NortonLifeLock Inc.
Q4 2006 Earnings Call Transcript

Published: 10 May 2006

[Operator:]

Good day, and welcome to Symantec’s Fourth Quarter 2006 and Fiscal Year 2006 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. Ms. Corcos please go ahead.

[Helyn Corcos:]

Good afternoon, everyone, and thank you for joining us. With me today are John Thompson, Chairman of the Board and CEO of Symantec and James Beer, Executive Vice President and Chief Financial Officer. In a moment, I will turn the call over to John. He will discuss highlights of our results for the fiscal fourth quarter and fiscal year 2006 which ended March 31, 2006. James will discuss the financial details of the quarter and the year, and then will provide a discussion of the guidance for the June 2006 quarter and fiscal year 2007, that’s outlined in the press release. James will then turn it back to John for concluding remark. This will be followed by a question and answer session. Today’s call is being recorded and will be available for replay on Symantec’s Investor Relations home page at symantec.com/invest. In addition to today’s press release, a copy of our prepared remarks and supplemental financial information are available on the IR website. Before we begin, I would like to remind everyone that some of the information discussed this call, including our projections regarding revenue and operating results for the coming quarter and fiscal years, 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 reports filed with the US Securities & Exchange Commission. Symantec assumes no obligation to update any forward-looking statements. In addition to reporting financial results in accordance with Generally Accepted Accounting Principles, or GAAP, Symantec reports non-GAAP financial results. Please note that our combined non-GAAP financial results include the historical results for Symantec and VERITAS for comparative fiscal periods. In addition, our non-GAAP results include deferred revenue that has been eliminated from our GAAP results as part of the purchase accounting for the acquisition of VERITAS and adjustments related to the fair value of the assets acquired and liabilities, assumed as part of the acquisition and also excludes certain non-GAAP expenses net of tax. 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 Investor Relations website. And now, it is my pleasure to introduce our CEO, Mr. John Thompson.

[John Thompson:]

