Form 10-Q, Symantec Corp, ended on 12/28/01

10-Q 1 f78671e10-q.htm FORM 10-Q Form 10-Q, Symantec Corp, ended on 12/28/01

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q


(Mark One)
[X]		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended December 28, 2001.


[ ]		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from______________to______________

Commission File Number 0-17781

SYMANTEC CORPORATION

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		77-0181864 (I.R.S. employer identification no.)

20330 Stevens Creek Blvd., Cupertino, California (Address of principal executive offices)		95014-2132 (zip code)

Registrant’s telephone number, including area code: (408) 517-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [X] NO [ ]

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, including 2,385,948 shares of Delrina exchangeable stock, as of February 1, 2002:


Common Stock, par value $0.01 per share		142,242,206 shares

TABLE OF CONTENTS


Part I. Financial Information
	Item 1. Financial Statements
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
Part II. Other Information
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EXHIBIT 10.02
EXHIBIT 10.03
EXHIBIT 10.04
EXHIBIT 10.05

SYMANTEC CORPORATION

FORM 10-Q
Quarterly Period Ended December 28, 2001
Table of Contents

PART I. Financial Information


		Page

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of December 31, 2001 and March 31, 2001	3
	Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2001 and 2000	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2001 and 2000	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
	PART II. Other Information
Item 1.	Legal Proceedings	28
Item 2.	Changes in Securities and Use of Proceeds	28
Item 5.	Other Information	28
Item 6.	Exhibits and Reports on Form 8-K	28
Signatures		30

Part I. Financial Information

Item 1. Financial Statements

SYMANTEC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS


			December 31,			March 31,
(In thousands)			2001			2001*

			(unaudited)
ASSETS
Current assets:
	Cash, cash equivalents and short-term investments		$	1,187,418		$	557,027
	Trade accounts receivable			154,665			116,661
	Inventories			11,947			5,855
	Deferred income taxes			81,362			76,426
	Other			26,445			25,932

		Total current assets		1,461,837			781,901
Restricted investments				115,726			74,534
Property, equipment and leasehold improvements, net				151,942			93,219
Deferred income taxes				3,900			3,900
Acquired product rights, net				79,494			104,287
Goodwill, net				570,445			713,550
Other				31,503			20,190

			$	2,414,847		$	1,791,581

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	72,770		$	66,109
	Accrued compensation and benefits			54,071			46,420
	Deferred revenue			303,324			183,256
	Other accrued expenses			61,360			43,385
	Income taxes payable			66,060			73,547

		Total current liabilities		557,585			412,717
Convertible subordinated debentures				600,000			—
Other long-term obligations				2,363			2,363
Commitments and contingencies
Stockholders’ equity:
	Preferred stock (authorized: 1,000; issued and outstanding: none)			—			—
	Common stock (authorized: 300,000; issued and outstanding: 140,516 and 144,012 shares, respectively)			703			720
	Capital in excess of par value			1,126,911			1,179,675
	Accumulated other comprehensive loss			(45,803	)		(48,872	)
	Unearned compensation			(496	)		(895	)
	Retained earnings			173,584			245,873

		Total stockholders’ equity		1,254,899			1,376,501

			$	2,414,847		$	1,791,581

*Amounts as of March 31, 2001 were derived from the March 31, 2001 audited financial statements.

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

SYMANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


		Three Months Ended						Nine Months Ended
		December 31,						December 31,

(In thousands, except per share data; unaudited)		2001			2000			2001			2000

Net revenues		$	290,247		$	219,294		$	760,655		$	602,948
Cost of revenues			52,565			30,938			138,581			85,383

	Gross margin		237,682			188,356			622,074			517,565
Operating expenses:
	Research and development		40,714			31,524			120,205			86,004
	Sales and marketing		109,742			87,093			318,292			239,489
	General and administrative		15,304			11,297			38,118			30,949
	Amortization of goodwill		49,413			11,965			147,809			22,342
	Amortization of other intangibles from acquisitions		536			320			1,608			880
	Acquired in-process research and development		—			22,300			—			22,300
	Restructuring and other expenses		9,377			1,282			11,423			1,282

	Total operating expenses		225,086			165,781			637,455			403,246

Operating income (loss)			12,596			22,575			(15,381	)		114,319
	Interest income		7,681			8,797			22,634			23,506
	Interest expense		(3,871	)		—			(3,871	)		—
	Income, net of expense, from sale of technologies and product lines		4,387			5,000			13,279			16,198
	Other expense, net		(33	)		(126	)		(1,026	)		(99	)

Income before income taxes			20,760			36,246			15,635			153,924
	Provision for income taxes		20,660			22,372			48,565			62,540

Net income (loss)		$	100		$	13,874		$	(32,930	)	$	91,384

Net income (loss) per share — basic		$	0.00		$	0.11		$	(0.23	)	$	0.74

Net income (loss) per share — diluted		$	0.00		$	0.11		$	(0.23	)	$	0.70

Shares used to compute net income (loss) per share — basic			139,740			126,142			144,046			123,054

Shares used to compute net income (loss) per share — diluted			147,140			130,968			144,046			129,808

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

SYMANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


					Nine Months Ended
					December 31,

(In thousands; unaudited)					2001			2000

	Operating Activities:
		Net income (loss)			$	(32,930	)	$	91,384
		Adjustments to reconcile net income (loss) to net cash provided by operating activities:
			Depreciation and amortization of property, equipment and leasehold improvements			27,313			20,751
			Amortization of debt issuance costs			520			—
			Amortization and write-off of acquired product rights			22,945			6,925
			Amortization of goodwill and other intangibles from acquisitions			149,417			23,222
			Write-off of acquired in-process research and development			—			22,300
			Write-off of equipment and leasehold improvements			6,971			1,396
			Deferred income taxes			—			(5,064	)
			Gain on divestiture of the web access management products			(392	)		—
			Net change in assets and liabilities, excluding effects of acquisitions:
				Trade accounts receivable		(38,092	)		(45,213	)
				Inventories		(6,096	)		923
				Other current assets		3,095			1,321
				Other assets		(975	)		(151	)
				Accounts payable		6,655			5,980
				Accrued compensation and benefits		7,636			7,042
				Other accrued expenses		13,330			(24,414	)
				Deferred revenue		122,932			51,423
				Income taxes payable		(7,691	)		53,188
				Income tax benefit from stock options		29,230			2,236

Net cash provided by operating activities						303,868			213,249

Investing Activities:
		Capital expenditures				(94,396	)		(33,953	)
		Purchased intangibles				(300	)		(1,561	)
		Cash paid to 20/20 Software				(1,535	)		(8,000	)
		Purchase of Foster-Melliar				(1,499	)		—
		Purchase of Lindner & Pelc				(2,137	)		—
		Cash acquired from AXENT acquisition				—			37,414
		Purchases of marketable securities				(565,215	)		(434,190	)
		Proceeds from sales of marketable securities				342,023			366,653
		Purchases of equity investments				—			(18,000	)
		Purchases of long-term, restricted investments				(41,192	)		—
		Proceeds from sales of long-term, restricted investments				—			8,646

Net cash used in investing activities						(364,251	)		(82,991	)

Financing Activities:
	Net proceeds from issuance of convertible subordinated debentures					584,625			—
	Net proceeds from sales of common stock and other					83,449			23,613
	Repurchases of common stock					(204,420	)		—

Net cash provided by financing activities						463,654			23,613

Effect of exchange rate fluctuations on cash and cash equivalents						(2,515	)		(2,335	)

Increase in cash and cash equivalents						400,756			151,536
Beginning cash and cash equivalents						227,923			104,000

Ending cash and cash equivalents					$	628,679		$	255,536

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The condensed consolidated financial statements of Symantec Corporation as of December 31, 2001 and for the three and nine months ended December 31, 2001 and 2000 are unaudited and, in the opinion of management, contain all adjustments, consisting of only normal recurring items necessary for the fair presentation of the financial position and results of operations for the interim periods. These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended March 31, 2001. The results of operations for the three and nine months ended December 31, 2001 are not necessarily indicative of the results to be expected for the entire year. All significant intercompany accounts and transactions have been eliminated. Certain previously reported amounts have been reclassified to conform to the current presentation format.

We have a 52/53-week fiscal accounting year. Accordingly, all references as of and for the periods ended December 31, 2001, March 31, 2001 and December 31, 2000 reflect amounts as of and for the periods ended December 28, 2001, March 30, 2001 and December 29, 2000, respectively. The three months ended December 31, 2001 and 2000 comprised 13 weeks of activity. The nine months ended December 31, 2001 and 2000 comprised 39 weeks of activity.

All Symantec share and per share amounts in this Form 10-Q have been adjusted to reflect the two-for-one stock split effected as a stock dividend, effective January 31, 2002. See Note 7 below.

Recent Accounting Pronouncements

As of April 1, 2001, we adopted Statement of Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes accounting and reporting standards for derivative instruments and for hedging activities. We do not use any derivative instruments for trading purposes and did not utilize any such instruments during the nine months ended December 31, 2001. We do, however, utilize some natural hedging to mitigate our foreign currency exposures and we hedge certain residual exposures through the use of one-month forward contracts. Due to the short period of time between entering into forward contracts and month end, the fair value of the derivatives at each month end is insignificant and accordingly, the impact of adopting SFAS No. 133 did not have a material impact on our financial position or results of operations. Other than these forward contracts, we did not utilize any derivative instruments during the nine months ended December 31, 2001.

