諾頓 (NLOK) 2013 Q1 法說會逐字稿

Good day and welcome to Symantec's first quarter 2013 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Helyn Corcos, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you. Good morning and thank you for joining our call to discuss our first quarter results for fiscal 2013. With me today are Steve Bennett, Symantec's newly appointed Chairman, President, and CEO; and James Beer, Symantec's Executive Vice President and CFO. In a moment, I will turn the call over to Steve. He will make a few opening remarks, then James will provide quarterly highlights and review our financial results as well as guidance assumptions as outlined in the press release. This will be followed by 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 and a copy of today's prepared remarks will be available shortly after the call is completed.

Before we begin, I'd like to remind you that we provide year-over-year constant currency growth rates in our prepared remarks unless otherwise stated. Earnings per share growth rates are provided on an as-recorded basis only. We use our foreign currency rules of sum in our guidance section for all constant currency year-over-year growth rates.

For the June 2012 quarter, the actual weighted average exchange rate was $1.28 per euro and the end-of-period rate was $1.27 per euro compared to the guided rate of $1.32. For the June '11 quarter, the actual weighted average was $1.44 per euro and the end-of-period rate was $1.45. We've included a summary of the year-over-year constant currency and actual growth rates in our press release table and in our supplemental information which are available on the website.

Some of the information discussed on this call, including our projections regarding revenue, operating results, deferred revenue, amortization of aquisition-related intangibles, and stock-based compensation for the coming quarter are contained forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statement. Additional information concerning these risks and uncertainties can be found in the Company's most recent periodic report filed with the US Securities and Exchange Commission. Symantec assumes no obligation to update any forward-looking statements.

In addition to reporting financial results in accordance with generally acceptable 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. Steve Bennett.

Thanks, Helyn, and good morning, everyone. Thanks really for joining us at this rescheduled time. We apologize for the last minute change, but because of the announcement, we felt it was the right thing to do to make this change on short notice. So, I'm really glad to be here on our earnings call on my first day on my new job.

The decision to replace Enrique was a tough one that was not based on any particular event or issue, but one that the Board made after the reflection of the ongoing Company performance. While progress has been made over the last three years in many areas, it was the Board's decision that making a change now was in the best interest of all of our stakeholders. Enrique has been a significant contributer during his 19 years at Symantec. Throughout his time and especially during his last three years as CEO, Enrique showed an incredible dedication to customers and strong enthusiasm to pursue new emerging opportunities. I want to recognize and thank him for his considerable commitment and wish him the best in the future.

My perspective is while the Company has very strong assets, we are underperforming against the opportunities, and I'm very excited about working with our leaders to speed up the pace in which we create value for all of our stakeholders. My first order of business will be to speak with our customers, partners and shareholders and over the next 90 to 120 days I'm going on a tour to listen, learn, and to work with the leadership team to figure out the right strategy to leverage all of Symantec's resources to accelerate our rate of value creation. Once this tour is completed, I'll share our go-forward strategy to win in the marketplace and how we're going to drive accelerated revenue and profit growth. This is a process I've used before many times in the past. It's been successful and I look forward to applying a similar play book at Symantec. With that, I'll turn the call over to James to review the quarterly highlights and financial details.

Thank you, Steve, and good morning. Let me start by welcoming you, Steve, to the management team. I look forward to working closely with you to drive value creation at Symantec. Now, let me start with some highlights from the quarter.

Our consumer results were driven by ongoing cross selling and upselling. The consumer security products continue to demonstrate best-in-class quality, winning over 250 awards in the past two years. Though early in their product lifecycle, our newest premium suites, Norton One, and Norton 360 Everywhere have received a very positive feedback, with Norton One earning the editor's choice award from PC Magazine. We also refreshed and extended our portfolio to target the growing number of Mac users. Norton Online Backup and Norton Live solutions maintained their strong performance, and continued to meaningful contributors to the growth of our business. Our Norton Mobile Security solution maintained its leadership position in the mobile security market, as we surpassed Lookout as the top grossing security app in the Google Play marketplace.

All still a nascent market, our products continue to receive top reviews, with Norton mobile security earning 4.4 stars in Google Play. We also signed new Norton Mobile Security partnerships with several leading wireless retailers and carriers in all three regions. On the enterprise side, our backup, archiving and e-discovery solutions continued to drive momentum. Our Enterprise Backup business continues to be driven by customers' desire to minimize complexity and backup challenges without complicating recovery. With three Best of VMworld awards, Symantec is the industry leader in VM Ware and Hyper V backup. Only Symantec offers a single product capable of providing true individual file recovery, deduplication, and policy management across the VM Ware, Hyper V, and traditional physical servers. Let me spend a moment on an area where we did not execute to our high standards on a new product launch.