Thanks, Helyn. Symantec ended fiscal 2006 with a solid March quarter and we’re poised to extend our successes into the new fiscal year. The tough head wins of strengthening currencies around the world in evolving threat landscape and the changes in our consumer revenue model have provided the challenging backdrop for the fiscal year 2006. Through all of this, I am very pleased with the progress our team has made with the integration of VERITAS. And I believe our company is well positioned for the changing competitive landscape in the overall software industry. The last 10 months have not been the easiest in our history, as we merged their teams some people opted to leave and we more than doubled the workload in some areas. But we persevered and we have concentrated on making our company better. We focused intensely on the sales force and our channel which are critical to our long-term success. We are seeing some early benefits from our progress in this area as evidenced in the results we posted to in the March quarter. The new Symantec is now 10 months old and I think we’ve accomplished a great deal in a short period of time. Together, we are now one company, one team, working to help our customers protect their digital assets and IT infrastructure. So, I would like to spend a few minutes recapping some of our accomplishments for fiscal year 2006. Our R&D teams had another prolific year as Symantec launched more than 100 new products and services around all of our product categories and shipped nearly 23 million boxes around the world. Some of the notable releases include NetBackup 6.0, Backup Exec 10d and Enterprise Vault 6.0, LiveState Recovery, the Symantec Mail Security Products and the Norton 2006 group of consumer security products albeit, a bit later than expected. We extended and delivered on our stated Phase I and phase II merger integration plans for our product support and services offerings. We’ve launched join product solutions for Email Management regulatory compliance and business continuity. We’ve also made significant progress to create common licensing, common instillation procedures and a common user interface across a number of our security and availability products. Beyond that, we’ll provide you with a detail update on our phase III plans at our analyst meeting later this month. As you know, to minimize disruption to our customers and partners, we chose an approach to sales integration we referred to as stay in your lanes. However with the close of the transaction, we started integrating our sales leadership teams above the first line manager level in July. This April we completed inauguration at the field or account level, so today, our teams are integrated across the Board and the vast majority of our customers now have a single account manager from Symantec. Our account managers are responsible for overall opportunity identification and relationship management. They are supported by product services and technical specialists. We’ve also reduced the number of accounts of rediscovering thereby allowing them to penetrate more deeply into an organization and leveraged the full breadth of our product portfolio. In addition, we have finished the consolidation of our sales opportunity management system, consolidated our sales plan structures and merged our sales information portals. In each of the geographies, we consolidate at our services teams under a single leader and while most of the market’s attention is been on the Symantec VERITAS integration, we’ve also seamlessly integrated the sales teams from IMLogic, BindView, Sygate and Relicore. Throughout all of this voluntary attrition in our real life sales operation was lower this year when compared to prior years. We have a strong sales team in place with extensive experience and in-depth knowledge that will continue to drive our success as a company. Now, I’d like to provide a few more highlights of the March quarter. As we finish the fiscal year, our execution in all segments and regions was quite strong. Business was driven by solid demand for enterprise products such as Email Archiving, systems recovery and Storage Management solutions as well as a consumer demand on our Norton Internet Security product. Importantly, our enterprise and consumer antivirus segments experience solid performance during the quarter. In addition, proforma combined deferred revenue grew to over $2.2 billion representing 18% year-over-year growth and 12% sequential growth. Our sales team continues to generate a significant number of large transactions. In the March quarter, we generated total of a 1142 transactions valid at more then $100,000 including 91 deals worth more then $1 million. In addition, almost 50% of the large transactions included multiple products or services. We’ve also focused on driving momentum for extensive community of partners. In the March quarter, we’ve launched the first phase of a new partner program which integrated 60,000 partners from 20 programs and 37 countries into one simplified structure. The restructure program is designed to accommodate a diverse partner eco system with bars, distributors, OEMs, consultants, services providers and alliances all now operating under a common program umbrella. The program is intended to drive demand for Symantec products and to reward our partners for not just selling our products but investing and training and services built around the Symantec product portfolio. The enterprise security business grew 9% year-over-year and 7% sequentially to $287 million for the March quarter. For fiscal year ’06, enterprise security grew 13% versus fiscal year ’05. In addition, we experienced a record quarter of bookings in the enterprise antivirus business and it performed inline with typical seasonal trends. Our Security Solutions experienced strong year-over-year growth during the March quarter. We saw solid demand for anti-spam products which posted another terrific quarter. We launched the 80 to 20 Mail Security appliance and a new release of Symantec Mail Security for the SMTP environments, which is targeting small and medium sized companies. Our MSS and compliance solutions also made solid contributions in the March quarter. We continue to improve our existing antivirus, enterprise antivirus solutions with the recent launch of Symantec Antivirus 10.1 and Symantec Clients Security 3.1. The combination of a more stable pricing environment and a number of additional initiatives we have underway will strengthen our position and the enterprise endpoint security market. Our fiscal, for fiscal year ’07, we will integrate several important integrate offerings. For example, we intend to integrate our antivirus and firewall technologies with recently acquired endpoint compliance technologies from Sygate and behavior blocking technologies from WholeSecurity. The project codename

[James Beer:]

