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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 29, 2019
or
o
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 000-17781
Symantec Corporation
(Exact name of registrant as specified in its charter)
Delaware
  
77-0181864
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
 
 
 
350 Ellis Street, Mountain View, California
  
94043
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code:
(650) 527-8000
  ________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
SYMC
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o   No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes o   No þ
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 þ   No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ   No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
  
Accelerated filer o
  
Non-accelerated filer o
  
Smaller reporting company o
 
  
 
 
Emerging growth company o
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o   No þ
Aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of Symantec common stock on September 28, 2018 as reported on the Nasdaq Global Select Market: $7,810,381,908. Solely for purposes of this disclosure, shares of common stock held by each executive officer, director, and holder of 5% or more of the outstanding common stock have been excluded as of such date because such persons may be deemed to be affiliates. This determination of possible affiliate status is not a conclusive determination for any other purposes.
The number of shares of Symantec common stock, $0.01 par value per share, outstanding as of May 13, 2019 was 618,193,875 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for the 2019 annual meeting of stockholders are incorporated herein by reference into Part III of this Annual Report on Form 10-K where indicated. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended March 29, 2019.
 


Table of Contents

SYMANTEC CORPORATION
FORM 10-K
For the Fiscal Year Ended March 29, 2019

TABLE OF CONTENTS
 
 
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
“Symantec,” “we,” “us,” “our,” and “the Company” refer to Symantec Corporation and all of its subsidiaries. Symantec, the Symantec Logo and Norton are trademarks or registered trademarks of Symantec in the United States (U.S.) and other countries. Other names may be trademarks of their respective owners.



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FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the Securities Act) and the Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements include references to our ability to utilize our deferred tax assets, as well as statements including words such as “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” “intent,” “momentum,” “projects,” and similar expressions. In addition, projections of our future financial performance; anticipated growth and trends in our businesses and in our industries; the anticipated impacts of acquisitions, restructurings, stock repurchases, and investment activities; the outcome or impact of pending litigation, claims or disputes; our intent to pay quarterly cash dividends in the future; plans for and anticipated benefits of our solutions; matters arising out of the ongoing U.S. Securities and Exchange Commission (the SEC) investigation; and other characterizations of future events or circumstances are forward-looking statements. These statements are only predictions, based on our current expectations about future events and may not prove to be accurate. We do not undertake any obligation to update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. These forward-looking statements involve risks and uncertainties, and our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors.
These and other risks are described under Item 1A. Risk Factors. We encourage you to read that section carefully.