While we delivered a much-improved user interface for Backup Exec, we excluded specific functionality that customers still required. As such, we have now reinstated this functionality to further simplify the backup process. We expect it will take two to three quarters to get Backup Exec back on track. Our backup appliance business is gaining significant traction, and has been well received by customers and the industry alike. Our 5220 appliance won the Backup and Recovery award at Microsoft's Best of Tech-Ed 2012 event. In the June quarter, we delivered our first appliance for the mid-market, and we continue to grow our appliance business by expanding our portfolio into additional geographies. The quality of our endpoint protection product, SEP 12, continues to garner industry acclaim. Third party research has confirmed that SEP 12 uses less computing power to provide greater protection than competitive offerings.

In addition, at the Gartner Security and Risk Management Summit, the quality of SEP was identified as a primary threat to our competitors. Trust Services, our SSL certificate business had another strong quarter. We continued to differentiate our premium and value SSL brands, driving growth in both market segments. We have also simplified and streamlined our online enrollment process, which will be rolled out to other geographies throughout the year. Our data loss prevention solutions saw strong growth across all of our geographies, including an increased appetite for DLP in Europe. We are winning competitive bids by demonstrating our market-leading capability to protect sensitive information from the desktop to the server. We rolled out DLP for tablets in fiscal 2012 to accommodate the breadth of devices in use, and plan to extend support to the iPhone later this year. eDiscovery and cloud based archiving exceeded our expectations this quarter, as we leveraged the scope and scale of the Symantec sales force. Both products were named leaders in their respective Gartner magic quadrants, as customers reported that our solutions were easy to buy, implement, and use.

User authentication continued its strong growth in the first quarter. We continue to gain market share, as customers choose our software-as-a-service-based authentication solution for its ease-of-use and best in class security. As governments and businesses deliver more online services requiring security, we expect to see continued growth for these services. Leveraging our user authentication technology, our security for the cloud solution, 03, signed its first large enterprise customer, and continues to garner significant attention. Enterprises are rapidly shifting their software needs to the cloud, and the security and visibility 03 offers addresses a critical customer need. We made significant progress towards developing the first complete enterprise mobility solution, including device and application management, data protection, and full compliance capabilities. While we work towards integrating these best-of-breed capabilities, we continue to receive positive feedback from customers. Moving now to the financial details.

We posted better than expected first quarter results for each of our key financial metrics for which we guide; revenue, deferred revenue, and EPS. GAAP revenue totaled $1.67 billion, an increase of 4% versus the June 2011 period. Our Clearwell and Live Office acquisitions together accounted for $24 million of total revenue. Our organic constant currency revenue growth rate for the June quarter was 1% year over year. Despite the US dollar strengthening by approximately 11% against the Euro year over year, our results were better than expected. Total foreign currency movements negatively impacted revenue growth by 3 percentage points, driving a reported revenue growth rate of 1%. Our subscription business continues to grow. In constant currency, our license revenue declined 6%, while content and maintenance revenue grew 2%. Subscription revenue, which includes our consumer, authentication, MSS, and software-as-a-service offerings grew 10%, and accounted for 44% of total revenue, compared to 42% of revenue in the year-ago period.

Enterprise subscriptions, which exclude our consumer offerings, grew 24% and accounted for 14% of total revenue, as compared to 12% of revenue in the year-ago period. The consumer business generated revenue of $521 million, up 2% year over year, driven by upselling customers to our premium suites, and growing our emergency businesses, such as online backup, Norton Live services, and our mobile applications. The storage and server management segment generated revenue of $584 million, an increase of 1% as compared to the June 2011 quarter, driven by continued growth in our backup and archiving business. Revenue from the information management business, which includes our backup archiving and eDiscovery offerings increased 6% year over year, driven by our appliances, cloud-based archiving, and eDiscovery solutions. Revenue from the storage and availability management business declined 8% year over year.

This business continues to be highly profitable, and generates strong cash flow for the Company. The security and compliance segment generated a revenue of $501, million up 10% year over year, as our endpoint protection business continues to gain market share with enterprise customers. Our authentication services and data loss prevention solutions continued to post double-digit growth. This is the first quarter of year-over-year growth for our services business since we transitioned our consulting services to specialized partners. Our services business generated revenue of $62 million, up 1% year over year. Turning, now, to total company margins. Consistent with the growth we are experiencing in our subscription and appliance businesses, non-GAAP gross margin declined 140 basis points to 84.3%, as higher costs are associated with these businesses, a trend we expect to continue going forward. Non-GAAP operating margin was 26.1%, down 60 basis points compared to the June 2011 quarter.