Thank you, John and good afternoon everyone. It’s a pleasure to be here. Indeed, I’m encouraged by the progress we’ve made as evidence by the March quarter and FY ’06 results. A lot of change impacted our business during the past 12 months, such as the slowing of the antivirus market, and evolving threat landscape, our new consumer revenue model and the negative impact to foreign currency movements, just to name a few of the drivers. Despite to all of that, we grew our fiscal year non-GAAP revenue by 8% to more than $5 billion and generated an even dollar in non-GAAP earnings per share. I believe we are doing the right things to prepare for the year ahead. But before I get into the new fiscal year, let me spend a minute reviewing the financial details of the March 2006 quarter. GAAP revenue for our March 2006 quarter was $1.239 billion. Non-GAAP revenue grew 1% over the March 2005 period to $1.3 billion. There were several factors that impacted our year-over-year growth that you should be aware of. First, foreign currency movements lowered non-GAAP revenue by almost $50 million or 4% in the March 2006 quarter as compared to March 2005. Second, it is important to note that the year-over-year comparable period for VERITAS’s results was the December 2004 period which was a record revenue quarter for that company. And third, the move to the ratable model in the consumer segment lowered non-GAAP revenue by approximately $18 million. Non-GAAP revenue grew by 4% sequentially and was positively impacted by foreign exchange movement of approximately $8 million or less than 1%, when compared to the December 2005 quarter. The March quarter is fully diluted GAAP earnings per share with $0.11. Non-GAAP fully diluted earnings per share for the quarter was $0.26, as inline with the previous March quarter’s non-GAAP results. International non-GAAP revenue for the March quarter was $650 million, growing 5% versus the year ago period and representing 50% of total non-GAAP revenue. Excluding currency effects, international non-GAAP would have grown by 12%. The Europe, Middle East, Africa region and Asia Pacific which includes Japan, grew 3% and 9% respectively. Americas revenue declined 2% driven primarily by the difficult year-over-year comparable period for VERITAS’s results and the move to the ratable model in the consumer segment. Non-GAAP gross margin remained stable at 85% for the March 2006 quarter compared to 85.1% for the year ago period. Non-GAAP operating expenses of $704 million were 54% of revenue for the March 2006 quarter versus operating expenses of $658 million or 51% of revenue in the March 2005 quarter. The most notable cost continues to headcount. Headcount at the end of the March quarter was 15,846 up 13% year-over-year, driven primarily by recent acquisitions. GAAP net income was $119 million for the March 2006 quarter and non-GAAP net income was $279million. This was 11% lower the non-GAAP net income of $314 million for the March 2005 quarter, driven by foreign exchange movements, change in the consumer business to a ratable model and the year-over-year methodology requirements noted earlier. Symantec exited March with a strong balance sheet. Cash and short-term investments were $2.9 billion at the end of March, it should be noted that we repurchased approximately 9 million shares valued at nearly $155 million at an average price $16.85 during the quarter. Our net accounts receivable balance at the end of the March 2006 quarter was $671 million, day sales outstanding or DSO was 47 days inline with normal seasonal trends for the combined business. Cash flow from operating activities for the quarter is expected to be approximately $460 million. Our tax payments were higher than in recent quarters, due to lower volumes of stock option exercises driven by our lower stock price. Proforma combined cash flow from operating activities for FY’06 is expected to be approximately $1.6 billion inline with our expectations. GAAP deferred revenue at the end of the March 2006 quarter was approximately $2.16 billion. As John mentioned, non-GAAP deferred revenue at the end of the March 2006 quarter reached a record $2.22 billion, including $58 million of VERITAS deferred revenue that was excluded as part of the purchase accounting for the merger. Non-GAAP deferred revenue grew $340 million or 18% as compared to the non-GAAP combined deferred revenue for the March 2005 quarter. On a non-GAAP basis, enterprise products represented roughly 60% of deferred revenue with consumer products accounting for about 40%. We expect about 60% or approximately $730 million of our June quarter revenue to come from the balance sheet. Now I would like to spend a few minutes discussing our guidance. Now as I’ve been onsite for a couple of months have had the change to evaluate our previous plans against the current business environment. The antivirus market and the threat landscape continued to undergo important changes. And as a result, we have decided to reduce our FY’07 revenue estimate by of the order of $100 million. We have also reworked our budgets to reduce expenses by $100 million. For FY’07, our assumptions are based on an exchange rate of $1.18 per Euro. As a result, we are forecasting the GAAP revenue for FY’07 will be between $5.2 billion to $5.4 billion. Our non-GAAP revenue guidance for FY’07 is between $5.3 billion and $5.5 billion. We forecast that our GAAP earnings per share results will be between $0.46 and $0.57. Symantec will be gaining, including expenses resulting from FAS 123R in our reported GAAP results starting in the June quarter. As such, the total stock-based compensation impact