Welcome. Symantec s Strategic Direction and 3Q 2013 Earnings Presentation. Helyn Corcos Vice President Investor Relations. January 23, /23/2013

Transcription

1 Symantec s Strategic Direction and 3Q 2013 January 23, 2013 Welcome Helyn Corcos Vice President Investor Relations 2 1

2 Q FY13 Earnings Highlight Strategic Direction and Operational Plan Questions & Answers 3 Forward Looking Statements This presentation contains statements regarding our intention to execute a new strategy, implement operational and organizational changes and our projected financial and business results, as well as our intention to return cash to shareholders through dividends and continued share buyback activity, which may be considered forward looking within the meaning of the U.S. federal securities laws. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from results expressed or implied in this presentation. Such risk factors include those related to: maintaining customer and partner relationships; the anticipated growth of certain market segments, particularly with regard to security and storage; the competitive environment in the software industry; changes to operating systems and product strategy by vendors of operating systems; fluctuations in currency exchange rates; the timing and market acceptance of new product releases and upgrades; the successful development of new products and integration of acquired businesses; and the degree to which these products and businesses gain market acceptance. Actual results may differ materially from those contained in the forward looking statements in this presentation. Additional information concerning these and other risk factors is contained in the Risk Factors section of our Form 10 K for the year ended March 30, 2012 and in our Form 8 K filed on June 11, Any information regarding pre release Symantec offerings, future updates or other planned modifications is subject to ongoing evaluation by Symantec and therefore subject to change. This information is provided without warranty of any kind, express or implied. Customers who purchase Symantec offerings should make their purchase decision based upon features that are currently available. We assume no obligation to update any forward looking information contained in this presentation

3 Use of GAAP and Non GAAP Financial Information Our results of operations have undergone significant changes due to a series of acquisitions, the impact of SFAS 123(R), impairment charges and other corporate events. To help our readers understand our past financial performance and our future results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non GAAP financial measures. The method we use to produce non GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Our non GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our non GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Investors are encouraged to review the reconciliation of our non GAAP financial measures to the comparable GAAP results, which is attached to the financial review presentation, and which can also be found, along with other financial information, on the investor relations page of our website at 5 3Q13 Earnings Highlights James Beer Chief Financial Officer 6 6 3

4 Better than Expected Results for 3Q13 3Q 13 3Q 12 As Reported Growth Y/Y Revenue $1,791m $1,715m 4% Non GAAP Operating Margin 25.6% 26.2% 60 bp Non GAAP EPS $0.45 $0.42 7% Revenue Drivers Constant currency adjusted revenue grew 5% Y/Y Organic, constant currency revenue grew 4% Y/Y Strength in EMEA, Information Management and Trust Services License, constant currency revenue grew 8% Y/Y driven by strength in Information Management solutions Subscription, constant currency revenue grew 5% and maintenance revenue grew 5% Y/Y Enterprise, constant currency subscription revenue grew 12% Profitability Drivers Operating margin and EPS driven by higher revenue and lower spending 7 7 Solid Revenue Results by Segment 3Q 13 3Q 12 FX Adjusted Growth Y/Y Consumer $530m $525m 2% Security and Compliance $527m $510m 4% Storage and Server Management $666m $618m 9% Services $68m $62m 9% Consumer up selling to premium suites and growing emerging backup, NortonLive services and mobile Security and Compliance strength in Trust Services, MSS and Encryption Storage and Server Management Information Management revenue grew 12% Y/Y driven by double digit growth in NetBackup Storage Management revenue grew 1% Y/Y as customers continue to deploy more mission critical applications on Linux and virtualized infrastructures Services driven by Business Critical Services 8 8 4