Operating margins were better than we expected in the June quarter, due to lower-than-expected OEM fees, which accounted for approximately $0.01 of benefits to EPS. In addition, ongoing cost controls decreased expenses, as we continue to tightly manage our expense structure. Improved operating leverage from better-than-expected revenue positively impacted EPS by approximately $0.02. Net income of $309 million resulted in fully diluted non-GAAP earnings per share of $0.43. Continued growth in subscriptions and maintenance contributed to deferred revenue growth of 5% year over year to total $3.75 billion. We exited the June quarter was $4.1 billion in cash, cash equivalents, and short-term investments, which was an increase of 79% year over year, driven primarily by the proceeds we received from our $1 billion senior note offering on June 14, and the sale of our 49% stake in the Huawei-Symantec joint venture. As we exited the June quarter, approximately 47% of our cash balance resided in the US, which includes the $1 billion in net proceeds from our June debt offering that will be used to retire our $1 billion convertible notes maturing in June of 2013.

Excluding this $1 billion, approximately 30% of our cash balance resides in the US. We continued repurchasing our shares during the quarter, spending $301 million of our domestic cash to repurchase 19 million shares at an average price of $15.59. Foreign currency movements negatively impacted operating cash flow by $12 million year over year. Cash flow from operating activities for the June quarter totaled $340 million. Now, I'd like to spend a few minutes discussing our guidance for the September 2012 quarter. Given the recent strengthening of the US dollar relative to other currencies, we expect GAAP revenue for the September 2012 quarter to be in the range of $1.635 billion to $1.665 billion. We expect year-over-year revenue to be down 1% to 3% on an as-reported basis, and up 1% to 3% in constant currency. Approximately 76%, or $1.25 billion, of our September quarter revenue is estimated to come from the balance sheet. Live Office is expected to contribute between $7 million and $8 million to our September quarter revenue. As a result of raising $1 billion in senior notes during June, our interest expense for the next four quarters will be higher by $8 million per quarter.

This will decrease EPS by $0.08 per quarter for a total of approximately $0.03 of dilution through June 2013. GAAP earnings per share are estimated to be between $0.15 and $0.19, as compared to $0.24 in the year-ago period. Non-GAAP earnings per share are estimated to be between $0.35 and $0.39, down 10% to flat on an as-reported basis. GAAP deferred revenue is estimated to be between $3.49 billion and $3.55 billion. We are expecting deferred revenue to be up 1% to 3% on an as-reported basis, and up 3% to 4% in constant currency. I would like to remind everyone that the September quarter typically produces the lowest quarterly operating cash flow of each year. Lastly, our guidance assumes an exchange rate of $1.23 per Euro versus the weighted average rate of a $1.41, and the end-of-period rate of $1.34 per Euro in the September 2011 quarter. Our $1.23 per Euro assumption reflects a decrease of 13% from our weighted average rate in the year-ago period, and a decrease of 4% sequentially. Our guidance assumes an effective tax rate of 28.5%, and a common stock equivalents total for the quarter of approximately 710 million shares. Now, I will turn it over to Helyn, so that we can start taking some of your questions.

Thank you, James. Operator, will you please begin polling for questions.

(Operator Instructions )

While the operator is polling for questions, I'd like to update you on our upcoming conference events. We will be presenting at the Citi Technology Conference on September 5 in New York City. We will be reporting our fiscal second quarter results on October 24. For a complete list of all of our investor-related events, please visit our Events section of the Investor Relations website.

Operator, we're ready to take our first question.

Brad Zelnick, Macquarie.

Steve, I appreciate the need to do some initial fact-finding over the next several months, and go out and do the tour that you spoke of. But are there any observations as Chairman that you can share, and any obvious changes that can be made to drive shareholder value?

Brad, thanks.

I think the answer is -- I debated whether to put this in the script or not -- in the employee communication, what we are saying is a two-prong approach. While we spend 90 to 120 days working through to make sure that we have the right strategy to lead the security market in the future, to win in the mobile connected virtual world like we won in the desktop PC world, we're also going to learn a lot of things in that process that we'll make action oriented decisions as soon as we run into.

I do not know exactly what those are. I don't come into the job with some clarity on that. But rest assured that I want to make a difference quickly in Symantec, and help energize the place, and make the kind of decisions that are going to help us accelerate value creation. So it is a two-prong approach -- while we're working on this strategy, we will also be making shorter-term decisions. But I can't give you any clarity around what those will be today.

Just a follow up for James.

James, if I look at -- you mentioned in your prepared remarks that cross-selling was strong in the quarter. But if I look at the percentage of deals with both storage and security, it seems to be at an all-time low. Is there something about the coordination of the sales effort that might have changed? And do you still believe that Symantec has the right offering to be successful in the market, in terms of going to market with both halves of the offering?