In July 2001, the Financial Accounting Standards Board, or FASB, issued SFAS No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with SFAS No. 142. Other intangibles will continue to be amortized over their useful lives. We will adopt SFAS No. 142 in our first quarter of fiscal 2003. As a result of the discontinuance of the amortization of goodwill and excluding the impact of potential impairment charges, the application of SFAS No. 142 is expected to result in an increase in our results of operations of approximately $200 million during fiscal 2003. During fiscal 2003, we will perform the first of the required impairment tests of goodwill and intangible assets deemed to have indefinite lives as of April 1, 2002. We have not yet determined what effect these tests will have on our earnings and financial position. Goodwill related to acquisitions subsequent to June 30, 2001 will not be amortized.

In October 2001, the FASB issued SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and addresses financial accounting and reporting for the impairment and disposal of long-lived assets. This statement is effective for fiscal years beginning after December 15, 2001. Adoption of this statement is not expected to have a material impact on our financial position or results of operations.

SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

Note 2. Balance Sheet Information


		December 31,			March 31,
(In thousands)		2001			2001

		(unaudited)
Cash, cash equivalents and short-term investments:
	Cash	$	131,119		$	97,685
	Cash equivalents		497,560			130,238
	Short-term investments		558,739			329,104

		$	1,187,418		$	557,027

Trade accounts receivable:
	Receivables	$	163,787		$	125,000
	Less: allowance for doubtful accounts		(9,122	)		(8,339	)

		$	154,665		$	116,661

Property, equipment and leasehold improvements:
	Computer hardware and software	$	248,613		$	189,497
	Office furniture and equipment		45,769			43,752
	Leasehold improvements		30,927			30,313
	Land and buildings		18,256			—

			343,565			263,562
	Less: accumulated depreciation and amortization		(191,623	)		(170,343	)

		$	151,942		$	93,219

Acquired product rights:
	Acquired product rights	$	135,352		$	136,029
	Less: accumulated amortization		(55,858	)		(31,742	)

		$	79,494		$	104,287

Goodwill:
	Goodwill	$	813,648		$	808,947
	Less: accumulated amortization		(243,203	)		(95,397	)

		$	570,445		$	713,550

Accumulated other comprehensive loss:
	Unrealized gain on available-for-sale investments	$	4,307		$	614
	Cumulative translation adjustment		(50,110	)		(49,486	)

		$	(45,803	)	$	(48,872	)

Note 3. Comprehensive Income (Loss)

The components of comprehensive income (loss), net of tax, were as follows:


		Three Months Ended						Nine Months Ended
		December 31,						December 31,

(In thousands; unaudited)		2001			2000			2001			2000

Net income (loss)		$	100		$	13,874		$	(32,930	)	$	91,384
Other comprehensive income (loss):
	Change in unrealized gain (loss) on available-for-sale investments, net of a tax provision (benefit) of $587, ($242), $1,738 and ($3,061)		1,248			(514	)		3,693			(6,506	)
	Change in cumulative translation adjustment		(8,642	)		10,505			(624	)		(3,751	)

Total other comprehensive income (loss)			(7,394	)		9,991			3,069			(10,257	)

Comprehensive income (loss)		$	(7,294	)	$	23,865		$	(29,861	)	$	81,127

SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

Note 4. Net Income (Loss) Per Share

The components of net income (loss) per share were as follows:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,

(In thousands, except per share data; unaudited)	2001		2000		2001			2000

Basic Net Income (Loss) Per Share
Net income (loss)	$	100	$	13,874	$	(32,930	)	$	91,384

Weighted average number of common shares outstanding during the period		139,740		126,142		144,046			123,054

Basic net income (loss) per share	$	0.00	$	0.11	$	(0.23	)	$	0.74

Diluted Net Income (Loss) Per Share
Net income (loss)	$	100	$	13,874	$	(32,930	)	$	91,384

Weighted average number of common shares outstanding during the period		139,740		126,142		144,046			123,054
Shares issuable from assumed exercise of options		7,400		4,826		—			6,754

Total shares for purpose of calculating diluted net income (loss) per share		147,140		130,968		144,046			129,808

Diluted net income (loss) per share	$	0.00	$	0.11	$	(0.23	)	$	0.70

For the three and nine months ended December 31, 2001, approximately 12,746,000 and 4,248,000 shares, respectively, issuable upon conversion of the 3% convertible subordinated debentures were excluded from the computation of diluted net income (loss) per share, as their effect would have been anti-dilutive.

For the three and nine months ended December 31, 2001, approximately 5,740,000 and 13,784,000 shares, respectively, issuable from assumed exercise of options were excluded from the computation of diluted net income (loss) per share, as their effect would have been anti-dilutive. For the three and nine months ended December 31, 2000, approximately 11,384,000 and 7,542,000 shares, respectively, issuable from assumed exercise of options were excluded from the computation of diluted net income per share as their effect would have been anti-dilutive.

Note 5. Common Stock Repurchases

On January 16, 2001, the Board of Directors replaced an earlier stock repurchase program with a new authorization to repurchase up to $700 million, not to exceed 30 million shares, of Symantec’s common stock with no expiration date. During the September 2001 quarter, we repurchased 9.6 million shares at prices ranging from $17.78 to $24.50 per share for an aggregate amount of approximately $204.4 million. During the March 2001 quarter, we repurchased 10.0 million shares at prices ranging from $23.04 to $25.58 per share for an aggregate amount of approximately $244.4 million. No shares were repurchased during the June 2001 and December 2001 quarters and the nine months ended December 31, 2000.

Note 6. Convertible Subordinated Debentures

On October 24, 2001, we completed a private offering of $600 million of 3% convertible subordinated debentures due November 1, 2006, the net proceeds of which were approximately $585 million. The debentures are convertible into shares of Symantec’s common stock by the holders at any time before maturity at a conversion price of $34.14 per share, subject to certain adjustments. We may redeem the debentures on or after November 5, 2004, at a redemption price of 100.75% of stated principal during the period November 5, 2004 through October 31, 2005 and 100% thereafter. Interest is paid semi-annually, commencing May 1, 2002.

SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

Note 7. Stock Split

On December 14, 2001, our Board of Directors approved a two-for-one stock split of Symantec’s common stock, to be effected as a stock dividend as of January 31, 2002 to stockholders of record on January 17, 2002. Based on the number of shares outstanding on January 17, 2002, the stock split resulted in the issuance of approximately 70,687,000 additional shares of Symantec’s common stock. All Symantec share and per share amounts in this Form 10-Q have been adjusted to give retroactive effect to the stock split.

Note 8. Acquisitions and Divestitures

Acquisition of Lindner & Pelc

On August 30, 2001, we purchased 100% of the outstanding shares of Lindner & Pelc Consult GmbH for approximately $2.2 million. The transaction was accounted for as a purchase and we recorded approximately $2.1 million in goodwill. As we acquired Lindner & Pelc subsequent to June 30, 2001, the related goodwill will not be amortized, but will be subject to annual impairment tests in accordance with SFAS No. 142. Under the terms of the agreement, we may also be liable for contingency payments based on targeted future sales through September 2004. The maximum aggregate amount of such contingency payments is approximately $2.0 million. As we pay additional amounts over the contingency period, we will record additional goodwill equal to these payments.

Acquisition of Foster-Melliar’s Enterprise Security Management Division

On July 11, 2001, we entered into an asset purchase agreement to acquire the enterprise security management division of Foster-Melliar, an IT services company located in Johannesburg, South Africa. We paid approximately $1.5 million for these assets and the IT services business. The transaction was accounted for as a purchase and we recorded approximately $1.5 million of goodwill. As we acquired Foster-Melliar’s enterprise security management division subsequent to June 30, 2001, the related goodwill will not be amortized, but will be subject to annual impairment tests in accordance with SFAS No. 142. Under the terms of the agreement, we may also be liable for contingency payments based on targeted future sales through fiscal year 2004. The maximum aggregate amount of such contingency payments is $1.5 million. As we pay additional amounts over the contingency period, we will record additional goodwill equal to these payments.

Acquisition of AXENT

On December 18, 2000, we acquired 100% of the outstanding common stock of AXENT Technologies, Inc. by issuing approximately 29,056,000 shares of our common stock to AXENT shareholders. We also assumed all of the outstanding AXENT employee stock options valued at approximately $87 million. The transaction was accounted for as a purchase. The acquisition was initially recorded in fiscal 2001 for approximately $925 million and allocated as follows (in thousands):


Net tangible assets of AXENT		$	130,517
In-process research and development			22,300
Tradename			4,100
Workforce-in-place			10,670
Developed technology			75,500
Deferred income taxes			(19,080	)
Deferred compensation			992
Goodwill			699,660

	Total purchase price	$	924,659

In fiscal 2001, we also accrued approximately $18 million in acquisition related expenses, which included financial advisory, legal and accounting, duplicative site and fixed assets, and severance costs. These acquisition related expenses were paid by the end of the December 2001 quarter.

After filing the pre-acquisition tax returns of AXENT during the December 2001 quarter, we identified additional tax losses and other beneficial tax attributes available from the pre-acquisition periods of AXENT. As a result, we recorded additional deferred tax assets of $5 million attributable to these carryforward tax benefits, with a corresponding offset to goodwill.

SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

During the September 2001 quarter, we divested the web access management products that we acquired with our acquisition of AXENT. As a result, we wrote off approximately $804,000 of workforce-in-place related to these products. See “Divestiture of the Web Access Management Products” below.

During the June 2001 quarter, we resolved certain pre-acquisition contingencies, and as a result, we increased the purchase price and goodwill by $4.5 million, of which $1.2 million remains as an accrual as of December 31, 2001.

