“I am pleased with the execution in the quarter, in particular the strong performance in backup and archiving and continued momentum in hosted services and data loss prevention. In addition, we saw growth in the public sector, driven by strength across all product lines in both the civilian and defense agencies,” said Enrique Salem, president and chief executive officer, Symantec. “We’re making good progress integrating the VeriSign security business, PGP and GuardianEdge into the Symantec portfolio and all three acquisitions performed better than expected in the quarter.”
“In the September quarter, we delivered better than expected results on all of our key financial metrics. Our enterprise business closed the quarter on a strong note, generating greater than expected revenue and deferred revenue,” said James Beer, executive vice president and chief financial officer, Symantec. “We also generated another quarter of excellent cash flow from operations, up 37 percent year-over-year, for a total of $1.74 billion over the last twelve months.”
GAAP Results: GAAP operating margin for the second quarter of fiscal year 2011 was 14.7 percent. GAAP net income for the fiscal second quarter was $136 million compared with net income of $155 million for the same quarter last year. GAAP diluted earnings per share were $0.17 compared with $0.19 for the same quarter last year.
GAAP deferred revenue as of Oct. 1, 2010, was $3.104 billion compared with $2.905 billion as of Oct. 2, 2009, up 7 percent on an actual and currency-adjusted basis. Cash flow from operating activities for the second quarter of fiscal year 2011 was $310 million. Symantec ended the quarter with cash, cash equivalents and short-term investments of $2.264 billion.
Non-GAAP Results: Non-GAAP operating margin for the second quarter of fiscal year 2011 was 25.1 percent. Non-GAAP net income for the second quarter was $266 million compared with $295 million for the year-ago period. Non-GAAP diluted earnings per share were $0.34 compared with earnings per share of $0.36 for the year-ago quarter.
As previously announced, Symantec is no longer reporting revenue and deferred revenue on a non-GAAP basis. For a detailed reconciliation of our GAAP to non-GAAP results, please refer to the attached consolidated financial statements.
During the second quarter of fiscal year 2011, Symantec repurchased approximately 17 million shares for $225 million at an average price of $13.16. Symantec has $322 million remaining in the current board authorized stock repurchase plan.
Business Segment and Geographic Highlights
For the September quarter, Symantec’s Consumer segment represented 32 percent of total revenue. During the quarter, Symantec made a one-time reduction to Consumer segment revenue of approximately $10 million resulting from certain consumers not receiving their subscription entitlements on a timely basis. Excluding this adjustment, Symantec’s Consumer segment revenue increased 3 percent year-over-year (increased 5 percent after adjusting for currency).
For the quarter, Symantec’s Security and Compliance segment represented 24 percent of total revenue and increased 5 percent year-over-year (increased 7 percent after adjusting for currency). The Storage and Server Management segment represented 38 percent of total revenue and declined 1 percent year-over-year (increased 1 percent after adjusting for currency). Services represented 6 percent of total revenue and declined 11 percent year-over-year (declined 9 percent after adjusting for currency).
International revenue represented 50 percent of total revenue in the second quarter of fiscal year 2011 and declined 1 percent year-over-year (increased 3 percent after adjusting for currency). The Europe, Middle East and Africa region represented 28 percent of total revenue for the quarter and declined 9 percent year-over-year (flat after adjusting for currency). The Asia Pacific/Japan revenue for the quarter represented 17 percent of total revenue and increased 11 percent year-over-year (increased 5 percent after adjusting for currency). The Americas, including the United States, Latin America and Canada, represented 55 percent of total revenue and increased 3 percent year-over-year on an actual and currency-adjusted basis.
Symantec completed the acquisition of VeriSign’s security business in early August. The VeriSign security acquisition performed better than expected, generating revenue of $18 million. The June quarter PGP and GuardianEdge acquisitions continue to perform well, generating revenue of $15 million. The combined earnings per share dilution of these acquisitions was 3 cents, which was one penny less dilutive than our expectations of $0.04. Sales and technology integration is progressing well, with the sales teams working on cross-selling opportunities, and acquired technologies being leveraged across the Symantec product portfolio.
Third Quarter Fiscal Year 2011 Guidance
Guidance assumes an exchange rate of $1.35 per Euro for the December 2010 quarter versus the actual weighted average rate of $1.48 per Euro for the December 2009 quarter, approximately a 10 percent currency headwind. The end of period rate for the December 2009 quarter was $1.43, approximately a 6 percent headwind versus the $1.35 per Euro assumption for the December 2010 quarter.
For the third quarter of fiscal year 2011, ending Dec. 31, 2010, revenue is estimated between $1.57 billion and $1.59 billion, up 2 to 3 percent year-over-year and up 3 to 4 percent after adjusting for currency.
GAAP diluted earnings per share are estimated between $0.23 and $0.24. Non-GAAP diluted earnings per share are estimated between $0.32 and $0.33.
Deferred revenue is expected to be in the range of $3.19 billion and $3.22 billion, up 5 to 6 percent year-over-year on an actual and currency-adjusted basis.
Symantec has scheduled a conference call for 5 p.m. ET/2 p.m. PT today to discuss the results from the fiscal second quarter 2011, ended Oct. 1, 2010, and to review guidance. Interested parties may access the conference call on the Internet at http://www.symantec.com/invest. To listen to the live call, please go to the Web site at least 15 minutes early to register, download and install any necessary audio software. A replay and script of our officers’ remarks will be available on the investor relations’ home page shortly after the call is completed.
Symantec is a global leader in providing security, storage and systems management solutions to help consumers and organizations secure and manage their information-driven world. Our software and services protect against more risks at more points, more completely and efficiently, enabling confidence wherever information is used or stored. More information is available at www.symantec.com.