I think our sales force, absolutely, continues to make more progress in terms of the cross-selling effort. I think what we are seeing in the marketplace right now is more, smaller transactions; customers really looking to purchase what they need for their immediate term, rather than some of the broader transactions that we have seen in prior quarters. I think that is just a reflection of the macro environment.

John DiFucci, JPMorgan.

The first question is for Steve.

Steve I appreciate that it is probably too early to say exactly what you're going to do, but one of the things whenever we see a change at the helm like this, there is always high probability or high risk for disruptions in the business. Just a question of what you're going to do to try to offset that, at least over the next couple of quarters?

I think the advantage I have coming in from the Chairman role is, I have been working and getting to know the Management team over the last couple of years, and there is a lot of really positive things going on here. I am quite excited about some of the new product launches that we have just launched. I think it is too early to speculate, because I think it is going to be a lot of subtle things that have to change and evolve. This is an evolution, not a revolution. Maybe I'll learn some things that, as we go forward, that we will have to change, but I don't sense a big amount of disruption. I think we have a very strong Leadership team.

I compare this to what I saw when I came to Intuit in 2000, and I actually think Symantec has a lot of capabilities in place that we had to build at Intuit. So I don't see a lot of disruption, but we will see and deal with that.

If I might, James, just a question on the guidance. It looks pretty modest, here, and probably appropriately. But does that have something to do with some of the change, here, and I guess what is behind this? Is it more about, if it is pretty much flattish revenue, and constant currency up 1% to 3%? But is there increased concerns about the economy? It looks like Europe, actually, was up on a constant currency basis, or EMEA, which is interesting.

Can you comment about that, about the macro environment and how that may be affecting guidance?

Obviously, as we go through our usual guidance process, we think about the macro environment, the customer environment, and so forth; and we feel as though we have appropriately taken that into account in both the absolute guidance and the way in which we guide. You, I am sure, have noticed, we have broadened out our ranges, for example. We have also got to acknowledge that foreign exchange is a material headwind here, both year over year and sequentially, as well, by the looks of things. So any of those are important factors to really focus on as you think through the guide that we have offered this morning.

Walter Pritchard, Citi.

James, just to follow-up on Brad's question on the multi-product transactions -- it does look like, independent of size, both of those metrics -- the $300 and under and the $1 million and over -- took a pretty dramatic downtick. Was that a factor of Backup Exec in the quarter? Just trying to put a finer point on what drove that, because it was fairly steady, and those metrics did both to take a tick down.

I think it is also fair to say that, year over year, the June quarter was a tough compare for us on these large deal statistics. We had some quite robust statistics this time a year ago. So Backup Exec -- yes, we acknowledged in our commentary that we have challenges there. Yes, that is a component of it. Again, I see a clear shift towards people buying more so for their immediate needs, rather than making longer-term commitments necessarily at this point in time. I do not think that is surprising, given where we are in the overall environment.

Just a question on Europe -- also for you, James -- it looks like your performance was pretty good, especially in light of what is going on over there. And I was wondering if you could put a little bit finer point on either country commentary, or some regional commentary around what you saw in the different geographies, and if it varied between Consumer and Enterprise, and so forth?

We are very pleased with the continued performance of the UK, and also in our emerging EMEA regions. So Middle East, parts of Africa, parts of Eastern Europe. Not surprisingly, Southern Europe was much tougher for us. And I was pleased by what we saw, both on the Consumer and Enterprise side of the house.

Great. Thanks. And welcome, Steve.

Thank you.

Adam Holt, Morgan Stanley.

Great. Thank you. And Steve -- welcome back into the game.

Yes, Adam, thanks. Good to hear from you again.

I guess my first question is for you.

Obviously, you've answered the operational questions. But could you refresh us on your philosophy around capital distribution and capital structure?

I think that it has emerged over time. I think that, at the end of the day -- and we have had this discussion at the Board meeting in my previous role -- to be clear on our capital allocation philosophy is to, first, define how much money we need to run the company, kind of a minimum cash threshold. And then above that, I think a lot of companies, now, that I have been involved in are evaluating the best way to return excess cash to shareholders. That is a discussion that we are having. We do not have any decisions, or any change of direction at this point. But that is something.

I think, obviously, we want to look hard at adjusted rate of return on acquisitions that is accretive to our portfolio. I give Enrique and James and team credit for really putting a lot more rigor in the acquisition process at Symantec over the last couple of years, both on the pricing, the negotiations, and the integration. And I think the results have been better.