The amount allocated to tradename, workforce-in-place, developed technology and goodwill is being amortized over their useful life of four years. Commencing in fiscal 2003, however, the remaining balance of workforce-in-place and goodwill will no longer be amortized. Instead they will be subject to annual impairment tests in accordance with SFAS No. 142. The deferred compensation related to the options assumed as part of the acquisition is being amortized over the remaining vesting period.

Acquisition of 20/20 Software

On March 31, 2000, we purchased 100% of the outstanding common stock of 20/20 Software for up to $16.5 million. The terms of the agreement required two guaranteed payments totaling approximately $7.5 million. We originally recorded approximately $6.1 million for goodwill and $2.3 million for acquired product rights, offset by $0.9 million in related income tax liabilities, which accounted for the $7.5 million guaranteed purchase price. In addition, the agreement required contingent payments that were based on targeted future sales of certain of our products from July 1, 2000 to June 30, 2001, with a cumulative maximum contingency amount of $9.0 million. We recorded contingent amounts of approximately $523,000, $4.2 million and $1.6 million during the September 2000, March 2001 and June 2001 quarters, respectively, resulting in a cumulative increase in the purchase price of $6.3 million, which was allocated to goodwill. The goodwill and acquired product rights will be amortized over a five-year period. Commencing in fiscal 2003, however, the remaining balance of goodwill will no longer be amortized. Instead it will be subject to annual impairment tests in accordance with SFAS No. 142.

Divestiture of the Web Access Management Products

On August 24, 2001, we entered into a sale and purchase agreement to sell assets and liabilities and transfer employees related to our web access management product line to PassGo Technologies Ltd. (“PassGo”) for approximately $1.1 million. The assets and liabilities sold primarily consisted of fixed assets and certain revenue deferrals related to the web access management products. We wrote off and transferred approximately $2.3 million of net fixed assets and $804,000 of workforce-in place. In addition, we accrued approximately $311,000 in transaction costs. These expenses were offset by $2.9 million in revenue deferrals due to the fact that no future obligations exist. We recorded a pre-tax gain of approximately $392,000 on the divestiture, which was recorded in income, net of expense, from sale of technologies and product lines on the Consolidated Statements of Operations.

We also entered into an exclusive license and option agreement with PassGo whereby they will license our web access management technology products. In consideration for the license, PassGo is required to pay us quarterly royalties on their net revenue starting at 30% and declining to 10% over a four year period. As a result, we will continue to amortize the developed technology related to the web access management products. PassGo also has an option to purchase the technology at a price starting at $18.8 million and declining to $3.3 million over a four year period. During the December 2001 quarter, we recorded approximately $662,000 for royalty and transition fees, offset by $525,000 for the amortization of developed technology in income, net of expense, from sale of technologies and product lines on the Consolidated Statements of Operations.

Note 9. Restructuring and Other Expenses

During the December 2001 quarter, we recorded approximately $9.4 million for exit costs associated with the relocation of our North American support group from Eugene, Oregon to an expanded facility in Springfield, Oregon. These costs included $6.7 million in rent and related exit costs remaining on the abandoned facilities in Eugene, Oregon and the write-off of $2.7 million in related abandoned leasehold improvements. As of December 31, 2001, the entire accrual of $6.7 million remained outstanding.

During the June 2001 quarter, we recorded approximately $2.0 million for the costs of employee severance, related benefits, outplacement services and abandonment of certain facilities primarily related to former AXENT operations. As a result, our workforce was reduced by 58 employees. These severance, related benefits, and outplacement costs were paid by the end of the September 2001 quarter.

SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

Details of the fiscal 2002 restructuring and other expenses were as follows:


	Cash/	Original		Amount			Amount		Balance
(In thousands)	Non-cash	Charge		Paid/Used			Adjusted		12/31/01

Employee severance and outplacement	Cash	$	1,686	$	(1,686	)	$	—	$	—
Excess facilities	Cash/ non-cash		9,737		(2,740	)		—		6,997

Total restructuring and other expenses		$	11,423	$	(4,426	)	$	—	$	6,997

During the March 2001 quarter, we reorganized various operating functions, and as a result reduced our workforce by 50 employees, and recorded approximately $1.1 million for the costs of severance, related benefits and outplacement services. In addition, we provided approximately $1.2 million for costs of severance and related benefits for the termination of six members of our senior management team due to a realignment of certain responsibilities. These severance, related benefits, and outplacement costs were paid by the end of the September 2001 quarter.

As a result of various restructuring and other activities that took place prior to fiscal 2001, we had recorded charges for employee severance and outplacement expenses and excess facilities and equipment costs. These costs were paid by the end of the December 2001 quarter.

Note 10. Litigation and Contingencies

On August 15, 2001, a customer filed a lawsuit in Michigan state court, purportedly on behalf of a class of customers who had experienced a particular error message when using the Symantec LiveUpdate feature. The complaint alleged violations of the Michigan Consumer Protection Act and breach of implied warranty. The parties agreed to dismiss the lawsuit with no payment by us, and the court ordered the matter dismissed on January 9, 2002.

On December 23, 1999, Altiris Inc. filed a lawsuit against us in the United States District Court, District of Utah alleging that unspecified Symantec products, including Norton Ghost Enterprise Edition, infringed a patent owned by Altiris. The lawsuit requests damages, injunctive relief, costs and attorney fees. In October 2001, a stipulated judgment of non-infringement was entered following the court’s ruling construing the claims of the Altiris patent, and Altiris has appealed the ruling. We believe Altiris’s claim has no merit and we intend to defend the action vigorously.

On May 12, 1999, a venture capital entity and a former stockholder owning less than a majority share of CKS Limited, which AXENT acquired in March 1999, commenced an action in the Suffolk County Superior Court in Boston, Massachusetts against AXENT and its directors. The action alleged violations of the Massachusetts Uniform Securities Act, negligent misrepresentations and unfair trade practices. We inherited this case upon our acquisition of AXENT. The case was settled and dismissed during the September 2001 quarter on confidential terms not material to us.

In July 1998, the Ontario Court of Justice (General Division) ruled that we should pay a total of approximately $4.7 million for damages, plus prejudgment interest, to Triolet Systems, Inc. and Brian Duncombe in a decade-old copyright action, for damages arising from the grant of a preliminary injunction against the defendant. The damages were awarded following the court’s ruling that evidence presented later in the case showed the injunction was not warranted. We inherited this case through our acquisition of Delrina Corporation, which was the plaintiff in this lawsuit. We have appealed the decision; however, we recorded a charge of approximately $5.8 million in the June 1998 quarter, representing the unaccrued portion of the damages through the date of the ruling plus legal costs. As of December 31, 2001, we believe that we have adequately accrued for both the damages and costs.

In October 1997, a complaint was filed in the United States District Court for the District of Utah on behalf of PowerQuest Corporation, against Quarterdeck. The complaint alleges that Quarterdeck’s partitioning software, included in Partition-It and Partition-It Extra Strength, violated a patent held by PowerQuest. In January 1998, PowerQuest obtained a second patent relating to partitioning and has amended its complaint to allege infringement of that patent as well. The plaintiff has subsequently added us as a defendant and seeks an injunction against past distribution of Partition-It and Partition-It Extra Strength and monetary damages. We believe this claim has no merit and we intend to defend the action vigorously.

SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

On September 15, 1997, Hilgraeve Corporation filed a lawsuit in the United States District Court, Eastern District of Michigan, against us, alleging that certain of our anti-virus products infringe a patent owned by Hilgraeve. The lawsuit requests damages, injunctive relief, costs and attorney fees. In March 2000, the court granted our summary judgment motions and dismissed the case. In September 2001, the Court of Appeals for the Federal Circuit reversed the summary judgment and ordered the case returned to the District Court. We have filed a petition for a writ of certiorari with the United States Supreme Court seeking review of that decision. We believe this lawsuit has no merit and we intend to defend the action vigorously.

Over the past few years, it has become common for software companies, including us, to receive claims of patent infringement. At any given time, we are evaluating claims of patent infringement asserted by several parties with respect to certain of our products. The outcome of any related litigation or negotiation that might arise from such claims could have a material adverse impact on our future results of operations or cash flows.

We are also involved in a number of other judicial and administrative proceedings incidental to our business. We intend to defend all of the aforementioned pending lawsuits vigorously and although adverse decisions (or settlements) may occur in one or more of the cases, the final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse affect on our financial condition, although it is not possible to estimate the possible loss or losses from each of these cases. Depending, however, on the amount and timing of an unfavorable resolution of these lawsuits, it is possible that our future results of operations or cash flows could be materially adversely affected in a particular period. We have accrued certain estimated legal fees and expenses related to certain of these matters; however, actual amounts may differ materially from those estimated amounts.

Note 11. Segment Information

Our operating segments are significant strategic business units that offer different products and services, distinguished by customer needs. We have five operating segments: Enterprise Security, Enterprise Administration, Consumer Products, Services and Other.

The Enterprise Security segment focuses on providing organizations with Internet security technology, services and response capabilities to deal with their specific security needs. The Enterprise Administration segment focuses on offering products that enable companies to be more effective and efficient within their IT departments. The Consumer Products segment focuses on delivering our security and problem-solving products to individual consumers, home offices and small businesses. The Services segment is focused on providing information security solutions that incorporate best-of-breed technology, security best practices and expertise and global resources to help enable E-business success. The Other segment is comprised of sunset products and products nearing the end of their life cycle. Also included in the Other segment are all indirect costs, general and administrative expenses, amortization of goodwill and charges that are one-time in nature, such as acquired in-process research and development, judgment settlements and restructuring and other expenses which are not charged to the other operating segments.

SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

The following table summarizes each segment’s net revenues from external customers, operating income (loss), and depreciation and amortization expense:


	Enterprise		Enterprise		Consumer								Total
(In thousands; unaudited)	Security		Administration		Products		Services			Other			Company

Three Months Ended December 31, 2001
Revenue from external customers	$	126,565	$	48,808	$	111,579	$	2,615		$	680		$	290,247
Operating income (loss)		29,453		31,245		50,045		(5,624	)		(92,523	)		12,596
Depreciation & amortization expense		5,826		1,133		3,295		415			60,454			71,123
Three Months Ended December 31, 2000
Revenue from external customers		71,105		53,747		93,761		437			244			219,294
Operating income (loss)		15,514		33,886		43,633		(423	)		(70,035	)		22,575
Depreciation & amortization expense		2,104		740		1,573		40			17,110			21,567
Nine Months Ended December 31, 2001
Revenue from external customers		336,943		161,771		252,650		7,956			1,335			760,655
Operating income (loss)		70,204		113,327		126,163		(9,509	)		(315,566	)		(15,381	)
Depreciation & amortization expense		11,663		2,495		6,579		862			178,596			200,195
Nine Months Ended December 31, 2000
Revenue from external customers		180,273		173,040		247,224		445			1,966			602,948
Operating income (loss)		34,368		115,437		99,438		(1,613	)		(133,311	)		114,319
Depreciation & amortization expense		6,634		2,535		5,532		111			36,086			50,898

Geographical Information


		Three Months Ended				Nine Months Ended
		December 31,				December 31,

(In thousands; unaudited)		2001		2000		2001		2000

Net revenues from external customers:
	United States	$	154,474	$	109,302	$	412,510	$	311,328
	Other countries		135,773		109,992		348,145		291,620

		$	290,247	$	219,294	$	760,655	$	602,948

SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

Note 12. Subsequent Events

In January 2002, we purchased land and a building in Maidenhead, United Kingdom for approximately $25 million. We expect to consolidate most of our UK facilities into this site during the first half of calendar year 2002.

On January 31, 2002, we issued approximately 70,687,000 additional shares of Symantec’s common stock as a stock dividend. See Note 7.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Symantec, the world leader in Internet security technology, provides a broad range of content and network security software and appliance solutions to enterprises, individuals and service providers. We are a leading provider of client, gateway and server security solutions for virus protection, firewall and virtual private network, vulnerability management, intrusion detection, Internet content and e-mail filtering, remote management technologies and security services to enterprises and service providers around the world. Founded in 1982, we have offices in 38 countries worldwide.

All Symantec share and per share amounts in this Form 10-Q have been adjusted to reflect the two-for-one stock split effected as a stock dividend, effective January 31, 2002.

RESULTS OF OPERATIONS

The following table sets forth each item from our condensed consolidated statements of operations as a percentage of net revenues and the percentage change in the total amount of each item for the periods indicated:


				Three Months									Nine Months
				Ended						Percent			Ended						Percent
				December 31,						Change			December 31,						Change
										in Dollar									in Dollar
(Unaudited)				2001			2000			Amounts			2001			2000			Amounts

Net revenues					100	%		100	%		32	%		100	%		100	%		26	%
Cost of revenues					18			14			70			18			14			62

		Gross margin			82			86			26			82			86			20
Operating expenses:
	Research and development				14			14			29			16			14			40
	Sales and marketing				38			40			26			42			40			33
	General and administrative				5			5			35			5			5			23
	Amortization of goodwill				17			6			313			19			4			562
	Amortization of other intangibles from acquisitions				—			—			*			—			—			*
	Acquired in process-research and development				—			10			(100	)		—			4			(100	)
	Restructuring and other expenses				4			1			631			2			—			*

			Total operating expenses		78			76			36			84			67			58

Operating income (loss)					4			10			(44	)		(2	)		19			(113	)
	Interest income				3			4			(13	)		3			4			(4	)
	Interest expense				(1	)		—			*			(1	)		—			*
	Income, net of expense, from sale of technologies and product lines				1			2			(12	)		2			3			(18	)
	Other expense, net				—			—			*			—			—			*

Income before income taxes					7			16			(43	)		2			26			(90	)
	Provision for income taxes				7			10			(8	)		6			11			(22	)

Net income (loss)					—	%		6	%		(99	)		(4	)%		15	%		(136	)

* Percentage change is not meaningful

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

Net Revenues

Net revenues increased 32% to $290.2 million in the December 2001 quarter from $219.3 million in the December 2000 quarter. Revenue growth in the December 2001 quarter compared to the December 2000 quarter was largely due to increased sales to our Enterprise Security customers as well as our Consumer Product customers, partially offset by a decline in our Enterprise Administration segment revenues. The revenue increase in the Enterprise Security and Consumer Product segments was due primarily to strong growth in our virus protection solutions.

Net revenues increased 26% to $760.7 million in the nine month period ended December 31, 2001 from $602.9 million in the comparable period ended December 31, 2000. The increase in net revenues was due primarily to growth in the Enterprise Security segment, particularly in our virus protection, firewall, intrusion detection and vulnerability management product solutions.

International

Net revenues from sales outside of the United States were $135.8 million and $110.0 million in the December 2001 and 2000 quarters, respectively. As a percentage of net revenues, sales outside of the United States represented 47% and 50% in the December 2001 and 2000 quarters, respectively. Net revenues from sales outside of the United States were $348.1 million and $291.6 million for the nine months ended December 31, 2001 and 2000, respectively. As a percentage of net revenues, sales outside of the United States represented 46% and 48% for the nine months ended December 31, 2001 and 2000, respectively. The increase in absolute dollars for the three and nine months ended December 31, 2001 compared to the three and nine months ended December 31, 2000 was primarily the result of sales growth in Europe and Asia.

International currency rates during the December 2001 quarter did not have a material impact on our international revenue growth as compared to average international currency rates during the December 2000 quarter. However, weaknesses in international currencies during the first six months of fiscal 2002 negatively impacted our international revenue growth by approximately $7 million for the nine months ended December 31, 2001 as compared to the impact of average international currency rates during the nine months ended December 31, 2000.

Segments

The Enterprise Security segment provides organizations with Internet security technology, services and response capabilities to deal with their specific security needs. The Enterprise Security segment comprised approximately 44% and 32% of net revenues in the December 2001 and 2000 quarters, respectively. For the nine months ended December 31, 2001 and 2000, the Enterprise Security segment comprised approximately 44% and 30% of net revenues, respectively. The segment’s net revenues, for the three and nine months ended December 31, 2001 increased during these periods primarily due to strong growth in our firewall, intrusion detection and vulnerability management product solutions, which was attributable to our acquisition of AXENT in December 2000, and virus protection product solutions.

The Enterprise Administration segment offers products that enable companies to be more effective and efficient within their IT departments. The Enterprise Administration segment comprised approximately 17% and 25% of net revenues in the December 2001 and 2000 quarters, respectively. For the nine months ended December 31, 2001 and 2000, the Enterprise Administration segment comprised approximately 21% and 29% of net revenues, respectively. The segment’s net revenues for the three and nine months ended December 31, 2001 compared to the three and nine months ended December 31, 2000 decreased due to a decline in sales of our pcAnywhere product, partially offset by growth in our Ghost Corporate Edition product. The decline in our pcAnywhere product was, and may continue to be, the result of a decrease in small business and home office sales, which was partially offset by an increase in corporate sales.

The Consumer Products segment provides security and problem-solving products to individual consumers, home offices and small businesses. The Consumer Product segment comprised approximately 38% and 43% of net revenues in the December 2001 and 2000 quarters, respectively. Net revenues from the Consumer Products segment were $111.6 million and $93.8 million in the December 2001 and 2000 quarters, respectively. The increase in net revenues was primarily related to stronger than expected consumer and small business spending, which contributed to the increase in sales of our Norton AntiVirus, Norton System Works and Norton Internet Security products. This segment’s net revenues have been seasonally higher in our December quarters over the last four years and we are unclear whether the increased demand in the December 2001 quarter will be sustainable in the future. For the nine months ended December 31, 2001 and 2000, the Consumer Products segment comprised approximately 33% and 41% of net revenues, respectively. Net revenues for the segment were $252.7 million and $247.2 million for the nine months ended December 31, 2001 and

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

2000, respectively. The increase in net revenues was primarily related to the increase in sales of our Norton AntiVirus products. The increased sales were partially offset by a decline in sales of our Winfax, and Macintosh products.

The Services segment provides information security solutions that incorporate best-of-breed technology, security best practices and expertise and global resources to help enable E-business success. Net revenues from this segment increased in the three and nine months ended December 31, 2001 compared to the three and nine months ended December 31, 2000 and represented approximately 1% of net revenues in the fiscal 2002 periods. The Other segment is comprised of sunset products and products nearing the end of their life cycle and represented less than 1% of net revenues in the three and nine months ended December 31, 2001 and 2000.

Gross Margin

Gross margin represents net revenues less cost of revenues. Cost of revenues consists primarily of manufacturing expenses, costs for producing manuals and CDs, packaging costs, royalties paid to third parties under publishing contracts, costs of consulting services, technical support costs and amortization and write-off of acquired product rights.