to FY’07 GAAP earnings is estimated to be approximately $0.14 or 12%. Our non-GAAP earnings per share guidance is between $1.05 and $1.15 for FY’07. We would expect operating expenses to increase to approximately $3 billion for FY’07 as we focus on investing in the business to drive revenue growth. Areas of investment include increased spending for marketing initiatives ahead of the entry of Microsoft, along with investment in consolidating our ERP systems and facilities. Several of these costs are one-time expenditures related to the VERITAS acquisition. Once behind us, we expect our expense performance to return to more historical levels. We expect fully diluted common stock equivalents of approximately 1.05 billion shares. This assumes we will be executing our previously announced repurchased program during FY ‘07. Deferred revenue is expected to be in the range of $2.3 billion to $2.5 billion. Cash flow from operating activities is expected to be in the range of $1.5 billion to $1.7 billion. This lower range than previously discussed is driven by higher tax payments due to lower volumes of stock option exercises resulting from our lower stock prices and a second tax issue which I will describe in just a moment. Lastly, as you know, we’ve reorganized and consolidated our business units. In doing so, for FY ‘07 we will reporting our results broken down into the following four segments. First consumer, second enterprise security and data management, third data centre management and fourth services. We will be providing you with the historical view of the new business segments at our analyst meeting placed at in the month. Now, forecast for the current quarter takes into account these seasonal nature of the June quarter in which enterprise and consumer demand tends to decline from the March period. Our guidance for the June 2006 quarter is as follows. GAAP revenue is estimated at between $1.20 billion and $1.23 billion. Non-GAAP revenue is estimated between $1.22 billion and $1.25 billion. GAAP earnings per share, is forecasted between $0.05 and $0.07. Total stock-based compensation impact to the June quarter GAAP earnings is estimated to be approximately $0.04 or 16%. Non-GAAP earnings per share, is estimated between $0.20 and $0.21. As I mentioned earlier, one of the areas of investment this year is in combining the back office ERP systems. This will serve as the catalyst in the December quarter for the merging of our enterprise security and availability volume programs, along with the harmonization of our maintenance accounting policies. A single buying program structure will provide customers with increased flexibility in terms of how they do business with Symantec, and will simplify our back office processes. Because of these changes, some of our enterprise revenue may need to be recognized on a pro rata basis, over the term of the license. The change to the maintenance methodology would likely create a one-time reduction in recognized revenue. Early indications are that these items could lower recognize revenue by of the order of $200 million in FY ’07, with the maintenance accounting convention change driving approximately $40 million of that amount. Our evaluation of this issue is continuing and I will update you on our findings in due course. It should be noted that such a reduction in recognized revenue would generate a corresponding increase in deferred revenue. Also such an accounting change would not affect our planned operating expenses. Before I turn the call back to John, I would like to address a tax-related matter. We are as yet unable to confirm our eligibility to claim a lower tax rate on a distribution made from a VERIATAS’s foreign subsidiary products of the acquisition due to a failure to file a timely extension to the final pre-acquisition return. The distribution was intended to be made pursuant to the American Jobs Creation Act of 2004 and what have therefore been eligible for a 5.25% effective less federal tax rate, it lures of the of the 55% statutory rate. We are seeking a ruling from the IRS on this matter, if we are unable to obtain verification from the IRS that we are eligible for the low rate of tax on the distribution, we will be required to pay additional US taxes totaling $130 million. Since this payment relates to the taxability of foreign earnings that are otherwise the subjects of the IRS assessments we received a month ago, this additional payment, if required would reduce the amount of taxes payable related to the VERITAS transfer pricing dispute. The failure to file the extension represented human error and a breakdown in our tax controls. Right at the top of my priorities list, is making sure that our controls are robust and fully utilized and that the finance team is properly skilled and resourced as we move into the new fiscal year. While certainly no excuse, I should point out that the tax department has suffered significant attrition following the closing of the VERITAS merger, leaving those remaining with significantly increased workloads. In recent weeks however, we have made progress in reinforcing the tax department, an experienced tax partner from a big four accounting firms has been recruited to lead the group and he is in the process of identifying and implementing further changes. Within the last couple of weeks, we’ve also hired a Senior Vice President of Finance Operations, who brings 25 plus years of financing experience to Symantec. Going forward, we will continue to build and recruit the necessary skills to required to run a company of this size and growth potential. Now I would like to hand the call back to John.