I think that we are going to continue to think about how we return excess cash to shareholders. I think the Company will continue to produce excess cash, and that we will produce more cash than we will spend on acquisitions. The real question is, what is the most thoughtful way to return that to shareholders? And I think that will be an ongoing discussion for the Board, and if we change some thoughts on how to deal with that, I think we will let you know. But it is a topic that is on the agenda for discussions.

That's terrific. And then maybe a question for you, James.

If you look at your license revenue growth in the last several quarters, it had been kind of stable, and obviously it is starting to move around a little bit. Is the license revenue growth, down 6% constant currency -- is that something that starts to improve as you get better mix around some of the emerging products? Or is there something else that you have to do at this point to get that business -- or that part of the business, I should say -- re-accelerated?

Adam, in terms of the license revenue growth percentage year over year, obviously we saw a bounce-back from what we were recording in the last quarter. That was important to see, and clearly we will continue to work on building that statistic. Once again, I really emphasized in my remarks the growth of subscription, because more of our new offerings into the market are on a subscription basis. So we are really pleased by the strong growth that we continue to see on our subscription business, basically, overall. But we particularly also break out the Enterprise subscription, which is growing at quite a nice 20%-plus pace.

Should we be thinking about that Business, then, as continuing to decline going forward? Or is there a level at which there is a run rate where it stabilizes? The license side.

Clearly, when you think about the license drivers of the Businesses, largely on the Enterprise side, and products like Backup Exec, as we work to get that back on track, that will be a relatively license-revenue-rich product, as is today, net backup and so forth. You know how we are focused on building our appliance activities around both of our backup product areas. I think there are opportunities to continue to build on the year-over-year license revenue statistics. I would just really emphasize the continued growth of the subscription business on the Enterprise side, and of course largely the Consumer business is a subscription service, as well.

Phil Winslow, Credit Suisse.

Steve, a question for you.

As you start to evaluate the business, here, are all sort of strategic options on the table in your mind? I.e., sale? Divestiture? Or do you actually believe that the current structure of Symantec is the appropriate one right now?

Phil, I think it is a good question. I guess my view on this is, one of the advantages of coming in from the outside is you start with a clean sheet of paper. And that is why I am so excited about the listening tour, where I will be out talking to investors, customers, partners, employees. I don't feel constrained at all by anything, and I think that will be healthy for our Company to take a clean sheet of paper, a zero base to look. And I have lots of questions to ask, and I'm going to collect a lot of data. But I am completely wide open, I start with a clean sheet of paper.

The most important thing is strategy, and structure follows a strategy. This is an important thing for me to really get right, working with the team. I'm not going to figure it out by myself. We have a team of really smart people here, and I think this fresh look will really help us. But I will tell you that I don't feel at all constrained by the Board. I took this job because I believe that our assets are better than our performance, and I need to learn what is getting in the way, and I think there is strategic clarity that we should be able to bring that will improve our focus and execution in resource allocation. And as I said earlier, so that we get back into the leadership position in the future mobile connected world that we had in the desktop PC world. That is my goal -- is to bring a strategy to the table in the next 90 to 120 days that positions us for that position in the future.

Great. Thanks. One quick follow-up.

A lot of questions today on the cross-sell percentage of this Company. Do you actually believe a single sales force for both storage and security is appropriate, or is that to be determined?

My view on this is, I think it is a good use case to run through the previous thing. I think it will be a great thing for me to learn, and I think we want to be sensitive, obviously, to any transition. I don't think you'll see any big decisions like that until we have a strategy. But structure and resource allocation follow strategy. So let's figure out where we are winning and why, where we are losing and why, and make thoughtful, informed decisions based on which hills we are going to charge, and then get everybody mobilized to charge those hills.

And we're going to pick hills that we believe we can win, based on the competitive environment, the resources and assets we have, and then we'll make whatever decisions are required, whether they are organizational, resource allocation, sales force alignment, to get all of our employees in the boat rowing in the same direction. I think that clarity of purpose will produce better results than what we have produced over the last few years.

Raimo Lenschow, Barclays

A lot of my questions have been answered, but can we go quickly, James, maybe into the cost base? You have done consistently better on the sales of market [sides] than we have anticipated. Can you talk a little bit, as you go through the transition, as you see how the top line is going, how do you think about costs in that process?

Bill Robbins and his team have been focusing for some years now on gradually improving their productivity and so forth. And I am pleased by the progress that we have all made together. We certainly feel as though there are opportunities for continued improvement over time. Some of what Bill has been focusing on of late is redesigning the way we have our specialist teams in the marketplace in order to gather together what were previously separate specialist groups into larger groups that focus on related technologies. It is things like that, that are allowing us to be more effective in terms of serving our customers, and getting greater productivity as a result. The best leverage, here, in terms of productivity is by growing the top line.