5 Strong Cash Generation 3Q 13 3Q 12 As Reported Growth Y/Y Cash From Operating Activities $463m $403m 15% Cash, Cash Equivalents and Short Term Investments Balance $4,252m $2,380m 79% 43% of cash on shore ~ 26% excluding $1 billion allocated to maturity of June 2013 convertible notes $200m to repurchase 11m shares at average price $17.94 $283m remaining in the current board authorized share repurchase plan 9 9 4Q FY13 Guidance 4Q 13 Expected Y/Y Growth FX Adjusted Growth Y/Y Revenue $1.70 to $1.74b 1 4% 1 3% GAAP EPS 18 to 19 (75 76)% na Non GAAP EPS 37 to % na Deferred Revenue $4.01 to $4.07b 1 2% 1 3% ~73% or $1.26b of March quarter revenue coming from balance sheet Guidance assumes FX rate of $1.32 per Euro 24.6% effective tax rate and 702m CSE R&D tax credit drives down our tax rate in 4Q

6 Symantec 4.0 Strategy Steve Bennett President and Chief Executive Officer 11 Symantec 4.0 Financial Theme Organic growth focused company Complemented by accretive acquisitions that add value to customers Growing operating margins and cash flow Disciplined approach to capital allocation

7 Strategy and Operating Plan Agenda Learning Journey Customers and Market Overview Offering Strategy Go to Market Strategy Organization Resource Allocation Financial View Over 8000 employees in town hall and small team meetings More than 1300 customers, including presenting at VISION Barcelona 36 Analyst meetings across all regions, speaking to Gartner, IDC, Forrester and others Springfield Boston Mountain View Roseville New York Baltimore Washington DC Culver City Heathrow Dublin Reading London Paris Barcelona Pune Chengdu Chennai Beijing Singapore Tokyo Sydney 78 financial analysts including attending Citi Investor Conference 251 partners at the Baltimore Partner Exchange Meetings with various House and Senate members, including General Alexander and presenting to over 900 attendees at the Symantec Government Symposium 14 7

8 Key Learnings Strengths Strong Assets Deep Expertise and Capability Portfolio of Leading Products Strong Brands Reach and Installed Base Key Learnings Opportunities Products and Services GTM and Global Strategy People and Organization

9 Evolution A Revolution

10 Market Trends, Competitive Landscape and Product Offerings Stephen Gillett COO Francis desouza President of Products & Services 19 Voice of the Customer Global economic uncertainty and enterprise security Full Emergence of Digital and Social Media Explosive data and intelligence growth Enterprise IT will need to adapt and evolve 20 10

11 Enterprise Security Redefined boundaries between consumer and business Enterprise attack sophistication is increasing Technology realm transfer Dispersion of authority 21 Countries and Government Governments are responsible for protecting their nation's critical infrastructure Attacks on citizens and institutions increasing in complexity Cyber has become the fifth domain for warfare after land, sea, air, and space 22 11

12 Changing Landscape and Market Trends Internet of Things Mobility Digital & Social Life Computing Ecosystems 23 Changing Market Requires a New Model For Protection Corporate Network PCs Data Center 24 12

13 Startups Specialist Integrated Stack Providers 25 Best of Need How We Win Scale Integration Cross Platform 26 13

14 We Will Strengthen Our Offerings: More R&D More R&D Better meet customer needs faster organic growth Better and Easier Customer Experience More Innovation Leverage Innovation File System DLP Increase R&D spend Redeploy and hire Advanced research Centers of Excellence Encryption Endpoint Protection Right for Me Offerings New Offerings Security Intelligence Zero based mindset Whole company scope Resource best growth opportunities Eliminate redundancy 27 We Will Strengthen Our Offerings: Better and Easier Customer Experience More R&D Better meet customer needs faster organic growth Better and Easier Customer Experience To Use, Upgrade and Maintain Focus product teams on end toend customer use experience Simplified licensing Self healing technology Right for Me Offerings New Offerings To Get Help and Support Simplified support options Expanded support channels ex. Web, chat, community support Knowledge management 28 14