[John Thompson:]

Thanks James. As you heard we have not being sitting still, we’ve implemented a number of changes to better prepare us for fiscal year ’07 and beyond. We realigned our four, into four distinct product business units. We’ve completed our sales coverage model transition, consolidated our partner programs and repositioned our services business. All of these changes have been undertaken to better align our business with the market segments and buying centers that we believe have the greatest potential for our company. For more than 20 years we’ve been protecting our customers from threats, systems failures, user errors and natural disasters. In fact, we protect more people for more online threats from anyone in the world. As we look ahead, we believe our business strategy, our team and our lineup of compelling offerings positions us well for long-term growth. There is no doubt there will be challenges, but I believed we made the right changes in our business to overcome these challenges. Further more, we build a very strong team that we continued, we will, we believe will continue to drive our leadership position in the industry. And now, I will turn it back to Helyn who will take questions from our audience.

[Helyn Corcos:]

Thank you John, Jamie will you please begin polling for questions.

[Operator:]

Thank you. (Operator Instructions).

[Helyn Corcos:]

While, Jamie is polling for questions, I would like to announce that Symantec plans to attend the following upcoming conferences. The JP Morgan Conference on May 22, The UBS Conference on May 23 and the NASDAQ London Conference on June 20. In addition, Symantec will be hosting an Analyst Meeting on May 31, in the Bay Area. This event is invitation only and registration is required, a live webcast and replay of the event will be available on the Investor Relation’s homepage. For complete list of investor related events, please visit our web calendar on the investor relations website. Jamie we are now ready for our first question.

[Operator:]

Thank you, we will take our first question from Heather Bellini with UBS.

[Heather Bellini:]

Hi thank you, I had 2 questions, one if you could comment John little bit on the consumer backup offerings that’s going to be part of Genesis, will that also be a standalone, standalone product and if you any commentary on pricing. And then, the follow up would be either for you or James regarding guidance, you guided to $0.20 to $0.21 on a non-GAAP basis versus the fiscal first quarter. I was just wondering if you could just walk us through your view of how earnings will ramp through our fiscal year ’07 and in order to hit the midpoint of the earnings range? Thank you.

[John Thompson:]

On Genesis, the backup offering in Genesis will be a backup service and so, at this point in time, its not planned as a standalone service, although that is certainly something the team is considering. As you may know, we’ve just released Norton Save and Restore which is a standalone backup product not a service, and hence it is available for those who wanted to local PC based backup as suppose to backing up with the service providers somewhere. I’ll turn to James and let him answer the guidance question.

[James Beer:]

Well Heather, our approach is really to offer the upcoming quarter and the full year look obviously more difficult to estimate the full year, I think previously the company has given guidance that indicated the importance of the last two quarters of the fiscal year and suddenly we see nothing to change that general perspective but I think I just leave it on that.

[Heather Bellini:]

Okay thank you.

[Operator:]

Sir we will take our next question from Adam Holt with JP Morgan.

[Adam Holt:]

Good afternoon John and James. I also had two questions about the guidance, the first is John in your comments, you talked about some of the things that you’ve accomplished in terms of getting through the sales force integration and changes. I was wondering what if any kind of assumptions you’ve made around any potential account changes and/or disruptions that went into the first quarter guidance. But and then just secondly as we take a step back and look at the year obviously, the out year has been a moving target. You’ve talked about some of the influences on that what are some of things that you can talk about to build up to the, to new numbers to get us confident that this is really a starting point for beats and races from here? Thanks.

[John Thompson:]

Our guidance certainly reflects our best view of the environment both competitive environment and our internal capability and capacity. So, I don’t view that there is any further news to come related to June quarter that has anything to do what our sales force that’s not reflected in these numbers that we’ve given you. We taken time over the course of the last 60 days, that James has been here to have each of our business unit leaders along with our finance and planning team come together and kind of think about the segments of the marketplace where we play our product roadmap for the coming year. The current competitive landscape and the changes that we think are likely over the course of the next 12 months. And those views are reflected in this new guidance. Our non-GAAP guidance is, on a full year basis, $5.3 billion to $5.5 billion. And earnings forecast associated with that is $1.05 to $1.15; we think that’s a certainly balanced view at this point given all that we know.

[Adam Holt:]

Great, thank you.

[Operator:]

And we will take our next question from Michael Turits with Prudential.

[Michael Turits:]

Hi guys good afternoon. First, James some clarifications on the cash flow issues and then a clarification on the revenue guidance; on the cash flow issue maybe it’s mainly on I’m coming out like to $1.51 billion for the cash flow for this year. But I think the adjustments that have made for reclassifications and also on the guidance for next year at the 1.6, basically 1.7, is the delta between that 1.8 surely the tax issue or the other issue and another revenue question?