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PART I
Item 1. Business
Overview
Symantec Corporation is a global leader in cyber security. We provide cyber security products, services, and solutions to more than 350,000 organizations and 50 million individuals worldwide. Our Integrated Cyber Defense Platform helps business and government customers unify cloud and on-premises security to deliver a more effective cyber defense solution, while driving down cost and complexity. Our Cyber Safety solutions from Norton LifeLock help consumers protect their devices, online privacy, identities, and home networks.
Our business and consumer offerings are powered by the largest civilian threat intelligence network, which uses artificial intelligence, machine learning, and human intelligence to analyze trillions of rows of data every day across hundreds of millions of devices to discover and help prevent advanced threats that might otherwise go undetected. We believe this threat intelligence data is a competitive advantage, and a primary way we are able to provide faster and better protection for customers.
Founded in 1982, Symantec has operations in more than 45 countries. Our headquarters are located at 350 Ellis Street, Mountain View, California. Our internet home page is located at www.symantec.com. The information contained, or referred to, on our website is not part of this annual report unless expressly noted.
Fiscal 2019 Business Highlights
During fiscal 2019, we continued to make progress enhancing and expanding our product and services portfolio and improving product integration, partner integration, and sales delivery to help enterprise customers deploy our Integrated Cyber Defense Platform. We also made progress driving market adoption and increasing customer retention of our Consumer Cyber Safety (previously called Consumer Digital Safety) solutions, building on our Norton LifeLock product portfolio. In addition, we implemented operational improvements to reduce costs and complexity, building on the business transformation programs we completed in fiscal 2019, and leveraged synergies from the successful integration of our acquired businesses.
Our product development teams built extensive point-to-point integrations across endpoint, network, cloud, and email security products, responding to customer demand to consolidate vendors and enhance their security posture across control points.
We further extended our Integrated Cyber Defense (ICD) Platform through application programming interfaces (APIs) and engineering-level integration with more than 120 certified technology partners that have developed or are in the process of developing over 250 integrations of complementary products and services to expand our ecosystem, helping businesses implement a coordinated and robust approach to threat protection, detection, and response that improves security outcomes and drives down cost and complexity.
We expanded the marketing of bundled offerings of cyber safety services for consumers through the integration of our Norton-branded security services with LifeLock-branded identity theft protection services, to help individuals and families combat ever-evolving cyberthreats. Bundling these solutions enables us to combine our Norton and LifeLock demand generation and customer relationship management programs to drive new customer acquisition, improve retention, and cross-sell within our large installed base.
We launched significant new products to advance our portfolio and competitive position:
Symantec Advanced EDR Tools and Managed EDR: We introduced Symantec’s Advanced Endpoint Detection and Response (EDR) tools and fully managed EDR (MEDR) service, enabling security teams around the world to stay ahead of threats. EDR improves incident response, threat hunting, and forensics, fortifying teams with investigation expertise and threat intelligence from a world-class team of security operations center analysts. MEDR detects stealthy attacks and examines suspicious activity for faster incident validation and response.
Cloud Security Portfolio Enhancements: We expanded our cloud security portfolio to help organizations protect cloud applications and related infrastructure. Our ICD Platform offers robust cloud protection, providing visibility and control for virtually any cloud app, and integrations with CloudSOC CASB, Cloud Workload Protection (CWP), and Data Loss Protection (DLP), while enabling customers to track more risk attributes and scan cloud applications and repositories with new API Integrations.
Data Loss Prevention Enhancements for Office 365: We introduced new features to protect data, whether at rest or in transit, on-premises or in the cloud, and everywhere it flows through a single management console.
Cloud-based Network Security with Web Isolation: We introduced industry-first Web Isolation technology that integrates into our Web Security Service (WSS) and enables web browsing, nearly eliminating the risk of infection by zero-day malware or advanced threats.
Cloud-based Network Security with Integrated Endpoint Protection: We introduced improved network-to-endpoint protection with the integration of Symantec Endpoint Protection (SEP) and SEP Mobile into WSS, allowing web traffic re-directs to WSS for enforcement of network security policies while consequently eliminating the need for a separate agent to manage traffic flow. Our new SD-Cloud Connector enables customers to combine the performance and reliability of Software Defined WAN (SD-WAN) technology with our