15 We Will Strengthen Our Offerings: Right For Me Offerings More R&D Better meet customer needs faster organic growth Better and Easier Customer Experience Tailored Offerings Consumers Small Businesses Large Enterprise Governments Geographies Specific Industries verticals Right for Me Offerings New Offerings Choice of Deployment Option Software Appliance Cloud Hybrids 29 New Offerings Will Address Broader Customer Needs More R&D Better meet customer needs faster organic growth Better and Easier Customer Experience Integrated, modular, solving bigger jobs Customer can buy existing products OR new integrated offerings Right for Me Offerings New Offerings Turn on new capability as needed 30 15

16 Symantec Addresses Unmet, Underserved Needs In Three Areas User Productivity & Protection Make it simple for me to be productive & protected at home and work Information Security Keep my business safe and compliant Information Management: Availability & Scalability Keep my business information and applications up and running 31 How Current Offerings Map to Customer Jobs User Productivity & Protection Information Security Information Management: Availability & Scalability Current Offering Examples Norton 360 Norton Mobile Security Norton Data Services Endpoint Protection Enterprise Mobility Endpoint Encryption User Authentication Managed Security Services Data Loss Prevention Mail and Web Security O3 Control Compliance Suite Critical System Protection Trust Services Storage Foundation HA NetBackup Enterprise Vault/eDiscovery Backup Exec BE.cloud FileStore 32 16

17 We Will Deliver New Integrated, Modular Offerings Over the Next 6 24 Months User Productivity & Protection Information Security New Higher Value Offerings Mobile Workforce Productivity Norton Protection Norton Cloud Information Security Service Identity/Content aware Security Gateway Data Center Security Business Continuity Information Management: Availability & Scalability Integrated Backup Cloud based Info Management Object Storage Platform 33 New Higher Value Offering: Mobile Workforce Productivity Enables authorized users to access corporate resources from any corporate or personal mobile device, PC or Mac while protecting data, applications, devices and identities Employee Owned/BYOD Corporate Owned Enterprise Applications Cloud Services Integrated Endpoint protection Corporate Personal Mobile device management Mobile container Mobile application Management Enterprise app store Endpoint encryption Endpoint DLP User authentication Solves an important customer problem and builds competitive advantage 34 17

18 New Higher Value Offering: Information Security Service Provides visibility into, and comprehensive protection from, advanced threats leveraging Symantec and 3rd party products Symantec Security Offerings 3rd Party Products and Tools Symantec Global Security Intelligence Network Enterprise Apps Integrated Analysis Correlation Visibility Dashboard Threat Detection Prioritization and Workflow Incident Management Risk Management Solves an important customer problem and builds competitive advantage 35 New Higher Value Offering: Business Continuity Delivers high availability, performance, and scalability for business applications in virtual, private cloud environments Applications Platforms Storage Integrated Windows Backup Unix/Linux Backup Virtual Backup Clustering Virtual HA Replication Disaster Recovery Service Orchestration Solves an important customer problem and builds competitive advantage 36 18

19 Examples of New or Expanded Centers of Excellence Cloud Platform & Capabilities Hardware Supply Chain Information Fabric Global Security Intelligence Network 37 Solve Bigger Problems Right for Me Offerings How This Benefits Customers Better and Easier How They Want to Buy 38 19

20 Symantec 4.0 Portfolio Strategy Evaluated entire portfolio Two key criteria Stand alone offering or part of a larger, modular future offering Asset to solve new, important customer problems? Portfolio review continues over time Will deal with anything that doesn t fit Nothing to announce today 39 Simplified Go to Market (GTM) Strategy Global Enterprise Customer Segment Global & Enterprise Symantec direct + Customer led channel involvement New Verticals business Telco/ISPs, SIs, XaaS, National Public Sector Commercial Channel led dedicated Symantec team supports Consumer and Small Business Combination of direct through e business and channel led Applied Right for GEO manner 40 20