Aaron Schwartz, Jefferies.

I think a question that has come up a little bit and some people may have is -- Steve, whether this is a transitory role for you, or if this is a long-term position that you are going to commit to. And in this process -- I know you pointed out that this was not based on any singular event -- but whether a full-serve outside candidate was also looked at?

The answer to that is no, because the Board believed that, because of my experience, and track record, and knowledge of the Company, that I was the right CEO. Some background on that -- as they did look at, and did a dry search, actually, before the decision was made to promote Enrique three years ago. It just turns out, coincidentally, I was on the short list for that decision three years ago, although that search was never commenced, and the decision was made to hire Enrique.

I am the CEO. I have told my wife, this might be a five-year deal, it might be a three-year deal. But the commitment I made to the Board when I took the job is that I will do this job until I am comfortable we are in a position, and have either an internal candidate, preferably like we did at Intuit, turning over the reins to Brad Smith, I will not turn over the leadership of this Company until I have been able to get it on a course I am comfortable with. And my goal would be to stay on as Chairman at that point. So I will have a long-term involvement. And the mix of what the roles are, and how that shapes out will be determined by our ability to make sure we have got the leadership in place to help the Company achieve the strategy we're going to set out.

Terrific. That's very helpful.

Maybe a follow-up question for James. You made some comments about the seasonality to the cash flow, here, in the second quarter. Would you expect still, that for the year the cash flow could be flattish with prior year?

We don't guide to the full year for cash flow, but I will just remind everyone, obviously, over the last couple of years, we have grown cash flow consistently, and obviously that is a key goal for the Company overall.

Robert Breza with RBC Capital Markets.

Good morning. James, just a couple of questions.

You talked about, as it relates to the segments of the business, Backup Exec being kind of a two- to three-quarter process that we have got to work through here. It looks like the Consumer business -- we all know the PC market doesn't look very good, at least for the next quarter or two. Can you just talk just directionally on how you see, given that you have that deferred revenue visibility that maybe we do not have, how do you expect the Consumer business to trend over the next -- or over the year, I should say? And then maybe just as backup question to the prior analyst -- when you think about cash flow here, coming in at $340 million, and being seasonally low, it would appear difficult that it would actually grow year on year, just given where DSOs are at 34 days for the quarter. Any other finer points would be helpful.

First of all, in terms of the Consumer business, we are very pleased by the ongoing growth there. Janice and her team have put together a remarkable string, of course, of continued and consistent growth. Obviously, we are very focused on continuing that.

Underlying that is the fundamental strength of our core products that get terrific reviews consistently, while at the same time, we are very much focused on bringing new services to market, as we talked about in our prepared remarks, very much oriented around the mobile world. And I think underpinning all of that is the investment that we've put, in recent years, into the e-commerce engine, which offers us such greater granularity into pricing, the behavior of different segments of our customer base on a geographic basis. We are able to continue learning, continue developing in order to allow us this consistent ability to upsell, cross-sell, which drives the growth; as we, in essence, seed and develop our place in the newer mobile space. That is the strategy. We are absolutely focused on continuing on that; and as we execute, I think there's more opportunity for the Consumer business to grow. We are pleased by how that is consistently developing.

In terms of cash flow, obviously, I did note earlier how we had an FX headwind, and certainly, looking at how the Euro is going, it's perfectly plausible that there would be those continuing headwinds for the next several months. We will see. That said, we're very focused on continuing to grow the top line. We have got a strong set of products and services that are very relevant to the marketplaces in which we operate. Yes, we have a problem in the Backup Exec area. We're really focused on sorting that out, and with that focus, with that level of effort, we will keep building the cash flow. It is volatile, more volatile than an accounting metric, obviously, in any one quarter, but I think we have plenty of opportunity ahead.

Michael Turits, Raymond James.

Steve, a question for you, and then a follow-up for James.

Stephen, obviously the business has been pretty flat. If you had to take a look and say what you thought were the areas that would be most likely to drive re-accelerated growth near term, and those that would be most likely to drive it long term, what would those be?

I think it is too early for me to answer that question, because I'm going to start from a customer back -- Intuit has been successful by starting with an important customer problem and then working back. I'm going to, actually, in my listening and learning tour, I am going to be out talking to futurists, and people that are very where-is-the-world-going-in-the-future, and I'm going to start from the market back as we build this strategy.

I would actually prefer not to articulate different, because I want to start with customer and projected future needs, and work back, and then organize around the Company around what are the mountains that we are going to charge, what are the hills we're going to take? So I actually think it would be inside-out to think about products and services today, and I actually think that is part of our opportunity -- is to rethink strategically the whole way the Company approaches the market, come market back, and be unconstrained by existing structures, and existing way we think about things.