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WSS to create a simple, high-performance method to connect branch office locations with our leading cloud security service.
Targeted Attack Analytics: We expanded our Advanced Threat Protection (ATP) offering to include our targeted attack technology. This feature enables ATP customers to leverage advanced machine learning to automate the discovery of targeted attacks, one of the most dangerous intrusions in corporate networks.
Consistent with our strategy of acquiring companies with complementary technology to enhance our products, services, and solutions and speed time to market, we completed several acquisitions during our fiscal year 2019, including the following:
Appthority. With this acquisition, we are able to provide mobile application security to our Consumer Cyber Safety customers, enabling them to analyze mobile apps for both malicious capabilities and unsafe and unwanted behaviors, such as vulnerabilities, risk of sensitive data loss, and privacy-invasive actions.
Javelin. This acquisition brings advanced software technology to our Enterprise Security solutions, enabling enterprises to defend against Active Directory-based (AD) attacks through detection of AD misconfigurations and backdoors to help prevent AD reconnaissance and credentials misuse by authorized devices and applications.
Luminate. With this acquisition, our solutions now incorporate software defined perimeter and zero trust technology enabling us to deliver private secure application access to all users, regardless of device, location, or infrastructure, extending the power of our ICD Platform to users and significantly extending our leadership in cloud security beyond alternative approaches.
We expanded our strategic partnerships in our Enterprise Security and Consumer Cyber Safety segments, including:
Fortinet. We entered into an expansive partnership agreement with Fortinet in an effort to provide customers with comprehensive and robust firewall security solutions. Under this arrangement, we intend to integrate Fortinet’s Next-Generation Firewall (NGFW) capabilities into our cloud-delivered WSS and to integrate our endpoint protection solutions into the Fortinet Security Fabric platform. This technology partnership is designed to provide essential security controls across endpoint, network, and cloud environments that are critical to enforcing the zero trust security framework, a model built on the reality that threats everywhere, both inside and outside an organization, require a multi-layered approach to prevention, detection, and response.
AON. We entered into a strategic partnership with AON, as part of our longer-term strategy to drive consumer adoption through business-to-business-to-consumer relationships. AON offers solutions to help high net worth individuals defend their assets against cyber criminals. The partnership provides that we will offer to AON customers features across our Consumer Cyber Safety solutions. We believe Cyber Safety is synergistic with many brands globally, such as insurers, banks, telecom providers and other organizations. As we expand Cyber Safety internationally and to address a growing array of vertical needs, we believe partnerships such as AON will expand the value we bring customers and the revenue potential for our consumer business.
Business Strategy
Our strategy is to combine best-of-breed technology with unmatched scale to deliver a comprehensive cyber security set of solutions for business and government customers, as well as consumers.
Our Enterprise Security strategy is to leverage our ICD Platform, partner ecosystem and global threat intelligence network to deliver Integrated Cyber Defense to business and government customers, helping them improve security while reducing cost and complexity. Our ICD Platform enables us to acquire new customers and cross-sell our full portfolio of products and services to existing customers and to customers of partners in our expansive ecosystem, such as Amazon.com Inc.’s AWS, Box, Inc., IBM Security, Microsoft Corporation (Microsoft), Oracle Corporation, ServiceNow, Inc., Splunk Inc., and many others.
Our Consumer Cyber Safety strategy is to combine and leverage our portfolio of Norton and LifeLock offerings to deliver a set of Cyber Safety solutions that address today’s continually evolving and increasingly complex threat landscape. This threat landscape puts consumers at increased risk of having their security, online privacy, and identities compromised. As the risks to consumers shift from PC-based attacks to more sophisticated threats such as ransomware, identity theft, and privacy risks, our software and services provide a multi-layered approach to protect consumers, regardless of device, network, or location.
Products and Services
Enterprise Security Portfolio: Integrated Cyber Defense
Our Enterprise Security portfolio includes a deep and broad mix of products, services, and solutions, delivered as part of our ICD Platform. Our platform unifies cloud and on-premises security to provide advanced threat protection and information protection across endpoints, networks, email, and cloud applications. Key components of our ICD Platform include:
Advanced Security Services
Advanced Threat Protection: Multiple layers of threat prevention, detection, and forensic technology provide a robust view of malicious activities across control points, enabling users to contain, investigate, and remediate threats.

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Information Protection: Encryption, data loss prevention, multi-factor authentication, tagging, and analytics enable businesses and governments to protect confidential information and IT assets while managing compliance requirements and restricting access to authenticated users.
Identity Management: Cloud-based authentication service with multi-factor authentication to cloud apps, network, and Virtual Private Network (VPN) to reduce the risk of breaches and unauthorized access.
Compliance enforcement: A suite of governance, risk, and compliance tools help customers inventory their IT assets, evaluate vulnerabilities, govern information access, and automate compliance reporting for more than 100 regulatory and best-practice frameworks including GDPR, HIPAA, NIST, PCI, and SWIFT.
Third-party applications: Over 250 TIPP (Technology Integration Partner Program) certified integrations enhance productivity for security operations and incident response teams while extending the value of current cyber investments.
Control Points
Endpoint Security: A single agent architecture delivers multi-layered security across endpoints - desktop, server, mobile, and IoT - and enables customers to protect enterprise and mobile workforces, regardless of operating system, device, or network security approaches.
Network Security: Cloud and on-premises network security solutions, based on an advanced proxy architecture, provide superior defense against advanced threats, enable users to protect critical business information, and help ensure secure and compliant use of cloud applications and the web.
Email Security: Multiple layers of protection (including threat isolation and advanced analytics) against ransomware, spear phishing, and enterprise email compromise help identify targeted attacks and enable users to protect email against user error and data leakage.
Cloud Application Security: Advanced solutions that secure cloud access, cloud infrastructure, and cloud applications, providing in-depth visibility, data security, and threat protection to safeguard users, information, and workloads across public and private clouds.
Cyber Security Services
An integrated portfolio including Managed Security Services, Incident Response, and Deep Sight Threat Intelligence, driven by our private network of cyber security analysts within our global security operations centers.
ICD Platform Foundations
Our solutions are powered by the following critical features:
Threat Intelligence: The world’s largest civilian threat intelligence network applies deep security research, expert analysis, and artificial intelligence to monitor and synthesize nine trillion rows of telemetry daily, helping discover and block targeted attacks and cybercrime that would otherwise go undetected.
AI and Machine Learning Services: Artificial intelligence and machine learning analyze massive amounts of control point data and sift through our entire telemetry data set to help identify potential threats and accelerate response and remediation.
API and ICD Exchange Services: APIs and ICD Exchange (ICDx) vastly simplify integrations with ICD, providing enhanced protection, investigation, and remediation across Symantec endpoints, networks, email, cloud applications, and third-party products.
ICD Manager Services: A shared management console provides a single point of control for policy management, monitoring, and reporting.
Automation: Built-in automation simplifies investigation, accelerates response times, and minimizes damages from attacks, while reducing manual processes and cost of security operations.
Open Ecosystem
An expansive set of open APIs with over 100 certified technology partners creating the broadest ecosystem in cyber security, enabling a coordinated and best-in-class approach to threat protection, detection, and response.
In addition to our core product portfolio, Symantec offers enterprise security services including:
Consulting Services: We provide the experience, expertise, and industry intelligence to assist enterprises to better architect, design, implement, and optimize their security software, people, and processes. Symantec consultants guide enterprises toward solutions that meet their business goals and leave them with the knowledge to maintain and enhance their security environment.
Premium Support Services: Our premium support services for enterprises focus on timely and accurate issue resolution by placing a product family expert at the center of a tailored support experience, who provides technical support, manages escalations, delivers case and system reviews, oversees environmental health checks, and provides proactive services such as upgrade planning and feature optimization.