21 New Marketing and Sales Capabilities New business growth Field paid only on new over time Separate renewals org Expanded high quality/ lower cost models Telesales e Business In product New global sales and partner enablement organization Beyond Current Point Products to Integrated Offerings Offerings Beyond Short-Term Bookings to Lasting Customer Value Customers Expanded Marketing Total customer experience New centers of excellence Strategic Pricing & Licensing New, enhanced partner program More selective based on capabilities Better enablement & Symantec support New performance based incentives 41 Organizational Strategy July 25 th to Present Common company level objectives Financial results + customers + partners + employees New staff performance objectives Changed staff meeting cycle Today Symantec 4.0 strategy and plan New org structure and leadership team New organization simplification initiative Splitting Chairman and CEO roles Trained 95% of directors and VPs on SYMC 4.0 leadership 42 21

22 New Organization Design: Objectives Improve Teamwork Increase Customer Focus Functionalize Upgrade Growth Capability Office of the CEO Senior leadership decision on talent + collaboration skills Consumer & business world merging Customer jobs vs. segments Break up BU structure that created silos Global in thinking and actions GEO leaders Upgrade process capability Consolidation for leverage Centers of excellence Eliminate redundancies Right talent Fewer, bigger roles for our best and brightest Marketing Sales process management IT Cloud Ops HR Strengthen leadership Improve Organic Growth Capabilities Minimize Execution Risk 43 Creation of the Office of the CEO New Roles or Major Changes Office of the CEO COO President Products & Services CFO

23 New Structure 11 Direct Reports to the CEO New Roles or Major Changes CEO Product & Services COO Verticals Business NA Enterprise Sales APJ Strategic Sales EMEA CFO HR Legal Strategy & Corp Dev 45 President of Products and Services Organization New Roles or Major Changes CEO Products Mobile Information Security Information Management CTO Business Critical Services Enterprise & Norton Endpoint PD Education Enterprise & Norton Endpoint PM Global/Vertical Offering Integration 46 23

24 COO Organization New Roles or Major Changes CEO COO Consumer Sales Renewals e Business CMO Sales Process & Enablement Customer Care CIO Communications Cloud Ops 47 Operational Plan James Beer Chief Financial Officer 48 24

25 Opportunities to Drive Efficiency & Redeploy Resources Company wide Opportunities Partially integrated acquisitions Siloed organization; redundancy Drove Duplication and Complexity Too much management 49 Opportunities to Drive Efficiency & Redeploy Resources Product Development 1 Consolidated $1.8 billion spending pool 2 Significant duplication today 24 cloud service platforms and 54 data center locations 3 Align point product spending with market opportunity 50 25

26 Opportunities to Drive Efficiency & Redeploy Resources Sales & Marketing 1 Simplify pricing & licensing 31 price lists and 41 license meters 2 Build high performance and cost effective renewals team 3 Consolidate worldwide marketing spend 4 Streamline route to market structure 23 distinct sales channels 5 Field sales real estate consolidation 6 Fewer individualized compensation plans 51 Opportunities to Drive Efficiency & Redeploy Resources Cross company 1 2 Management ranks have expanded steadily High cost Slow decision making, removed from front line reality Organization Simplification Initiative Move from 10 layers of management to 6 7 Move from average of 4 spans to ~

27 Investments to Build Organic Growth Engine People Products Infrastructure Product Development Existing offerings New integrated offerings Product delivery capabilities Cloud infrastructure platform Hardware Supply Chain Information Fabric Global security intelligence network Sales & Marketing Marketing Pricing resources Customer analytics Brand building Sales Process improvements Renewals team e Business expansion General & Administrative IT a strategic enabler Insource some activity Applications and infrastructure HR building talent and organizational capability Process capability 53 Expense to Revenue Ratios Invest to drive faster organic growth Symantec Benchmark 1 FY12A FY17E Median High R&D 14% 16% 13% 17% S&M 41% 27% 28% 50% G&A 6% 5% 8% 13% 1 Benchmark includes 3 year averages for BMC, CA, CVLT, CRM, ORCL, MSFT, SAP, INTU, CTXS, ADBE 54 27

