windows platform.

And then we're also bringing new capabilities. I commented about ApplicationHA which is a new product that we co-developed with VMware that is an important component of making a virtualized environment more robust.

So, we absolutely believe that the trends that you're seeing there are going to continue. And it's important to note that a lot of the native tools or tools that are coming from some of the proprietary vendors, we are definitely seeing people recommit and re-buy into the capabilities that we deliver from our Storage Management and Availability business.

I mean we saw some specific big deals where people had considered or started to use some of the alternatives from companies like you mentioned, Oracle and others. And they've re-committed to our capabilities.

So we're pleased with the last several quarters of results in the Storage and Availability Management business. And, I actually believe that that team that we've put in place here at Symantec is just doing an outstanding job.

Adam Holt, Morgan Stanley.

My question is about the enterprise security business. It looks like on a constant currency organic basis, it was flattish and you've got what seems like a lot of product momentum there.

So I guess two questions. One, when do you think some of the newer [or growth year] products start to have more of a material impact? And secondly, how are you feeling about the SMB business currently and its trajectory in terms of it getting maybe a little bit better?

As you see our DLP business, our MSS security services, our authentication services continue to grow in overall scale and also our SaaS businesses; I expect that that will be a more meaningful contributor to the overall growth rate of the Security Compliance segment. You know, SMB we announced some changes in organizational structure in mid-May and that team we just did our business review -- we are clearly starting to see progress.

But, that is a lot of work that we've got to do there around continuing to enable our partners, driving demand, I talked -- I touched on the new product [down in our] Symantec Endpoint Protection for small business, the new release of SEP 12. And so there's a lot of work that we're doing to drive better results.

But that continues to be a focus area for the Company and I expect that will be the case for the remainder of this fiscal year and into next year. But I'm very happy with the work the team has already done and I expect to see that continue to improve. But that's been the one area that we are going to have to continue to do some focused work.

If I could just ask a quick follow-up, it looked like very good large deal activity in a quarter that some were worried about the end of the quarter deal environment. Maybe talk a little bit about whether there was anything anomalous in large deals and what you think drove the success there. Thank you.

Absolutely. So it's actually better execution by our sales team.

If you look at it, the team was very focused on getting a fast start to the year and it was everything from getting quotas out sooner to how do we make sure that we look at better account planning, how do we do better deal reviews, executive engagement. And I just think our sales team is executing better than we have seen in probably five to 10 years here at Symantec. I'm very pleased with the work they're doing and they were focused on getting that fast start and they absolutely did it.

Brent Thill, UBS.

Enrique, just on the environment, obviously the growth rate you're giving is a pretty solid outlook. But when you take into account some of the things that are going on in the government as well as Europe, I would assume that's in your forecast, and I just wanted to clarify that and just in terms of how you're thinking about that in the back half of the year. And then I just want to follow up with a quick follow-up.

Sure, Brent. So when you think about the current environment, we are very focused on the big trends that are driving our business -- the threat landscape, I mean it's more toxic than ever. The attacks are more targeted.

I go to -- every major customer I talk to is thinking about how do they protect their data, their environment, their infrastructure. So you've got that big trend that's a positive.

The second thing is that you continue to see the growth in data. And we've been now for a number of quarters delivering double-digit growth around our backup and archiving business, and that is because customers are really saying how do I protect all of this data that's being created?

And so that combination of those two trends are absolutely helping Symantec. Now as far as you commented on the current issues around the government, obviously that's something we don't control.

We're not really in a position to look at or say what happens. And so, our team has absolutely been thinking through what is impacted by changes like that, and obviously it's our federal business and so we've thought through our expectations there. We understand the risks.

And as we look at our forecasting process, while the government is an important part of our business, we have as you know a fairly diverse business and we have thought through what those implications are. At this point, though, like I said, we don't control what they do in Washington or anywhere else in the governments around the world, and we are focused on continuing to drive much better execution here at Symantec, and hopefully what you're seeing from our results is that that's what we're doing quarter in and quarter out.

And just a higher-level strategy question. There have been some network vendors that have talked about adding more Endpoint Security offerings and I guess just in terms of your emphasis on network, how do you think differently about that as others are starting to eye your market?

We very much focus on the information. You -- the device to us is irrelevant. We feel like the device is where the end user interacts with the information that they use for their personal -- for their personal life, for their corporate life and we're very focused on that.