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Cyber Security Services: We provide continual threat monitoring, customized guidance, and 24x7 personalized service within an enterprise’s security environment through our Managed Security Services, Deep Sight Intelligence, and Incident Response Services.
Consumer Cyber Safety Portfolio
Our Consumer Cyber Safety solutions consist primarily of the following product offerings which are being integrated into a unified user experience under the Norton LifeLock brand:
Norton Security: Our Norton Security solutions are available as a subscription service providing protection for devices against malware, viruses, adware, and ransomware on multiple platforms: Windows, Mac, Android, and iOS. Users also have access to a password manager, parental controls, and safe web browsing that blocks malicious sites and filters browser search results. Users also can perform secure cloud backups of photos, financial files, and other important documents on Windows, providing additional protection in the event ransomware attacks make these files unavailable. For mobile devices, Norton Security also filters risky apps, enables stolen device recovery, provides contact recovery, and blocks unwanted spam texts and calls. Norton Security includes 24x7 support by trained support agents who are available to assist customers.
LifeLock Identity Theft Protection: Our LifeLock identity theft protection solution provides identity monitoring, alerts, and restoration to our customers. LifeLock puts users in control of their identity elements, including social security numbers, bank accounts, email addresses, physical addresses, and driver’s license and phone numbers. The service alerts users on key events and recommends actions to prevent unauthorized access. If an identity theft takes place, LifeLock’s identity experts work with the user to restore their identities, managing interaction with various governmental agencies, financial institutions, and merchants - and addressing legal fees, wage loss, and associated damages.
Norton Wi-Fi Privacy VPN: Our Norton Wi-Fi Privacy VPN service offers a protected way to connect to the Internet, encrypting data users send over internet connections and enhancing levels of privacy online. With this service, users can confidently access private information such as passwords, bank details, and credit card numbers when using public Wi-Fi on PC, Mac, or mobile device without risk of compromise. Users can also connect globally to their favorite apps, websites, and online streaming by changing their virtual location. This service also limits the ability of websites to track users, thereby eliminating persistent personalized ads based on browsing history.
Sales and Go-to-Market Strategy
Our go-to-market network includes direct sales forces and broad e-commerce capabilities, as well as indirect sales resources that support our global partner ecosystem. We also maintain strategic relationships with a number of original equipment manufacturers (OEMs), Internet service providers (ISPs), global service integrators (GSIs), wireless carriers, and retail and online stores through which we market and sell our products.
Enterprise
We sell and market our products and services to large enterprises, including business, government, and public-sector customers, through our field sales force and reseller channels. Our field sales team leverages our global partner ecosystem, primarily targeting senior executives and IT department personnel responsible for managing a company’s highest-order IT and cyber security initiatives.
We also sell and market our products and services to small, medium, and large businesses through field sales and inside sales forces that leverage indirect sales partners around the world, who are specifically trained and certified to sell our solutions. These partners include national solution providers, regional solution providers, national account resellers, global/federal system integrators, and managed service providers.
Our enterprise products and services are also available on our e-commerce platform, as well as through authorized distributors, GSIs, and OEMs, who incorporate our technologies into their products, bundle our products with their offerings, or serve as authorized resellers of our products.
Consumer
We sell and market our consumer products and services to individuals, households, and small businesses globally. We bring these products to market through direct marketing and co-marketing programs supported by our e-commerce and tele-sales platforms. In addition, we utilize Internet-based resellers, system builders, ISPs, employee benefits providers, wireless carriers, retailers, and OEMs to distribute our offerings worldwide. We drive consumer business growth through global brand and demand campaigns, new customer acquisition, retention focused cross-selling, and customer success programs.
Research and Development
Symantec embraces a global research and development strategy to drive organic innovation and product integration across our portfolio. Our engineering and product management teams are focused on delivering new versions of existing product lines, as well as developing entirely new products and services to drive the company’s leadership in cyber security. We also have a technology research organization focused on short, medium, and longer-term applied research projects, with the goal of transferring completed innovations into our product groups for commercialization.