28 Financial Plan Commitment to 5%+ organic revenue growth and 30%+ operating margins Organic revenue 5%+ CAGR FY15 17 Operating margins 30% goal in FY15 FY14 A Transition Year Expect 0 2% revenue growth Operating margins grow 200 bps Free cash flow impacted by ~$275 million severance payments Incremental CapEx $100 $150 million 55 Capital Allocation Strategy CapEx and acquisitions that support strategy + meet IRR hurdles Return excess cash to shareholders Strategy Elements 15%+ IRR hurdle Target returning 50% of free cash flow longer term Over time, ~50/50 balance between dividends and repurchases 56 28

29 Capital Allocation Announcing Today Initiating dividend with targeted yield of 2.5% in 1Q14 New $1B share repurchase authorization Continue opportunistic buybacks FY14 Expect to return $800m Will invest $ m for severance and CapEx investments 57 Symantec 4.0 Operating Theme Better and Easier What we do People and Partnerships Internal and external creating customer value How we play As a Team Making High Quality, Timely Decisions Symantec wide objectives and performance metrics One Symantec strategy with cascading organizational strategies and operational priorities Individual accountability to their role and the team How we think Innovation + Execution. Global and Local Big and Small Innovation everywhere with special focus on customer driven and technology innovation Excellence in execution through people, process and technology Act big where there is value act small everywhere else Eliminate complexity not valued by customers or partners Create and leverage global centers of excellence How we organize Simplified and Streamlined Inverted triangle organizational philosophy Lean and effective management structure Culture of learning and sharing to make us better 58 29

30 Symantec 4.0 Company Theme Enabling people, businesses and countries to protect and manage their digital information so they can focus their time and energy achieving their aspirations 59 Appendix 60 30

31 4Q FY13 Guidance Three Month Ending March 29, 2013 Year Over Year Growth Rate Revenue Guidance Range Actual Constant Currency GAAP revenue range $1.70 $1.74B 1% 4% 1% 3% Three Month Ending March 29, 2013 Year Over Year Growth Rate Earnings Per Share Guidance and Reconciliation Range Actual GAAP diluted earnings per share range $0.18 $0.19 (76)% (75)% Add back: Stock based compensation, net of tax $0.04 Amortization of intangible assets, non cash interest expense and transition & transformation expenses, net of tax $0.15 Non GAAP diluted earnings per share range $0.37 $0.38 (3)% 0% Three Month Ending March 29, 2013 Year Over Year Growth Rate Deferred Revenue Guidance Range Actual Constant Currency GAAP deferred revenue range $4.01 $4.07B 1% 2% 1% 3% 61 GAAP to Non GAAP Reconciliation ($ In millions, except per share data) Three Months Ended Year-Over-Year Non-GAAP Growth Rate December 28, 2012 December 30, 2011 Constant GAAP Adj Non-GAAP GAAP Adj Non-GAAP Actual Currency Net revenue: $1,791 N/A $1,791 $1,715 N/A $1,715 4% 5% Gross profit: $1,492 $20 $1,512 $1,444 $26 $1,470 3% 4% Stock-based compensation 4 4 Amortization of intangible assets Gross margin % 83.3% 84.4% 84.2% 85.7% -130 bps -110 bps Operating expenses: $1,194 $140 $1,054 $1,144 $123 $1,021 3% 4% Stock-based compensation Amortization of intangible assets Restructuring and transition 27 5 Acquisition/divestiture-related expenses 4 3 Operating expenses as a % of revenue 66.7% 58.8% 66.7% 59.5% -70 bps -40 bps Operating income $298 $160 $458 $300 $149 $449 2% 2% Operating margin % 16.6% 25.6% 17.5% 26.2% -60 bps -80 bps Net income: $212 $101 $313 $240 $74 $314 0% N/A Gross profit adjustment Operating expense adjustment Non-cash interest expense China VAT tax refund (24) - Income tax effect on above items (44) (45) Tax related adjustments: Release of pre-acquisition tax contingencies (6) (42) Diluted net income per share attributable to Symantec Corporation stockholders $0.30 $0.15 $0.45 $0.32 $0.10 $0.42 7% N/A Diluted weighted-average shares outstanding attributable to Symantec Corporation stockholders % N/A 62 31