I'm actually quite excited to go on this listening tour and get opinions from all over the world on the most important customer problems that we can solve better than anybody else and make money. If we do that right, and focus on those critical areas, I think we will accelerate the rate of value creation for our investors and our other stakeholders. I'm going to defer that, but that'll be a robust discussion in the next 30, 90 to 120 days, or whenever I get to the point to share that. You guys, I'm sure, will be, other than our employees, some of the first ones to hear where we come down.

Thanks, Steve, and good luck with all things.

James, we have had down bookings this quarter and last quarter, and looks like the guidance for slightly down next. I think the hope had been that in the second half you would start to see bookings positive, in terms of growth. Do you think we're still on track to that?

I wouldn't try to go beyond the guidance that we have already offered this morning. But as you look at the implied billings statistics, if you do the foreign exchange adjustment, and just really focus on the organic statistics, the June quarter implied billings were up 4% year over year. So that was an important rebound from where we had been in the previous two quarters, where we were down year over year in both of those.

Gregg Moskowitz, Cowen & Co.

Steve, you had mentioned earlier that Symantec has a lot of capabilities in place that did not exist at Intuit when you had joined 12 years prior. Just wondering if you could elaborate on that, and perhaps provide some examples of what you think currently works very well at Symantec, whether from an R&D distribution, or an operational standpoint?

I think, Gregg, it is an excellent question. Let me just give you a couple of specific answers; because, as you know, what you see in the depth of level of knowledge you see as a Board member or a Chairman is a lot different than what you see as a CEO. There are some things I know, but there is a lot of things I do not know.

The Board actually went through and did a tour on Monday -- I think it was Monday, now -- of the new e-commerce platform that Janice and her team built, that James referred to earlier. I saw just an incredible e-commerce platform, that I say -- This is an unbelievable asset in our A/B testing capability, and the team that is running that is very exciting. Frankly, my conclusion on that is -- Boy, there is a lot of companies out there that should be using this, because it is better than anything I had seen. What you do with that, now, as a Company? We built it internally; it is awesome.

That is the kind of thing, Gregg, that I have got to learn more about, and say -- Hey, this is an asset. Are we really leveraging this in the way that we could, or are we just using it internal? There may be something there, there may not be anything there. I give Enrique credit -- we have a performance management system for the organization here that is pretty robust. That is pretty important as we move forward. So there's organizational things; there's assets in the customer and marketing area. I think there's a lot of question.

To be honest, I bet I have the same questions that many of you would have. And those are all things I'm going to take on in this listening and learning tour. And I'll be much better prepared to talk about that as we get together here again toward the end of the year, 120 days from now. I am actually looking forward to that discussion, because I think that I will be much better informed then than I am now.

Just building on one of those points, Steve -- one of the areas where the team is already underway around thinking -- the next step, if you will, is around the e-commerce engine, where we see potential to bring it also over on to the Enterprise side of the business, particularly focusing around small, medium-sized businesses where you have got a lot of the same types of needs and capabilities. I think there are some very interesting opportunities in the areas like that.

Steve Ashley, Robert W. Baird.

I just was going to go back to the blank sheet of paper line of questioning. I believe a mission -- I do not know if it is written into the formal mission statement -- has been to protect information. Do you go to the field in this fact-finding under that existing mission statement, or is that mission statement subject to revision in the future, after you go through this process?

I think it is a very thoughtful question. All I can do is give you my experience at Intuit, which is the most relevant. Which the mission statement has revolutionized people's lives by solving important problems. It was an unconstraining mission statement, because there is lots of problems. The logic there was, uncover important customer problems that we can solve better than anybody else in the world and make money. That is the same logic I'm going to apply at Symantec.

I learned that from Scott Cook and Bill Campbell at Intuit. I think it was very powerful, simple strategic logic. Symantec has very strong assets in many areas. The customers' needs are changing dramatically and radically. As I said, our goal is to lead in the future mobile interconnected world like we did on the desktop PC world.

I believe, and I'm very sensitive, we did not change the mission at Intuit. But it was broad enough to allow us to change the strategy. I do not know, to be honest. I don't believe we will be constrained by the mission of Symantec. I'd like to be consistent there if it does not constrain us. But that is one of the questions I am going to have to figure out. I will not be constrained in how I think about finding important customer problems that we can solve better than anybody else in the world and make money. That will be the foundation for the strategy this Company is going to move forward on.

Ed Maguire, CLSA.

I had a question, really, for James.