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Symantec’s Security Technology and Response organization is a global team of security engineers, threat analysts, and researchers who provide the underlying functionality, content, and support for many of our solutions. These front-line security experts analyze threat telemetry collected through our vast cyber intelligence networks to protect our customers against current and emerging threats. Our research and development teams also leverage these vast data sets and insights to develop new technologies and approaches in order to improve security outcomes for our customers.
We believe that technical leadership is essential to our success, and we expect to continue to commit substantial resources to research and development.
Product and Technical Support
Symantec has support facilities throughout the world, staffed by technical product experts knowledgeable in the operating environments in which our products are deployed. Our support experts assist customers with both issue resolution and threat detection.
We provide Enterprise Security customers with various levels of technical support and customer success services. Our support program offers annual maintenance support contracts, including content, updates, and technical support. Our Essential Support includes: self-service options, assisted support delivered by telephone or electronically during contracted-for hours, immediate patches for severe problems, periodic software updates, and access to our technical knowledge base and frequently asked questions. Our Premium Support includes all Essential Support services with the addition of proactive health checks, assigned technical contacts, and other customer success activities.
Our Consumer Cyber Safety support includes self-help online services and phone, chat, and email support worldwide. Most of our Norton Security products come with automatic downloads of the latest virus definitions, application bug fixes, and patches, as well as a “Virus Protection Promise,” which in some markets provides free virus removal services to customers whose protected computers become infected. Our Consumer Cyber Safety service and support offerings come with 24x7x365 customer support, along with alert resolution, lost wallet protection, and restoration services during normal business hours.
Competition
Our markets are consolidating, highly competitive, and subject to rapid changes in technology. The competitive landscape has changed significantly over the past few years, with new competition arising. Some of the market growth has come from startups that focus on solving a particular issue or delivering a niche-oriented product, and from larger integration providers that increasingly seek to add to or extend their offerings. We focus on delivering comprehensive customer solutions, integrating across our broad product portfolio, and partnering with other technology providers to differentiate our offerings and platforms from the competition.
In addition to the competition we face from direct competitors, we face indirect or potential competition from retailers, application providers, operating system providers, network equipment manufacturers, and other OEMs who may provide various solutions and functions in their current and future offerings. We compete with these same parties to acquire technologies, products, or companies. We also compete with other software companies in our effort to place our products on the computer equipment sold to consumers and enterprises by OEMs. We compete for access to distribution channels and for spending at the retail level for our consumer offerings and in corporate accounts for our enterprise offerings.
Our Enterprise Security competitors vary by product category, geography, channel, and customer size:
Endpoint security competitors include McAfee LLC (McAfee), Microsoft, CrowdStrike, Inc., and Carbon Black, Inc., as well as several point-product competitors, freeware providers, and regional security companies.
Network security competitors include Palo Alto Networks Inc. (Palo Alto), FireEye Inc. (FireEye), Cisco Systems, Inc. (Cisco), McAfee, Forcepoint LLC (Forcepoint), and Zscaler, Inc., as well as other established and emerging companies.
Cloud security competitors include Cisco, McAfee, Microsoft, and Netskope, Inc., as well as other established and emerging companies. We expect additional competition as the market for security-as-a-service continues to develop and expand.
Email security competitors include Proofpoint, Inc. and Microsoft.
Advanced threat protection competitors include McAfee, Palo Alto, FireEye, International Business Machines Corporation (IBM), and Dell EMC, as well as Niksun Inc. and Trend Micro Inc. (Trend Micro). As new IT budgets are created to address next-generation threats, we expect to compete with additional specialized vendors, as well as larger vendors that may continue to acquire or bundle their products.
Information protection competitors include RSA (a Dell Technologies business), McAfee, Forcepoint, Digital Guardian, Inc., and Microsoft.
Cyber security services and managed security services competitors include FireEye, IBM, and SecureWorks Corporation, as well as other additional established and emerging companies.
Our Consumer Cyber Safety competitors vary by product category, geography, and channel. Norton Security competitors include Avast Software s.r.o., McAfee, Microsoft, and Trend Micro. Consumer backup product competitors include Carbonite, Inc. LifeLock identity theft protection competitors include credit bureaus Experian PLC, Equifax Inc., and TransUnion, as well as others including Affinion Group, Inc., Anchor Free, Inc., Credit Karma, Inc., and Intersections, Inc.