Who are you and should you have access to the information? And I think that approach is separate from whatever the device is or quite frankly for what you can do at the network infrastructure layer.

Now, that said, we obviously are sensitive to what our customers are saying and what we continue to see as our results show in products like DLP and managed security services, they are coming to us and saying help us protect the information, help us manage our security operations. And that's what we'll continue to do.

Philip Winslow, Credit Suisse.

This is Dennis Henson for Phil Winslow. License revenues beat expectations over the last couple quarters. Can you provide more details on what's driving the turnaround here and what your expectations are going forward? Thanks.

What we continue to see is as we drive some of these new product lines, DLP, backup, the stabilization in our Storage Management and Availability business, these products are the biggest drivers of new license for the Company and, we continue to see big favorable moves in our direction. We are winning in the DLP space.

Our backup business is doing very, very well, not only on our traditional software business, but also our appliance business. We see an incredible demand for the work that we're doing in appliances.

I was talking to the team just the other day and our ability to integrate de-duplication, the media server capabilities into one appliance is absolutely what customers wanted and we are delivering that into the market. We're obviously going to leverage our very big installed base in backup and take those appliances aggressively to market worldwide.

So my expectation is that we will continue to see improvements in new license going forward and, also, that you've got to be sensitive to which doesn't quite come across when you license is that some of our products, like our SaaS products, don't show up in new license because those are more subscription oriented. And so you've got to look at that trade-off because over time, my expectation is you'll start seeing a bigger move to those subscription products, not just to the new license products. That means MSS products, our SaaS-based offerings, the consumer business obviously and our new VeriSign assets will absolutely be more of that subscription or ratable oriented offering.

And can you provide some more color on the VeriSign business this quarter? What you saw in terms of trends in overall ASPs and the mix of the premium certs?

We definitely are seeing -- the strategy that our team has taken of saying we're going to go after every customer. If they are a value buyer, we've got a great strategy to satisfy that demand. If you are a premium buyer and you understand the differentiated value that we bring with the daily scans, the vulnerability detection on your site, the extended validation certificate.

So we're very comfortable with what we're seeing in the mix. I think prices have stabilized and our team is executing very, very well in our trust services business and I think again, that's something that's sustainable.

Neil Herman, Ticonderoga Securities.

It looks like your operating cash flow growth in the quarter on a year-over-year basis was about 50%; quite impressive. If you could kind of give us a sense in terms of your thoughts for the full year in terms of what we should be thinking about with respect to your operating cash flow.

And then number two, if you could update us a bit on the competitive environment in particular with McAfee as being part of Intel, is that creating opportunities for you and is part of that also -- secure ID cards have had a problem. Is that also creating more opportunities for you as well?

Let me take the cash flow question first of all. What I would expect is that for the first half of the fiscal year, our cash flow from operations is going to be up about 20% year over year. So, a strong growth rate.

And, we don't offer full-year guidance on that metric but, we're certainly pleased with the first quarter's result and are looking to that first half metric that I mentioned.

With regards to the competitive environment, clearly we've got a distracted competitor. You are integrating what was a focused security company into a much larger semiconductor company, more diversified portfolio.

And so, that's a benefit to us. We're clearly seeing some displacements.

We're seeing a lot of people leave. They've had some leadership changes there.

So my expectation is that that is a benefit to our security business that will continue for some time. With regards to some of the other attacks and some of the other things that you talk about, clearly there's customer concern about the attacks.

You talked about a specific vendor in RSA, and that is driving people coming to us and saying how can we use your VeriSign Identity Protection technology as a replacement for some if not all of the deployment that we've got with our existing offering? And so ultimately, both of those are positives for Symantec and I expect them to continue for the foreseeable future.

Gregg Moskowitz, Cowen and Co.

Just a follow-up on the storage business. Stabilization for Sun obviously has been a well-documented topic. But, it's nice to see storage management revenues actually grow year over year; something we haven't seen in a long time. Just wondering, Enrique, if you can update us on the outlook for your storage management business in particular. We all know it's not high-growth certainly but, curious if you think you've turned a corner there.

When you look at that business, what's important to us is that we are competing well against the native tools. We are adding other platforms and doing well on Linux and we're doing well on Windows, and then we are also adding new capabilities.

So we're bringing in things like ApplicationHA. So you're right, we've had some pretty big headwinds there over the last several years that our team has been able to say here is how we go after that market and create real value for customers.