[James Beer:]

Okay. So to the first one, for this fiscal year, we’re looking at proforma number of $1.5 billion for operating cash flow, sorry $1.6 billion for the operating cash flow. And for FY ’07, the delta most is what the company has previously discussed is very much driven by those two tax issues that I mentioned. First of all, to be frank that our lower stock price is meaning the fewer employees excising options, when they do excise options obviously there tends to be smaller delta between strike price and the excise price. And that’s, there is a lower tax reduction available to us, thus the higher tax payment. And then, the other item relates to the $130 million of tax that I discussed at the end of my remarks.

[Michael Turits:]

Okay and then the other clarification is on the revenue guidance I think you said that because you integrated the selling plan between availability and security, but as its the firmware, you might have to get firmware, between the $200 million is that $200 million mainly, if that happens and then you would reduce $5.3 billion to $5.5 billion guidance got against that?

[James Beer:]

That’s correct the, I wonder to give everyone a head of that’s to this issue that we are still very much working on but it is something that, we are thinking through very seriously as we bring together the back office systems of the two companies. And obviously, we will be looking to respond to the needs of the marketplace in terms of how the buying programs are designed, I mean there is also an issue of the bank that when you bring together two different companies that have different accounting methods for things such as maintenance we’ve obviously got to pick a single procedure going forward. And so that’s what is driving the $40 million of so component of what I described as a total impact of the order is around $200 million.

[Operator:]

We will take our next question from Sarah Friar with Goldman Sachs.

[Sarah Friar:]

Good afternoon guys, just on the guidance for the June quarter your obviously estimating in a pretty significant ramp on the operating expense line, now presently a lot of that’s going to things like sales and marketing expense with the new consumer products et cetera. Could you give us a little bit more color on that? And then specifically, as we look at through the year James, just a follow on Michael’s question, if we see the revenue take that $200 million hit of the bookings doesn’t change? But would that have a similar flow through to the bottom line or other similar expenses that you can refer to balance?

[John Thompson:]

Well, let me, let me start with them I’ll probably address them both, it would appear there as though the right thing for us to do ahead of Microsoft’s entry is to make sure that market understands that the strength of our product portfolio in the strength of our brand. So we are investing more in the consumer business in lasing awareness and consciousness that consumers have about our capabilities and that’s reflected in some of the current end-market programs around the world and other things that we will do between now and let’s say the launch of our ’08 version of products. Now with respect to the guidance if in fact we do decide to make the changes that would improve licensing flexibility with customers then we will have to have resources to drive the placement of those licenses, hence it will go to the deferred revenue and while it goes to the deferred revenue we will have to have some expense in order to generate the deferred revenue so your likely to have a flow through effect in the EPS as well.

[Sarah Friar:]

Okay.

[James Beer:]

Yeah I think its, its relatively early days we did want to give everyone ahead up this issue. Certainly, the experience on the consumer side is we have moved them towards the raise model has been at the cost-of-goods sold associated with our consumer revenue has also gone ratable.

[Sarah Friar:]

Sure.

[James Beer:]

So as similar in things it could be envisaged if we move down in this further direction.

[Sarah Friar:]

Okay thank you.

[Operator:]

And we’ll take our next question from Walter Pritchard with Cowen & Company.

[Walter Pritchard:]

Great thanks, the two questions. One, just John if you could maybe walk us with the consumer number that was little bit better than I expect and I know, we saw little better number out of McAfee as well. Just wondering if you can maybe comment on what specific channels you’re seeing are stronger there and especially versus your expectation. And then also, I think you would outline some segment guidance initially on your January comp expenses, I am just wondering if there is any update to that or do we sort of expect all the segments to come in, modestly lower than they were expected before?

[John Thompson:]

Well, I think we’ll have to give you new segment guidance in at our Analyst Conference, because we’ve gone through the process of reorganizing our business but we haven’t, we haven’t bothered to go back and rework the plans against the new FY ’07 segments. So watch this space. On the consumer side, I think there strength for the quarter was clearly in Norton Internet Security, it now represents 50% of the consumer revenues that’s a product that grew north of 30% in the quarter. So it’s a very, very strong quarter for NIS or Norton Internet Security. On the channel side, the electronic channels continue to be very, very strong. They now represents 65% of revenue year-over-year their contribution is up almost 10 full points, and so we think as is indicative in other people’s results will shift to electronic continues.