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We believe that the principal competitive factors necessary to be successful in our industry include product quality and effectiveness, time-to-market, price, reputation, financial stability, breadth of product offerings, customer support, brand recognition, and effective sales and marketing efforts.
Intellectual Property
Protective measures
Our intellectual property is an important and vital asset of the company that enables us to develop, market, and sell our products and services and enhance our competitive position. Intellectual property includes our proprietary business and technical know-how, inventions, works of authorship, and confidential information. To protect our intellectual property, we rely primarily upon legal rights in trade secrets, patents, copyrights, and trademarks, in addition to company policies and procedures, security practices, contracts, and relevant operational measures.
We protect the confidentiality of proprietary information by entering into non-disclosure agreements with our employees, contractors, and channel and business partners, and we enter into license agreements with respect to our software and proprietary information that include confidentiality terms. These agreements are generally non-transferable and have either a perpetual or time-limited term. We also publish company policies on trade secret protection and employ access controls and associated security measures to protect our facilities, equipment, and networks.
Patents, copyrights, trademarks, and licenses
We maintain an internal patent program with the objective of identifying inventions that provide the basis for new patent applications in areas of importance to our business. We have approximately 2,345 U.S. patents, in addition to foreign patents and pending U.S. and foreign patent applications, which relate to inventive aspects of our products and technology. The duration of our patents is determined by the laws of the issuing country. In the U.S., this is typically twenty years from the date of filing of the priority patent application resulting in the patent, which we believe is adequate relative to expected product lifecycles.
Our products, particularly our software and related documentation, are protected under U.S. and international copyright laws and laws related to the protection of intellectual property and proprietary rights. We employ procedures to label copyrightable works with the appropriate proprietary rights notices, and we actively enforce these rights in the U.S. and abroad. However, these measures may not provide adequate protection, and our intellectual property rights may be challenged.
Symantec, Norton, LifeLock, and associated logos, including the checkmark in a circle logo, are trademarks or registered trademarks of the company in the U.S. and other countries in which we conduct business. In addition, we have used, registered, or applied to register other trademarks and service marks to help distinguish our products and services from those of our competitors. We actively enforce our trademark, service mark, and trade name rights in the U.S. and abroad based on our rights under common law, and various U.S. and foreign laws and regulations, as well as rights under international treaties and conventions. The duration of our trademark registrations varies from country to country. In the U.S., we are generally able to maintain our trademark rights and renew trademark registrations for as long as the trademarks are in use.
In limited cases, we license intellectual property from third parties for use in our products and generally must rely on those third parties to protect the licensed rights. This can include open source software which is not subject to proprietary rights protection. While the ability to maintain and protect our intellectual property rights is important to our success, we believe our business is not materially dependent on any individual patent, copyright, trademark, trade secret, license, or other intellectual property right.
Seasonality
As is typical for many technology companies, our business is subject to seasonality. See our quarterly results of operations in “Selected Quarterly Financial Data (Unaudited)” included in Part II, Item 8 of this Annual Report on Form 10-K.
Corporate Responsibility
Our annual Corporate Responsibility Report can be found via the Symantec website at https://www.symantec.com/about/corporate-responsibility. The information contained, or referred to, on our website, including our Corporate Responsibility Report, is not part of this annual report unless expressly noted.
Employees
As of March 29, 2019, we employed more than 11,900 people worldwide.
Available information
Our Internet home page is located at www.symantec.com. We make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission (SEC) on our investor relations website located at www.symantec.com/invest. The information contained, or referred to, on our website is not part of this annual report unless expressly noted. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding our filings at http://www.sec.gov.
Item 1A. Risk Factors
A description of the risk factors associated with our business is set forth below. The list is not exhaustive, and you should carefully consider these risks and uncertainties before investing in our common stock.