Gross margin decreased to 82% of net revenues in the three and nine months ended December 31, 2001 from 86% in the three and nine months ended December 31, 2000. Factors contributing to the decrease in our gross margin include increased amortization of acquired product rights primarily from our acquisition of AXENT and technical support costs as a result of an increase in related enterprise sales. In addition, consulting service costs included in costs of revenue increased along with the related increase in consulting service revenues.

Research and Development Expenses

Research and development expenses as a percentage of net revenues were 14% for the three months ended December 31, 2001 and 2000. Research and development expenses as a percentage of net revenues were 16% and 14% for the nine months ended December 31, 2001 and 2000, respectively. Research and development expenses were approximately $40.7 million and $31.5 million in the December 2001 and 2000 quarters, respectively, and $120.2 million and $86.0 million for the nine months ended December 31, 2001 and 2000, respectively. The increase was primarily a result of salary increases and other employee related expenses and AXENT related research and development expenses.

Sales and Marketing Expenses

Sales and marketing expenses as a percentage of net revenues were 38% and 40% in the December 2001 and 2000 quarters, respectively. The decrease in sales and marketing expenses as a percentage of net revenues was attributed to the disproportionate growth in net revenues of 32% compared to growth in sales and marketing expenses of 26% during the December 2001 quarter. For the nine months ended December 31, 2001 and 2000, sales and marketing expenses as a percentage of net revenues were 42% and 40%, respectively. Sales and marketing expenses were approximately $109.7 million and $87.1 million in the December 2001 and 2000 quarters, respectively, and $318.3 million and $239.5 million for the nine months ended December 31, 2001 and 2000, respectively. The increase was primarily a result of Enterprise Security segment hiring, salary and commission increases and AXENT related sales and marketing expenses.

General and Administrative Expenses

General and administrative expenses as a percentage of revenue remained flat at 5% for the three and nine months ended December 31, 2001 and 2000. General and administrative expenses were approximately $15.3 million and $11.3 million in the December 2001 and 2000 quarters, respectively. For the nine months ended December 31, 2001 and 2000, general and administrative expenses were approximately $38.1 million and $30.9 million, respectively. The increase in these expenses was primarily a result of additional headcount, salary increases and expenses associated with internal software implementation projects.

Amortization of Goodwill and Other Intangibles From Acquisitions

Amortization of goodwill and other intangibles from acquisitions increased approximately $37.6 million to $49.9 million in the December 2001 quarter from $12.3 million in the December 2000 quarter. Amortization of goodwill and other intangibles from acquisitions increased approximately $126.2 million to $149.4 million for the nine months ended December 31, 2001 from $23.2 million for the nine months ended December 31, 2000. The increase

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

was due to the amortization of goodwill and other intangibles primarily from our acquisition of AXENT in December 2000.

Acquired In-Process Research and Development

We recorded no acquired in-process research and development charges during the three and nine months ended December 31, 2001.

During the December 2000 quarter, we wrote off approximately $22.3 million of acquired in-process research and development associated with our acquisition of AXENT in December 2000. This write-off was necessary because the acquired technologies had not yet reached technological feasibility and there were no alternative uses.

Restructuring and Other Expenses

During the December 2000 quarter, we recorded approximately $1.3 million for the costs of employee severance, related benefits, outplacement services and abandonment of certain equipment as a reduction in our Toronto workforce and departure of four members of our senior management.

See Note 9 of Notes to Condensed Consolidated Financial Statements in this Form 10-Q.

Interest and Other Income (Expense)

Interest income was relatively flat at approximately $7.7 million and $8.8 million in the December 2001 and 2000 quarters, respectively, and $22.6 million and $23.5 million for the nine months ended December 31, 2001 and 2000, respectively.

Interest expense of $3.9 million for the three and nine months ended December 31, 2001 was related to the 3% convertible subordinated debentures issued in October 2001. We recorded no interest expense during the nine months ended December 31, 2000.

Other expense, net was insignificant during the periods reported.

Income, Net of Expense, From Sale of Technologies and Product Lines

Income, net of expense, from sale of technologies and product lines was approximately $4.4 million and $5.0 million in the December 2001 and 2000 quarters, respectively. In the December 2001 quarter, the $4.4 million consisted of $4.25 million of royalty payments received from Interact, a subsidiary of the Sage Group, plc, and $662,000 of royalty and transition fees from PassGo, offset by $525,000 for the amortization of developed technology. In the December 2000 quarter, the $5.0 million consisted entirely of royalty payments received from Interact.

Income, net of expense, from sale of technologies and product lines was approximately $13.3 million and $16.2 million for the nine months ended December 31, 2001 and 2000, respectively. For the nine months ended December 31, 2001, the $13.3 million consisted of $12.8 million of royalty payments received from Interact, a pre-tax gain of $392,000 from the divestiture of our web access management products, and $662,000 of royalty and transition fees from PassGo, offset by $525,000 for the amortization of developed technology. For the nine months ended December 31, 2000, the $16.2 million consisted primarily of royalties and other transition fees received as a result of the sale of our Visual Café and ACT! product lines.

Income Tax Provision

Our effective tax rate on income before restructuring and other expenses, amortization of goodwill and charges for acquired in-process research and development, was 32% for the three and nine months ended December 31, 2001 and 2000. This effective tax rate was lower than the U.S. federal and state combined statutory rate primarily due to a lower statutory tax rate on income generated by our Irish operations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

The tax provision of $48.6 million for the nine months ended December 31, 2001 consisted of a $56.0 million (or 32% effective tax rate) provision on $174.9 million of income before restructuring and other expenses and amortization of goodwill and a $7.4 million tax benefit on $159.2 million of restructuring and other expenses and amortization of goodwill. The tax benefit was lower than the U.S. federal and state combined statutory tax rate due to the nondeductibility of substantially all of the goodwill amortization.

Similarly, the tax provision of $62.5 million for the nine months ended December 31, 2000 consisted of a $64.0 million (or 32% effective tax rate) provision on $199.8 million of income before restructuring and other expenses, amortization of goodwill and charges for acquired in-process research and development and a $1.5 million tax benefit on $45.9 million of restructuring and other expenses, amortization of goodwill and charges for acquired in-process research and development. The tax benefit was lower than the U.S. federal and state combined statutory tax rate due to the nondeductibility of charges for acquired in-process research and development and substantially all of the goodwill amortization.

Selected Pro Forma Financial Data

For comparative purposes, the following table displays, on a pro forma basis, our results of operations as if the acquisition of AXENT had occurred at the beginning of fiscal 2001 and excluding all acquisition related amortization and one-time charges. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from pro forma measures used by other companies.


	Three Months Ended				Nine Months Ended
	December 31,				December 31,

(In thousands, except per share data; unaudited)	2001		2000		2001		2000

Pro forma net revenues	$	290,247	$	241,752	$	760,655	$	693,544

Pro forma net income	$	59,442	$	40,383	$	135,617	$	136,055

Pro forma net income per share — diluted	$	0.39	$	0.26	$	0.89	$	0.86

Shares used to compute pro forma net income per share — diluted		159,886		156,650		155,240		157,528

The following items represent the difference between the pro forma financial data and the related GAAP financial data in the Condensed Consolidated Statements of Operations.

For the three and nine months ended December 31, 2000, pro forma net revenues include AXENT net revenues of $22.5 million and $90.6 million, respectively, as if the acquisition had occurred at the beginning of fiscal 2001.

For the three and nine months ended December 31, 2001, the pro forma net income excludes all acquisition related amortization and one-time charges of $66.7 million (tax benefit of $7.3 million) and $183.8 million (tax benefit of $15.3 million), respectively. For the three and nine months ended December 31, 2000, the pro forma net income includes AXENT’s net loss of $11.0 million and $6.2 million, and excludes all acquisition related amortization and one-time charges of $39.3 million (tax benefit of $1.8 million) and $55.3 million (tax benefit of $4.4 million), respectively.

For the three months ended December 31, 2001, shares used to compute pro forma net income per share (diluted) include approximately 12,746,000 shares issuable upon conversion of the 3% convertible subordinated debentures issued in October 2001. For the nine months ended December 31, 2001, shares used to compute pro forma net income per share (diluted) include approximately 4,248,000 shares issuable upon conversion of the 3% convertible subordinated debentures and approximately 6,946,000 shares issuable from assumed exercise of options. Correspondingly, the numerator used to compute pro forma net income (diluted) for the three and nine months ended December 31, 2001 excludes the interest expense of $2.6 million from the 3% convertible subordinated debentures, net of income tax. For the three and nine months ended December 31, 2000, shares used to compute pro forma net income per share (diluted) include approximately 25,682,000 and 27,720,000 shares, respectively, which represents the number of Symantec shares that would have been exchanged for AXENT’s weighted number of common shares outstanding for the respective periods.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

Liquidity and Capital Resources

Cash, cash equivalents and short-term investments increased approximately $630.4 million to $1,187.4 million at December 31, 2001 from $557.0 million at March 31, 2001. This increase is largely due to the net proceeds from the issuance of convertible subordinated debentures and, to a lesser extent, from cash provided from operations, proceeds of approximately $7.5 million received upon surrender of approximately 600,000 shares of Interact, and net proceeds from the exercise of stock options and sales of common stock through our employee stock purchase plan. The increase was partially offset by cash used for stock repurchases and capital expenditures.

Net cash provided by operating activities for the nine months ended December 31, 2001 was approximately $303.9 million and was comprised of net non-cash related expenses of $206.8 million and a net increase of $130.0 million in liabilities, net of an increase in assets, offset by a net loss of approximately $32.9 million.

Net trade accounts receivable increased $38.0 million to $154.7 million at December 31, 2001 from $116.7 million at March 31, 2001. The increase in net trade accounts receivable is primarily due to a higher percentage of enterprise sales as compared to consumer sales.