[Walter Pritchard:]

Thanks.

[Operator:]

We will take our next question form Gregg Moskowitz with Susquehana Financial Group.

[Gregg Moskowitz:]

Okay thanks very much, first question wondering John if you can comment on what product we’re most involved in the large field that you signed during the quarter, in the long it was lined obviously we are very early on the security storage convergence trend but if you could have any, any of large field across those product types, I’ll be interested in hearing that? And then just secondly, if you could quantify the effect within the enterprise security segment from applications specifically BindView, IMlogic in the first full quarter for Sygate? Thanks.

[James Beer:]

Well we don’t breakout acquisition revenues, but let me talk about the strength in the quarter; the products were strongest quarter were Enterprise Vault on the enterprise side that is, Enterprise Vault Storage Foundation and our compliance products. We also saw good solid bookings growth and revenue performance in our enterprise antivirus solutions as well. So across the Board, the business was in pretty healthy shape in every segment. Like all businesses this is a portfolio so you are going to have some ups and downs, but I am pretty pleased with this as a seasonally adjusted, kind of March quarter.

[Gregg Moskowitz:]

Great thank you.

[Operator:]

We’ll take our question from Daniel Ives with Friedman Billings Ramsey.

[Daniel Ives:]

Yeah thank you, could you speak to, you talked about the stabilization on the pricing environment which is different tuned and we’ve seen talk about over the last three quarters, can you just maybe tell about the factors there and just why you think its going to change for the positive on the pricing environment in the enterprise? Thanks.

[James Beer:]

Well it’s hard what factors are to be very honest, because we’ve only had one data point and as I’ve said in the past when we’ve had one data point lets be careful not to extrapolate it into a trend line. I am satisfied that the data we’ve seen suggested prices were stable compared to the last 2 or 3 quarters, but that is yet to be a trend. If it continues that should board well for us and others in the industry. I would hope that many of the competitors who play in the space recognize that its not our collective best interest to compete based on price.

[Operator:]

We’ll take our next question from Todd Raker with Deutsche Bank.

[Todd Raker:]

Hi guys 2 questions for you, first James I was hopeful that you could tell us what the tax impact in the cash from $1.6 billion was just past year from stock options convergence?

[James Beer:]

I think we probably would not get into that degree of specifics, frankly. So we’ll cover a lot of detail in the 10-K in that regard, so I think we’ll just leave it to that point.

[Todd Raker:]

Okay, and what should we be looking at from a tax rate on the income statement for fiscal ’07?

[James Beer:]

Well obviously we’ve got our hands full with tax issues as we’ve been discussing here, but we are teaming the tax rate in the 30% to 31% round for the fiscal year.

[Todd Raker:]

Okay and a little quick question for John, with vision confidence, its very clear that you guys have a lot of lines on the side, on the product development cycle, how comfortable are you today with the product roadmap both on the consumer enterprise side and your ability to deliver against all your objectives?

[John Thompson:]

Well we’ve outlined Todd for our customers, we had 3,500 customers in this conference, this is what we are going to do this year and while there is a certain level of science associated with software business, certain part of art as well. I have to believe thought that the team is committed to deliver on those days and our track record’s pretty going on good. Yes occasionally we’ve slipped but that the exception rather than the other.

[Operator:]

Thank you. And we will take our next question from Rob Owens with Pacific Crest Securities.

[Rob Owens:]

Yeah good afternoon, could you elaborate a little bit on your comments to change in the threat landscape and just how that’s affecting viral behavior?

[James Beer:]

Well, if you think about it Rob between 2002 and 2004, there were almost a 100 medium to high severity viruses that hit the marketplace. In calendar year 2005, there were only 6, and clearly for the under penetrated low end of the business or corporate market and the consumer markets, having a lot of visibility in the marketplace about virus attacks or worm attacks certainly drives the level of demand given the strength of our distribution capability and the brand awareness around Symantec and Norton, when the threat landscape changes so precipitously to the point where there are so few high profile attacks it will have a corresponding effect on basic antivirus and other technologies that tend to deal with malicious content. That’s why we believe our product portfolio have the shift more toward addressing the new threats which are much more silent, much more focused on identity theft and fraud and hence Genesis and some of the other product capabilities we tend to our intent to deliver will address the new threat landscape.