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A decrease in demand for our solutions could adversely affect our financial results.
We are subject to fluctuations in demand for our solutions due to a variety of factors, including market transitions, general economic conditions, competition, product obsolescence, technological change, shifts in buying patterns, the timing and duration of hardware refresh cycles, financial difficulties and budget constraints of our current and potential customers, public awareness of security threats to IT systems, and other factors. While such factors may, in some periods, increase product sales, fluctuations in demand can also negatively impact our sales. If demand for our solutions declines, whether due to general economic conditions, a shift in buying patterns or otherwise, our revenues and margins would likely be adversely affected.
Fluctuations in our quarterly financial results have affected the trading price of our outstanding securities in the past and could affect the trading price of our outstanding securities in the future.
Our quarterly financial results have fluctuated in the past and are likely to vary in the future due to a number of factors, many of which are outside of our control. If our quarterly financial results or our predictions of future financial results fail to meet our expectations or the expectations of securities analysts and investors, the trading price of our outstanding securities could be negatively affected. Volatility in our quarterly financial results may make it more difficult for us to raise capital in the future or pursue acquisitions. Our operating results for prior periods may not be effective predictors of our future performance.
Factors associated with our industry, the operation of our business, and the markets for our solutions may cause our quarterly financial results to fluctuate, including but not limited to:
Fluctuations in our revenue due to the transition of our sales contracts to a higher mix of products subject to ratable versus point-in-time revenue recognition;
Fluctuations in demand for our solutions;
Entry of new competition into our markets;
Our ability to achieve targeted operating income and margins and revenues;
Competitive pricing pressure for one or more of our classes of our solutions;
Our ability to timely complete the release of new or enhanced versions of our solutions;
The number, severity, and timing of threat outbreaks (e.g. worms, viruses, malware, ransomware, and other malicious threats) and cyber security incidents (e.g., large scale data breaches);
Our resellers making a substantial portion of their purchases near the end of each quarter;
Customers’ tendency to negotiate licenses and other agreements near the end of each quarter;
Cancellation, deferral, or limitation of orders by customers;
Loss of customers or strategic partners;
Changes in the mix or type of products and subscriptions sold and changes in the renewal rates for our subscriptions;
The rate of adoption of new technologies, new releases of operating systems, and new business processes;
Consumer confidence and spending changes, which could be impacted by market changes and general economic conditions, among other reasons;
Political and military instability caused by war or other events, which could slow spending within our target markets, delay sales cycles, and otherwise adversely affect our ability to generate revenues and operate effectively;
The timing, rate and pricing of customer purchases to replace older versions of our hardware products that have reached end of life;
The impact of litigation, regulatory inquiries, or investigations;
The timing and extent of significant restructuring charges;
The impact of acquisitions and our ability to achieve expected synergies;
Disruptions in our business operations or target markets caused by, among other things, terrorism or other intentional acts, outbreaks of disease, or earthquakes, floods, or other natural disasters;
Fluctuations in foreign currency exchange rates;
Movements in interest rates; and
Changes in tax laws, rules, and regulations.
Any of the foregoing factors could cause the trading price of our outstanding securities to fluctuate significantly.
Our business depends on customers renewing their arrangements for maintenance, subscriptions, managed security services, and cloud-based (cloud) offerings.
A large portion of our Enterprise Security revenue is derived from arrangements for maintenance, subscriptions, managed security services, and cloud offerings, yet customers have no contractual obligation to purchase additional solutions after the initial subscription or contract period. In particular, term-based license subscriptions and cloud-based products are increasing as