Net cash used in investing activities for the nine months ended December 31, 2001 was approximately $364.3 million and was comprised primarily of approximately $264.4 million in net purchases of marketable securities and investments, $94.7 million of capital expenditures and purchased intangibles and $5.2 million for acquisition related transactions.

On January 16, 2001, the Board of Directors replaced an earlier stock repurchase program with a new authorization to repurchase up to $700 million, not to exceed 30 million shares, of Symantec’s common stock with no expiration date. During the September 2001 quarter, we repurchased 9.6 million shares at prices ranging from $17.78 to $24.50 per share, for an aggregate amount of approximately $204.4 million. During the March 2001 quarter, we repurchased 10.0 million shares at prices ranging from $23.04 to $25.58 per share, for an aggregate amount of approximately $244.4 million. No shares were repurchased during the June 2001 and December 2001 quarters and the nine months ended December 31, 2000.

On October 24, 2001, we completed a private offering of $600 million of 3% convertible subordinated debentures due November 1, 2006, the net proceeds of which were $585 million. The debentures are convertible into shares of Symantec’s common stock by the holders at any time before maturity at a conversion price of $34.14 per share, subject to certain adjustments. We may redeem the notes on or after November 5, 2004, at a redemption price of 100.75% of stated principal during the period November 5, 2004 through October 31, 2005 and 100% thereafter. Interest is paid semi-annually, commencing May 1, 2002. We intend to use the net proceeds of the offering for general corporate purposes, including working capital, potential acquisitions, stock repurchases and investments in our infrastructure.

We believe that existing cash and short-term investments, cash generated from operating results and cash from the convertible note offering will be sufficient to fund operations for at least the next year.

Synthetic Leases

We currently have two real estate leasing arrangements that we have classified as operating leases.

One of the lease arrangements is for two existing office buildings in Cupertino, California. Lease payments for these facilities are based on the three-month LIBOR in effect at the beginning of each fiscal quarter plus a specified margin. We have the right to acquire the related properties at any time during the seven-year lease period ending February 1, 2006. If, at the end of the lease term we do not renew the lease, purchase the properties or arrange for a third party to purchase the properties, we will owe the lessor an amount up to the guaranteed residual amount of approximately $66 million, representing approximately 84% of the lessor’s purchase price of the property. We will also be obligated to the lessor for all or some portion of this amount if the price paid by the third party is below the guaranteed residual amount.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

On March 30, 2001, we entered into a master lease agreement for land and the construction of two office buildings, one approximately 100,000 square feet in Newport News, Virginia, effective June 6, 2001, and another approximately 175,000 to 200,000 square feet in Springfield, Oregon, effective April 6, 2001. Our lease payments will vary based on one-, three- or six-month LIBOR plus a specified margin. We have the right to acquire the related properties at any time during the six and one-half year lease period ending September 28, 2007. We moved into the Oregon facility immediately after the end of the December 2001 quarter. The Virginia facility is scheduled to be completed during the first half of calendar 2002. If, at the end of the lease term we do not renew the lease, purchase the properties or arrange for a third party to purchase the properties, we will owe the lessor an amount up to the guaranteed residual amount representing approximately 85% of the lessor’s ultimate purchase price of the properties, up to a maximum amount of $55 million as of December 31, 2001. We will also be obligated to the lessor for all or some portion of this amount if the price paid by the third party is below the guaranteed residual amount.

As security for each of these arrangements, we are required to maintain a cash collateral, which was $116 million at December 31, 2001. We are required to invest the cash collateral in U.S. Treasury securities or certificates of deposit with specified lenders and maturities not to exceed two to three years. In accordance with the lease terms, these funds are not available to meet operating cash requirements. As of December 31, 2001, the investments related to the California lease totaled approximately $77 million and the investments related to the Oregon and Virginia leases totaled approximately $39 million. These amounts are classified as non-current restricted investments within the financial statements.

In addition, we are obligated to maintain certain financial covenants including a minimum cash balance, tangible net worth and quarterly earnings before income tax, depreciation and amortization, or EBITDA, and a maximum debt and senior debt to EBITDA ratio. Future acquisitions, financing activities or operating losses may cause us to be in violation of these financial covenants. In the event of default, we may be required to release the cash collateral and take possession of the buildings.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

Business Risk Factors

The foregoing discussion contains forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others things, those risk factors set forth in this section and elsewhere in this report. We identify forward-looking statements by words such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or similar terms that refer to the future. We cannot guarantee future results, levels of activity, performance or achievements.

We have grown, and may continue to grow, through acquisitions which give rise to a number of risks that could have adverse consequences for our future operating results. We have made six acquisitions since March 1999, with our acquisition of AXENT Technologies, Inc. in December 2000 being the largest. Although we cannot assure you that we will be successful in completing them, we intend to pursue future acquisitions. Integrating acquired businesses has been and we expect that this will continue to be a complex, time consuming and expensive process. To integrate acquired businesses, we must implement our technology systems and assimilate and manage the personnel of the acquired operations. Our past acquisitions have given rise to substantial amounts of goodwill and other intangible assets that have been amortized or written off in subsequent years. Future acquisitions may result in substantial amounts of intangible assets that will be amortized or written off and goodwill that will be subject to annual impairment tests. In addition, a number of our acquisitions have resulted in our incurring substantial restructuring and other expenses and write-offs of acquired in-process research and development costs and this also may occur as a result of future acquisitions. Further, we may need to issue equity or incur additional debt to finance future acquisitions, which could be dilutive to our existing stockholders or could increase our leverage. Any of these and other factors could harm our ability to achieve anticipated levels of profitability from acquired operations or realize other anticipated benefits of an acquisition. Further, the difficulties of integrating acquired businesses could disrupt our ongoing business, distract our management focus from other opportunities and challenges and increase our expenses and working capital requirements.

Continued integration of AXENT may be difficult, which may adversely affect operations. We have been in the process of integrating AXENT into our operations since the date of acquisition. We may encounter substantial difficulties, costs and delays involved in integrating our operations, including perceived adverse changes in business focus and potential conflicts in distribution, marketing or other important relationships. Further, the market price of our common stock could decline if the integration of AXENT is unsuccessful or we are unable to successfully market our products and services to AXENT’s customers or AXENT’s products and services to our customers.

Our increased sales of enterprise-wide site licenses may increase fluctuations in our financial results. Sales of enterprise-wide site licenses through our Enterprise Security segment have been increasing and now represent a major portion of our business. This enterprise market has significantly different characteristics than the consumer market and different skills and resources are needed to penetrate this market. Enterprise licensing arrangements tend to involve a longer sales cycle than sales through other distribution channels, require greater investment of resources in establishing the enterprise relationship and can sometimes result in lower operating margins. The timing of the execution of volume licenses, or their nonrenewal or renegotiation by large customers, could cause our results of operations to vary significantly from quarter to quarter and could have a material adverse impact on our results of operations.

Demand for our consumer products may have been affected by factors that will not recur in future periods. Although there is no assurance this trend will continue, our sales to individual consumers, home offices and small businesses over the last four years have been seasonal, with higher sales generally in our December quarters. In addition, consumer demand has likely been affected by many market forces beyond our control including the release of new technology in the form of new operating systems or new hardware, a heightened awareness to security threats, or many other events that could affect consumer and small business demand. Therefore, our results of operations may continue to vary significantly from quarter to quarter and a decrease in consumer demand could have a material adverse impact on our results of operations.

Downturns in the network security, Internet infrastructure and related markets may decrease our revenues and margins. The market for our products depends on economic conditions affecting the broader network security,

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

Internet infrastructure and related markets. Downturns in these markets may cause potential customers to delay or cancel security projects, reduce their overall or security-specific information technology budgets or reduce or cancel orders for our products. Further, in this environment, customers may experience financial difficulty, cease operations or fail to budget for the purchase of our products. This, in turn, may lead to longer sales cycles, delays in payment and collection, and price pressures, causing us to realize lower revenues and margins. In addition, the terrorist acts of September 11, 2001 have created an uncertain economic environment, and we cannot predict the impact of these events, or of any related military action, on our customers or business.

We expect to make substantial changes to our information systems that could disrupt our business. The information systems that support our accounting, finance, order management and manufacturing systems are based on Oracle 10.7, and many of the business applications used in other aspects of our business have been tightly coupled with Oracle 10.7. Oracle has released a new version, 11i, and has announced that support for Oracle 10.7 will be discontinued after June 2002. In addition, as our business has grown, we have developed needs for an increasingly robust customer relationship management, or CRM, system. During fiscal 2002, we began implementing Oracle 11i and a new CRM system. Oracle 11i implementation occurred in the December 2001 quarter for the United States operations and is expected to occur during the first half of calendar 2002 for the Europe, Middle East and Africa, or EMEA, operations. These types of transitions frequently prove disruptive to the underlying business of an enterprise and may cause us to incur higher costs than we anticipate. Failure to manage a smooth transition to the new systems could result in a material adverse effect on our business operations.

Our software products and web site may be subject to intentional disruption. Although we believe we have sufficient controls in place to prevent intentional disruptions, such as software viruses specifically designed to impede the performance of our products, we expect to be an ongoing target of such disruptions. Similarly, experienced computer programmers, or hackers, may attempt to penetrate our network security or the security of our web site and misappropriate proprietary information or cause interruptions of our services. Our activities could be substantially disrupted and our reputation, and future sales, harmed if these efforts are successful.