Customers still see the value, the clear value in our high-performance file systems, some of the new functionality around thin provisioning, some of the new work we've done on high availability. And so I do believe that great execution there by our team and customers understanding the value we bring on virtualized platforms with products like ApplicationHA are all positive. Now remember, ApHA is a new product that's relatively small and so it's gonna take time to for that to have any meaningful impact on business.

And I think also, the fact that our products work across the range of different environments that tend to be resident in the data center is really of great value to our customers as well.

Okay, thanks, and then a quick follow-up on Clearwell. James, you talked about $8 million to $12 million in revenues. Previously you were looking for $10 million to $15 million. Is that just because of the earlier than expected close or are there any other reasons?

No. It's just our sense right now for where we see the Clearwell opportunity and obviously we're going to go and work and see if we can beat that number.

Robert Breza, RBC Capital Markets.

Maybe, James, just a quick housekeeping item. I know you mentioned taxes would be 28% for this coming quarter. Any change in the tax rate beyond that that you can help us understand?

No, I think that's a good planning assumption for the year at this stage and we'll update you each quarter.

Great. And then, Enrique, you mentioned I think in your prepared remarks or at least in the large deal count you're seeing very good cross-sell opportunity. Have -- or can you provide us any kind of color in terms of as you think of your customer base, how many of them have the multiple products or just kind of what is the penetration opportunity out of that cross-sell? Thanks.

When you look at our customer base, what you've got is our team is doing a great job of building stronger and better relationships on our accounts. A lot of that starts with we're very focused on measuring customer loyalty and our customer loyalty numbers in general over the last several years have trended up.

That means we're building better relationships at our accounts and the whole Company is focused on that. As far as a specific metric of what we've got as far as how many of our customers have both, the majority of customers in the Global 2000 use some level of product from Symantec -- that they have some security from Symantec, they have some of our storage products.

What really is happening is that they are expanding the utilization of those products. So that's how you want to think about it.

In some of the deals I mentioned, for example the one with the large telecommunications provider, they were already using security. They had some of our storage products, but they decided to extend the use further to use more of them.

And that's what I expect with great execution in our sales team is that we'll be able to get more revenue per customer as they use more of our portfolio. With Clearwell, for example, as we bring that in, that's going to be a strengthening of both our backup and archiving businesses.

And so that will again give us one more thing to drive into the account base and I absolutely expect that customers will do more with a broader set of Symantec's products. In every call, we talk about cross-sell opportunities and I think our sales team is doing a great job of making that happen.

Thanks. Nice quarter.

Tom Ernst, Deutsche Bank.

This is Jobin Mathew on behalf of Tom. I would like to understand the mobile business. In particular, can you talk about the business model and the marketshare in terms of some of your new products like Norton Mobile 2.0 which is seeing a lot of downloads?

When you look at the mobile space, we've had 600,000 downloads and so we are seeing interest. One of the questions I get all the time is, is there going to be a need for security products on some of these mobile platforms?

Well, what we're seeing is absolutely customers believe there is a need with a lot of these downloads. But it's still early and there's still 1.4 billion PCs that need to be protected.

I don't have a market share statistic for you as far as mobile market share because it's just one of those things that I haven't seen any external data. But what I'm really pleased with is a couple things.

One, I believe there's clear demand for the mobile platform. Two, I think the focus Symantec has in that area under both [Janice] in consumer and [Frances] in enterprise is going to allow us to capture a meaningful part of the market. And so as that market unfolds, I'm confident we're going to do very well.

Philip Rueppel, Wells Fargo Securities.

James, your guidance for next quarter implies operating margins, non-GAAP operating margins declining. Is that due to just the Clearwell operating expenses or are there some other investments that you're making on the operating expense line?

Clearly there's an impact from Clearwell on the operating margin side. So I'm comfortable there, what I said at analyst day, about operating margins is still operative for the year.

Okay, thanks. And then just on the Clearwell business, is it fully integrated now? Is that $8 million to $12 million that you mentioned, is that kind of a full quarter for them and is it in the hands of Symantec sales reps or is that yet to come in future periods?

Yes, that is a full quarter of revenue from Clearwell in the September period. And, we are certainly very much engaged in terms of updating the sales force on the opportunity to enhance what was already our eDiscovery offerings to integrate those eDiscovery capabilities with our market leading archiving capability. So, we feel as though we are in an good space here and we now have the leading solution. So, we're getting very focused on getting that to market as quickly as we can.