As you had mentioned that Enterprise subscriptions saw 22% growth -- and this really goes back to the question about the mix between products and subscriptions, and the transition toward more cloud-based solutions. Could you comment on how you are seeing this impact the mix in the business? And for Steve, how this broader transition may inform the questions that you ask, and how you may be looking to drive value out of some of the assets like the e-commerce platform.

First of all, the Enterprise subscriptions Business actually grew 24% year over year. Good strong number. Where we are in the financial model seeing this manifest itself is a continued increase in the volume of our in-period revenue that is rolling straight off the balance sheet. In this September quarter, we're going to have 76% of our revenue coming off the balance sheet. That has been a steady increase over the last couple of years, and I would expect that to continue, as we bring more service offerings into the marketplace.

Ed, strategically, again I love the question. And I really appreciate the strategic nature of a lot of these questions you folks are asking today, because I really do enjoy that kind of dialogue with our investors or our analysts.

Look, the best thing I can do, again, is bring a philosophy that was developed at GE and applied at Intuit, which is -- I don't start with, whether it is subscription or whether it is desktop or license. I start with, how do we solve an important customer problem? How do we deliver that product or service -- I actually call it an offering, so we do not have a debate over whether it's a product or a service? And how do we be ubiquitous to how customers want to buy? Because I am indifferent if they bought TurboTax on the web or as a software-as-a-service, or on a desktop.

What I want to do is win the product offering game, solve that problem better than anybody else, however they want to buy it. Is it a license? Is it an appliance? Is it a software-as-a-service subscription? I want to be better than anybody else at meeting that customer need, and I don't want to start with -- I think the outcome of that, based on the secular trends, is we're going to see more software-as-a-service, and all that. But I want to be the best appliance solution, and the best license solution, and the best subscription offering software-as-a-service solution, and let customers pick what is right for it them.

Small businesses, consumers, different enterprises might pick different solutions. If you had to say how you're going to prioritize, or what is your thinking going into it, I think we want to skate where the puck is going, not to where it has been. We're going to be much more focused on the emerging and the future needs, and I think we're going to have to accelerate our pace and rate of change away from winning in the past to winning in the future. And that may take some courage and some leadership from our team, but that is what we're going to do.

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

Dan Cummins, ThinkEquity.

Welcome back, Steve.

I would like to ask if there is a possibility that you will be back sooner than 90 or 120 days? It seems to me, many of us on this call would say, it won't take you that long to find out what the value perception is among your customers for a signature-based anti-malware. Is there a chance you'd be back sooner, just to let us know perhaps a binary statement about whether the plan will be incremental or bold with respect to your portfolio?

The second question specifically on the Consumer business. Do you have a strong hypothesis or opinion about the changing risk profile of your Consumer business right now, with respect to Windows 8, or Microsoft's willingness, now, to perhaps move strategically against its hardware partners, and maybe close that platform up a good deal and resemble Apple much more?

I think we have to figure out a way to leverage our assets to do something that other folks can't do. I think our products have big advantages over a single platform system today. And I think the answer -- first let me answer your question. I think the answer is no.

We will make some decisions that you might see or hear about that to me are more strategy-independent. But I think those will be more on the shorter-term value creation. I think the big leverage point, and the big decisions will be sorting through the reality of how the market is evolving, to your point; and figuring out where to place our chips. I would defer. I don't think there's going to be any strategic decisions. And I want to travel around the world. I'm going to go to India, I've got to visit all of our customers.

So there is a lot for me to learn, not just about the strategy, but part of this is learning the Organization's capability to execute the new strategy, and make them part of the process. I think there is something more than just figuring out the strategy. I think it is all part of getting the Organization mobilized, and starting to get that [art], so we can execute the new strategy, however that comes down.

I actually think that is an important part of this process. If it was just the strategy process for presentation, I could do it faster than 90 days. But the big part of this is making sure I'm working the organizational and change management part of this, which I have got a long track record of doing multiple times to produce excellent results. That is what takes more time than just the strategy look. To me, it is an integrated process, and that is why it will take the kind of time frames I talked about.

Thank you, operator. I think that's it.

Did we lose him? Are we over time, here? My answer was too long, and they all dropped off.

Let me just close for everybody. Thank you. I'm glad to be back in the game. Actually, the last day or so, I realized I might have missed it more than I thought. I am quite excited and energized to be back. I'd like to thank all of the Symantec employees for delivering a solid quarter, and I look forward to working with all of them to make Symantec continue on the path to accelerate value creation for all of our stakeholders.

Thanks, and I look forward to next discussion next quarter, or at the appropriate time. Thanks for joining us, again, on short notice. Goodbye.

Thank you, and that does conclude today's conference. Thank you for your participation.