Our markets are highly competitive and our operating results and financial condition could be adversely affected if we are unable to anticipate or react to this competition. Our markets are intensely competitive. If we are unable to anticipate or react to this competition, our operating results could be adversely affected by reducing our sales or the prices we can charge for our products. In the recent past, many of our competitors have significantly lowered the price of their products and we may have to do the same to remain competitive. Our ability to remain competitive depends, in part, on our ability to enhance our products or develop new products that are compatible with new hardware and operating systems. We have no control over, and limited insight into, development efforts by third parties with respect to new hardware and operating systems and we may not be able to respond effectively or timely to such changes in the market. In addition, we have limited resources and we must make strategic decisions as to the best allocation of our resources to position ourselves for changes in our markets. We may from time to time allocate resources to projects or markets that do not develop as rapidly or fully as we expect. We may fail to allocate resources to third party products, to markets or to business models that are more successful than we anticipate.

We face risks associated with our foreign operations. A significant portion of our net revenues, manufacturing costs and operating expenses result from transactions outside of the United States, often in foreign currencies. As a result, our future operating results could be materially and adversely affected by fluctuations in currency exchange rates and general uncertainty with each country’s political and economic structure. In addition, governmental regulation of imports or exports or our failure to obtain any required export approval of our technologies, particularly our encryption technologies, could impede our international sales. In light of recent terrorist activity, governments could enact additional regulation or restrictions on the use, import or export of encryption technologies. Additional regulation of encryption technology could delay or prevent the acceptance and use of encryption products and public networks for secure communications. This might decrease demand for our products and services.

Introduction of new operating systems may adversely affect our financial results and stock price. The inclusion of security, remote access or virus protection tools in new operating systems and hardware packages could adversely affect our sales. For example, the inclusion of features by Microsoft in new or upcoming versions of Windows, which directly compete with our products, may decrease or delay the demand for certain of our products, including those currently under development. The release of future editions of Windows could adversely affect our financial results and stock price. Additionally, as hardware vendors incorporate additional server-based network

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

management and security tools into network operating systems, the demand may decrease for some of our products, including those currently under development.

Our earnings and stock price are subject to significant fluctuations. Due to many factors, including those noted in this section, our earnings and stock price have been and may continue to be subject to significant volatility. There have been previous quarters in which we have experienced shortfalls in revenue and earnings from levels expected by securities analysts and investors, which have had an immediate and significant adverse effect on the trading price of our common stock. This may occur again in the future.

Fluctuations in our quarterly operating results have affected our stock price in the past and could affect our stock price in the future. If our quarterly operating results fail to meet the expectations of analysts and investors, the trading price of shares of our common stock and of the debentures could be negatively affected. Our quarterly operating results have varied substantially in the past and may vary substantially in the future depending upon a number of factors, including:

       •    the timing of announcements and releases of new or enhanced versions of our products and product upgrades

       •    the introduction of competitive products;

       •    uncertainty about and customer confidence in the current economic conditions and outlook;

       •    reduced demand for any given product;

       •    seasonality in the end-of-period buying patterns of foreign and domestic software markets; and

       •    the market’s transition between new releases of operating systems.

In addition to the foregoing factors, the risk of quarterly fluctuations is increased by the fact that a significant portion of our net revenues has historically been generated during the last month of each fiscal quarter. Most resellers tend to make a majority of their purchases at the end of a fiscal quarter. In addition, many enterprise customers negotiate site licenses near the end of each quarter. In part, this is because these two groups are able, or believe that they are able, to negotiate lower prices and more favorable terms at that time. Our reliance on a large portion of revenue occurring at the end of the quarter and the increase in the dollar value of transactions that occur at the end of a quarter can result in increased uncertainty relating to quarterly revenues. Due to this end-of-period buying pattern, forecasts may not be achieved, either because expected sales do not occur or because they occur at lower prices or on terms that are less favorable to us. In addition, these factors increase the chances that our results could diverge from the expectations of investors and analysts.

We must effectively adapt to changes in the dynamic technological environment. We are increasingly focused on the Internet security market, which, in turn is dependent on further acceptance and increased use of the Internet. The following critical issues concerning the use of the Internet remain unresolved and may affect the market for our products and the use of the Internet as a medium to distribute or support our software products and the functionality of some of our products:

       •    security;

       •    reliability;

       •    cost;

       •    ease of use;

       •    accessibility;

       •    quality of service; and

       •    potential tax or other government regulations.

In addition, new technologies, such as non PC-based Internet access devices and handheld organizers are gaining acceptance. We must adapt to these changing technological demands. If we are unable to timely assimilate changes brought about by the Internet and non PC-based environments, our future net revenues and operating results could be adversely affected.

The results of our research and development efforts are uncertain. We will need to incur significant research and development expenditures in future periods as we strive to remain competitive. The length of our product development cycle has generally been greater than we originally expected and we are likely to experience delays in future product development. In addition, a portion of our development efforts have not been technologically successful and certain products have not achieved market acceptance. As a result, the products we are currently developing or may develop

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

in the future may not be technologically successful, achieve market acceptance or compete effectively with products of our competitors.

We are dependent upon certain distribution channels. A large portion of our sales is made through the retail distribution channel, which is subject to events that cause unpredictability in consumer demand. This increases the risk that we may not plan effectively for the future, which could result in adverse operating results in future periods. Our retail distribution customers also carry our competitors’ products. These retail distributors may have limited capital to invest in inventory. Their decisions to purchase our products are partly a function of pricing, terms and special promotions offered by our competitors and other factors that we do not control and cannot predict. Our agreements with retail distributors are generally nonexclusive and may be terminated by them or by us without cause. We would be adversely affected if companies in our chain of distributors chose to increase purchases from our competition relative to the amount they purchase from us.

Some distributors and resellers have experienced financial difficulties in the past. Distributors that account for a significant portion of our sales may experience financial difficulties in the future. If these distributors do experience financial difficulties and we are unable to move their inventories to other distributors, we may experience reduced sales or increased write-offs, which would adversely affect our operating results.

Product returns may negatively affect our net revenues. Product returns can occur when we introduce upgrades and new versions of products or when distributors or retailers have excess inventories, subject to various contractual limitations. Our return policy allows distributors, subject to these contractual limitations, to return purchased products in exchange for new products or for credit towards future purchases. End-users may return our products through dealers and distributors or to us directly for a full refund within a reasonably short period from the date of purchase. We estimate and maintain reserves for such product returns which to date have been materially consistent with our actual experience. Future returns could, however, exceed the reserves we have established, which could have a material adverse effect on our operating results.

We depend on internal communications systems that may be disrupted. Our order management and product shipping centers are geographically dispersed. A business disruption could occur as a result of natural disasters, intermittent power shortages in the State of California, or the interruption in service by communications carriers. If our communications between these centers are disrupted, particularly at the end of a fiscal quarter, we may suffer an unexpected shortfall in net revenues and a resulting adverse impact on our operating results. Communications and Internet connectivity disruptions may also cause delays in customer access to our Internet-based services or product sales.

We are subject to litigation that could adversely affect our financial results. From time to time, we may be subject to claims that we have infringed the intellectual property rights of others, or other product liability claims, or other claims incidental to our business. We are currently involved in a number of lawsuits. We intend to defend all of these lawsuits vigorously. However, it is possible that we could suffer an unfavorable outcome in one or more of these cases. Depending on the amount and timing of any unfavorable resolutions of these lawsuits, our future results of operations or cash flows could be materially adversely affected in a particular period.

Although infringement claims may ultimately prove to be without merit, they are expensive to defend and may consume our resources or divert our attention from day-to-day operations. If a third party alleges that we have infringed their intellectual property rights, we may choose to litigate the claim and/or seek an appropriate license from the third party. If we engage in litigation and the third party is found to have a valid patent claim against us and a license is not available on reasonable terms, our business, operating results and financial condition may be materially adversely affected.

The trend toward consolidation in the software industry could impede our ability to compete effectively. Consolidation is underway among companies in the software industry as firms seek to offer more extensive suites of software products and broader arrays of software solutions. Changes resulting from this consolidation may negatively impact our competitive condition. In addition, to the extent that we seek to expand our product lines and skills and capacity through acquisitions, the trend toward consolidation may result in our encountering competition, and paying higher prices, for acquired businesses.

We must attract and retain personnel in a competitive marketplace. We believe that our future success will depend in part on our ability to recruit and retain highly skilled management, marketing and technical personnel. To

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

accomplish this, we believe that we must provide personnel with a competitive compensation package, including stock options, which require ongoing stockholder approval. Such approval may not be forthcoming and, as a result, we may be impaired in our efforts to attract necessary personnel.

Our intellectual property and proprietary rights may not be adequately protected from all unauthorized uses. We regard our software and underlying technology as proprietary. We seek to protect our proprietary rights through a combination of confidentiality agreements and copyright, patent, trademark and trade secret laws. Third parties may copy aspects of our products or otherwise obtain and use our proprietary information without authorization or develop similar technology independently. All of our products are protected by copyright laws, and we have a number of patents and patent applications pending. We may not achieve the desired protection from, and third parties may design around, our patents. In addition, existing copyright laws afford limited practical protection. Furthermore, the laws of some foreign countries do not offer the same level of protection of our proprietary rights as the laws of the United States, and we may be subject to unauthorized use of our products. Any legal action that we may bring to protect proprietary information could be expensive and may distract management from day-to-day operations.