And one more if I could. Enrique, you mentioned a couple of times the strength in the appliance piece of your business.

Is that strength sort of being attractive to new customers or is it just as interesting for existing customers upgrading or expanding their platforms? And you mentioned Backup Exec will come on appliance. Are there other product areas and families that you see that you might introduce on the appliance form factor over the course of the next year?

So two parts to that, Phil. First, we absolutely -- a lot of the appliance businesses with the high-end appliance has been into our current installed base, but we are seeing customers that have not been using our data protection solutions broadly take a close look at the appliances because it does simplify the day-to-day deployment and management.

When you can integrate a lot of the core backup infrastructure into one appliance, so you don't have to buy a separate technology for de-duplication, separate media servers, separate software, you integrate that all into one box, that is something that is definitely not just something that our installed base wants, that's something that other new customers -- but it is more in the installed base that is the early adoption.

You are correct. The reason we moved to the appliances is because customers again went easier to manage, easier to deploy. And so you're seeing us develop and deliver a series of appliances.

And so you've heard us talk about two or three different appliances. I expect that to continue and you'll probably see several of our other products be delivered on the appliance form factor.

Michael Curtis, Raymond James.

It's James Westman sitting in for Michael. In storage foundation, how did it grow quarter to quarter in license and maintenance and when do you expect it to start growing?

License and maintenance. So (multiple speakers)

Well, we saw growth as we were alluding to earlier, the Storage and Availability Management business was a contributor to that Company growth in license. We saw Company growth up 4% year over year and while we don't break that number down into its constituent parts, it was clearly one of the contributors.

I apologize if you guys have been over this. We've been flipping back and forth between calls.

No problem.

No problem. We were -- just to be clear though, what we were trying to figure out is we saw license growth for several consecutive quarters. And that business absolutely grew year over year and so we just wanted to make sure we answered the right question.

Got it and that covers it. Thank you.

Daniel Ives, FBR.

Enrique, I was just curious, when you went through sort of the quarter-end close, did anything from just a high level surprise you in terms of just deal sizes, regions, just anything that stood out that you saw when you kind of went through sort of end of the quarter deal flow pipeline?

What I saw, to be honest, nothing really surprised me. What was clear is our -- the last several quarters, I've been encouraged by our close rates.

I've just been seeing our team do a good job of driving to closure and I think that's the disciplined process that our sales leadership team has been driving over the last several years, and so nothing surprising. Just real good execution by the sales team.

Gwen, we have time for one last question.

Craig Nankervis, First Analysis.

Enrique, nice job on the quarter. Enrique, you commented at the analyst event a couple of months ago or whenever it was that you pushed out some activities that you customarily accomplish in the June quarter to free up the Company to have a fast start.

Clearly you've had a fast start. Can you go into that a bit, what you did that was different this time and, whatever it was, how much you attribute the results to that versus other factors?

I think ultimately we're very thoughtful about learning from what happens each quarter and so, what we've done is, we've said what are the things that allow our team to get focused? Well, let's get quotas out as early as possible. Let's look at what are anything that distracts or keeps our team from getting engaged in the quarter.

And so there are a number of activities that we look to complete either virtually or push out. So for example, our sales conference, we held it in July instead of holding it in the first quarter.

That's just one of many examples because the key is we obviously go as aggressive as possible to finish our fiscal year, and so we've got to be in the pipeline building as early as possible. So the combination of quotas getting out earlier, moving some activities out and also thinking about the pipeline earlier meaning not just waiting until you're in quarter because as you know in enterprise software, it takes time to build and close pipeline. So just the focus that we've had on doing a much better and more disciplined job of managing the sales organization, managing the accounts, managing the pipeline is obviously working.

So, whatever got pushed out is not going to have some sort of impact in another quarter in which it's now going to be accomplished. It's not that sort of aftereffect thing?

No, it's not. Everything that -- we thought through what we needed to do and like I said, we basically have managed through all those activities and the biggest drivers were really just great execution by the sales force and making sure we had the right account discipline.

That concludes our question-and-answer session. I would now like to turn the call back to Enrique Salem for closing remarks.

Thanks, operator. I'm pleased with the team's execution and our better-than-expected results for the fourth consecutive quarter and I am optimistic about our prospects for this quarter. So, thank you for joining us this afternoon and I look forward to speaking with you again soon. Thank you.

Thank you, everyone. That does conclude today's conference. We thank you for your participation.