[Rob Owens:]

Great on increase in marketing, you’ve been talked about that for while in front of Microsoft, should we take this as a reiteration of that or are you increasing the shelter marketing even to high levels and that….

[James Beer:]

This is just a repeat of what we’ve said.

[Rob Owens:]

Okay thanks.

[Operator:]

And we will take our next question from Charlie Chen with Needham & Company.

[Charlie Chen:]

Hi thanks, I had a follow-up question about the pricing environment just to comment on stable pricing and does that hold true for the SMB segment, where you seem to have seen the most aggressive pricing?

[John Thompson:]

Yes.

[Charlie Chen:]

Okay great and James if you had commented on your expectations for currency in the guidance in the first quarter and full fiscal year?

[James Beer:]

Yeah the currency rate that we are using for our guidance is $1.18 per Euro.

[Charlie Chen:]

Okay and last question on Genesis, any thoughts to the timing of the GA release and pricing?

[James Beer:]

We’re not going to talk about pricing until we are ready to release the product that would not be fair to our channel partners or customers. The current thinking is that the product will ship in the fourth quarter if you will over the year. I think there are some appropriate considerations that the team will need to go through in terms of whether or not that’s the right product introduction time, given that we will certainly refresh the Norton Antivirus and Norton Internet Security products in the August, September timeframe. So the team is going through the evaluation we have to be in the marketplace late summer, we will take the feedback from that and make the determination is to when we should release the product. But, it clearly will come this fiscal year

[Operator:]

Thank you we will take our next question from Peter Kuper with Morgan Stanley.

[Peter Kuper:]

Great thank you. John two clarifications if I might, one is that I heard you talk about the retracting consumer, might go back to more of a, little bit of license upfront unless not that, a little bit of a, if I heard that correctly, so just a quick clarification there?

[James Beer:]

I’m Sorry, I can’t understand you Peter.

[Peter Kuper:]

Amount of, I hope break on you?

[James Beer:]

Yeah.

[Peter Kuper:]

Okay. Just if you can hear me now, the simple question is what your chances are sounds like the leadership takes I think, originally we were looking forward in calendar year ’06 but it sounds like it might be…

[James Beer:]

I’m not announcing interchange in the Genesis state. So what would be the other question?

[Peter Kuper:]

About consumer retract and varying changes from some civil variables after some licensing commitment?

[James Beer:]

No.

[Peter Kuper:]

Okay thanks.

[Operator:]

We will take our next question from Robert Breza with RBC Capital Market.

[Helyn Corcos:]

Jamie, that will be our last question.

[Operator:]

Okay and at this time I’d like to go ahead and the turn the call back over to…

[Helyn Corcos:]

We can take Rob Breza, I’m sorry but that would be our last question.

[Operator:]

My apologies, one moment. And Mr. Breza go ahead with your question.

[Robert Breza:]

Thank you. Just a quick clarifications on I think what Peter was trying to get there with on a revenue recognition changes James was talking about $200 million that total reflected in your guidance correct?

[James Beer:]

No, no.

[Robert Breza:]

Okay thank you.

[James Thompson:]

That’s very much should heads up that’s something that we are thinking through.

[Robert Breza:]

Okay thank you.

[Operator:]

And with no further questions I’d like to turn the conference back over to Mr. Thompson for any closing comments or additional remarks.

[John Thompson:]

Well I appreciate everyone’s interest in our business and its performance. We’ve certainly had a challenging fiscal year ’06. We think many of those challenges have been well handled by our team and our employees were better much stronger fiscal year ’07. We look forward to seeing you on May 31, and we will give you more details about our operating plan for this year. Thanks for listening in.

[Operator:]

And ladies and gentlemen that does concludes today’s Symantec fourth quarter 2006 fiscal year 2006 conference call. We thank you for your participation and you may now disconnect.