Our products are complex and are operated in a wide variety of computer configurations, which could result in errors or product failures. Because we offer very complex products, undetected errors, failures or bugs may occur when they are first introduced or when new versions are released. Our products often are installed and used in large-scale computing environments with different operating systems, system management software and equipment and networking configurations, which may cause errors or failures in our products or may expose undetected errors, failures or bugs in our products. In the past, we have discovered software errors, failures and bugs in certain of our product offerings after their introduction and have experienced delays or lost revenues during the period required to correct these errors. Our customers’ computer environments are often characterized by a wide variety of standard and non-standard configurations that make pre-release testing for programming or compatibility errors very difficult and time-consuming. Despite testing by us and by others, errors, failures or bugs may not be found in new products or releases after commencement of commercial shipments. Errors, failures or bugs in products released by us could result in negative publicity, product returns, loss of or delay in market acceptance of our products or claims by customers or others. In addition, if an actual or perceived breach of network security occurs in one of our end customer’s security systems, regardless of whether the breach is attributable to our products, the market perception of the effectiveness of our products could be harmed. Because the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques. Alleviating any of these problems could require significant expenditures of our capital and resources and could cause interruptions, delays or cessation of our product licensing, which could cause us to lose existing or potential customers and would adversely affect results of operations.

Most of our license agreements with customers contain provisions designed to limit our exposure to potential product liability claims. It is possible, however, that these provisions may not prove effective in limiting our liability.

Increased utilization and costs of our technical support services may adversely affect our financial results. Like many companies in the software industry, technical support costs comprise a significant portion of our operating costs and expenses. Over the short term, we may be unable to respond to fluctuations in customer demand for support services, including periods of high customer usage in which delays may be experienced. We also may be unable to modify the format of our support services to compete with changes in support services provided by competitors. Further, customer demand for these services could cause increases in the costs of providing such services and adversely affect our operating results.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We believe there have been no significant changes in our market risk exposures during the nine months ended December 31, 2001 as compared to what was previously disclosed in our Form 10-K for the year ended March 31, 2001.

Part II. Other Information

Item 1. Legal Proceedings

Information with respect to this item is incorporated by reference to Note 10 of Notes to Condensed Consolidated Financial Statements included in this Form 10-Q.

Item 2. Changes in Securities and Use of Proceeds

Under the terms of a purchase agreement dated October 18, 2001, we sold $600 million principal amount of 3% convertible subordinated debentures due November 1, 2006 to Credit Suisse First Boston Corporation, which principal amount included debentures purchased pursuant to an option that we granted to the initial purchaser. The issuance and sale of the debentures and the subsequent offering of the debentures by the initial purchaser were exempt from the registration provisions of the Securities Act of 1933 by Section 4(2) of such act. The debentures were sold for cash. The aggregate offering price was $600 million and the aggregate discount to the initial purchaser was $15 million. The debentures are convertible at any time before maturity into our common stock at a conversion price of $34.14 per share, subject to adjustments. We may redeem the debentures on or after November 5, 2004.

Item 5. Other Information

On January 2, 2002, we announced that John Schwarz had been appointed as our president and chief operating officer. Mr. Schwarz has previously served as president and chief operating officer of Reciprocal, a security software company, and as general manager of IBM’s Industry Solutions unit, an organization focused on building business applications and related services for IBM’s large industry customers.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits. The following exhibits are filed as part of this Form 10-Q:


			4.01			Form of Note for Registrant’s 3% Convertible Subordinated Notes due November 1, 2006. (Incorporated by reference to Exhibit 4.08 filed with the Registrant’s Registration Statement on Form S-3 (No. 333-77072) filed January 22, 2002.)
			4.02			Indenture between the Registrant, as Issuer, and State Street Bank and Trust Company of California, N.A., as Trustee, dated October 24, 2001 related to the Registrant’s 3% Convertible Subordinated Notes due November 1, 2006. (Incorporated by reference to Exhibit 4.09 filed with the Registrant’s Registration Statement on Form S-3 (No. 333-77072) filed January 22, 2002.)
			4.03			Registration Rights Agreement between the Registrant and Credit Suisse First Boston Corporation dated October 24, 2001 related to the Registrant’s 3% Convertible Subordinated Notes due November 1, 2006. (Incorporated by reference to Exhibit 4.10 filed with the Registrant’s Registration Statement on Form S-3 (No. 333-77072) filed January 22, 2002.)
			10.01			Termination agreement by and between Symantec Corporation and Dana E. Siebert. (Incorporated by reference to Exhibit 10.01 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 28, 2001.)
			10.02			Offer Letter between Symantec Corporation and John Schwarz, dated December 20, 2001.
			10.03			FY2002 Executive Annual Incentive Compensation Plan between Symantec Corporation and John Schwarz.
			10.04			Second Amendment to Participation Agreement, dated as of December 28, 2001, by and among Symantec Corporation, The Symantec 2001 Trust, the Holders and Lenders (as defined in the Participation Agreement), and The Bank of Nova Scotia.
			10.05			Third Amendment to Amended and Restated Participant Agreement, dated as of December 28, 2001, by and among Symantec Corporation, SMBC Leasing and Finance, Inc., other Institutions Identified Herein, The Bank of Nova Scotia, and Sumitomo Mitsui Banking Corporation.

Part II. Other Information, continued

(b) Reports on Form 8-K

A report on Form 8-K was filed by the Company on May 1, 2001, reporting that Dana E. Siebert, Executive Vice President, Service Provider Solutions Division, had decided to leave the Company for personal reasons. The organization that reported to Mr. Siebert has become a part of the Company’s enterprise business operations.

A report on Form 8-K was filed by the Company on October 18, 2001, announcing that the Company had issued a press release dated October 17, 2001 with respect to its intention to raise capital through a private offering of convertible subordinated debentures.

A report on Form 8-K was filed by the Company on October 22, 2001, announcing that the Company had issued $525 million through a private offering of convertible subordinated debentures, including a 30-day option to acquire an additional $75 million of the debentures, within the United States to qualified institutional buyers.

Items 3 and 4 are not applicable and have been omitted.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 7, 2002 SYMANTEC CORPORATION

By /s/ John W. Thompson

John W. Thompson
Chairman of the Board and
Chief Executive Officer

By /s/ Gregory Myers

Gregory Myers
Chief Financial Officer and
Chief Accounting Officer

EXHIBIT INDEX


Exhibit
Number		Description

4.01		Form of Note for Registrant’s 3% Convertible Subordinated Notes due November 1, 2006. (Incorporated by reference to Exhibit 4.08 filed with the Registrant’s Registration Statement on Form S-3 (No. 333-77072) filed January 22, 2002.)
4.02		Indenture between the Registrant, as Issuer, and State Street Bank and Trust Company of California, N.A., as Trustee, dated October 24, 2001 related to the Registrant’s 3% Convertible Subordinated Notes due November 1, 2006. (Incorporated by reference to Exhibit 4.09 filed with the Registrant’s Registration Statement on Form S-3 (No. 333-77072) filed January 22, 2002.)
4.03		Registration Rights Agreement between the Registrant and Credit Suisse First Boston Corporation dated October 24, 2001 related to the Registrant’s 3% Convertible Subordinated Notes due November 1, 2006. (Incorporated by reference to Exhibit 4.10 filed with the Registrant’s Registration Statement on Form S-3 (No. 333-77072) filed January 22, 2002.)
10.01		Termination agreement by and between Symantec Corporation and Dana E. Siebert. (Incorporated by reference to Exhibit 10.01 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 28, 2001.)
10.02		Offer Letter between Symantec Corporation and John Schwarz, dated December 20, 2001.
10.03		FY2002 Executive Annual Incentive Compensation Plan between Symantec Corporation and John Schwarz.
10.04		Second Amendment to Participation Agreement, dated as of December 28, 2001, by and among Symantec Corporation, The Symantec 2001 Trust, the Holders and Lenders (as defined in the Participation Agreement), and The Bank of Nova Scotia.
10.05		Third Amendment to Amended and Restated Participant Agreement, dated as of December 28, 2001, by and among Symantec Corporation, SMBC Leasing and Finance, Inc., other Institutions Identified Herein, The Bank of Nova Scotia, and Sumitomo Mitsui Banking Corporation.

	•		the timing of announcements and releases of new or enhanced versions of our products and product upgrades

	•		the introduction of competitive products;

	•		uncertainty about and customer confidence in the current economic conditions and outlook;

	•		reduced demand for any given product;

	•		seasonality in the end-of-period buying patterns of foreign and domestic software markets; and

	•		the market’s transition between new releases of operating systems.

	•		security;

	•		reliability;

	•		cost;

	•		ease of use;

	•		accessibility;

	•		quality of service; and

	•		potential tax or other government regulations.


	A report on Form 8-K was filed by the Company on May 1, 2001, reporting that Dana E. Siebert, Executive Vice President, Service Provider Solutions Division, had decided to leave the Company for personal reasons. The organization that reported to Mr. Siebert has become a part of the Company’s enterprise business operations.

	A report on Form 8-K was filed by the Company on October 18, 2001, announcing that the Company had issued a press release dated October 17, 2001 with respect to its intention to raise capital through a private offering of convertible subordinated debentures.

	A report on Form 8-K was filed by the Company on October 22, 2001, announcing that the Company had issued $525 million through a private offering of convertible subordinated debentures, including a 30-day option to acquire an additional $75 million of the debentures, within the United States to qualified institutional buyers.


Date: February 7, 2002	SYMANTEC CORPORATION

	By	/s/ John W. Thompson

		John W. Thompson Chairman of the Board and Chief Executive Officer




	By	/s/ Gregory Myers

		Gregory Myers Chief Financial Officer and Chief Accounting Officer