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a percentage of our total revenues. While we believe our customers’ renewal rates, in general, have been relatively stable in recent periods, customer retention and renewal rates may decline or fluctuate as a result of a number of factors, including our customers’ level of satisfaction with our solutions or our customer support, customer budgets, and the pricing of our solutions compared with the solutions offered by our competitors, any of which may cause our revenue to grow more slowly than expected, or to decline. Accordingly, we must invest significant time and resources in providing ongoing value to our customers. If these efforts fail, if our customers do not renew for other reasons, or if our customers renew on terms less favorable to us, our revenue may decline, and our business will suffer.
If we are unable to develop new and enhanced solutions that achieve widespread market acceptance, or if we are unable to continually improve the performance, features, and reliability of our existing solutions or adapt our business model to keep pace with industry trends, our competitive position may weaken, and our business and operating results could be adversely affected.
Our future success depends on our ability to effectively respond to the rapidly changing needs of our customers, as well as competitive technological developments and industry changes, by developing or introducing new and enhanced solutions on a timely basis.
We have in the past incurred, and will continue to incur, significant research and development expenses as we strive to remain competitive. If we are unable to anticipate or react to competitive challenges or if existing or new competitors gain market share in any of our markets, our competitive position could weaken, and we could experience a decline in our sales that could adversely affect our business and operating results. Additionally, we must continually address the challenges of dynamic and accelerating market trends and competitive developments, such as the emergence of advanced persistent threats in the security space, the continued volatility in the PC market, the market shift towards mobility, and the increasing transition towards subscription and cloud-based solutions, all of which continue to make it more difficult for us to compete effectively. For example, although we have been investing heavily in solutions that address the cloud security market, we cannot be certain that it will develop at a rate or in the manner we expect or that we will be able to compete successfully with new entrants or more established competitors. Customers may require features and capabilities that our current solutions do not have. Our failure to develop new solutions and improve our existing solutions that satisfy customer preferences and effectively compete with other market offerings in a timely and cost-effective manner may harm our ability to renew our subscriptions with existing customers and to create or increase demand for our solutions, which may adversely impact our operating results. The development and introduction of new solutions involves a significant commitment of time and resources and are subject to a number of risks and challenges including but not limited to:
Lengthy development cycles;
Evolving industry standards and technological developments by our competitors and customers;
Evolving platforms, operating systems, and hardware products, such as mobile devices, and related product and service interoperability challenges;
Entering into new or unproven markets;
Executing new product and service strategies;
Trade compliance difficulties;
Developing or expanding efficient sales channels; and
Obtaining sufficient licenses to technology and technical access to operating system software.
If we are not successful in managing these risks and challenges, or if our new or improved solutions are not technologically competitive or do not achieve market acceptance, our business and operating results could be adversely affected.
If we are unable to attract and retain qualified employees, lose key personnel, fail to integrate replacement personnel successfully, or fail to manage our employee base effectively, we may be unable to develop new and enhanced solutions, effectively manage or expand our business, or increase our revenues.
Our future success depends upon our ability to recruit and retain key management, technical (including cyber-security experts), sales, marketing, finance, and other personnel. Our officers and other key personnel are employees-at-will and we generally do not have employment or non-compete agreements with our employees, and we cannot assure you that we will be able to retain them. Competition for people with the specific skills that we require is significant, especially in and around our headquarters in the Silicon Valley, and we face difficulties in attracting, retaining, and motivating employees as a result. In order to attract and retain personnel in a competitive marketplace, we must provide competitive pay packages, including cash and equity-based compensation. Additionally, changes in immigration laws could impair our ability to attract and retain highly qualified employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business, results of operations and future growth prospects could suffer. The volatility in our stock price may from time to time adversely affect our ability to recruit or retain employees. In addition, we may be unable to obtain required stockholder approvals of future increases in the number of shares required for issuance under our equity compensation plans. As a result, we may issue fewer equity-based incentives and may be impaired in our efforts to attract and retain necessary personnel. If we are unable to hire and retain qualified employees, or conversely, if we fail to manage employee performance or reduce staffing levels when required by market conditions, our business and operating results could be adversely affected.

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Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. From time to time, key personnel leave our company and the frequency and number of such departures has widely varied and have resulted in significant changes to our executive leadership team. For example, we are initiating a Chief Executive Officer transition process, and appointed an interim President and Chief Executive Officer. Additionally, our Chief Operating Officer resigned in November 2018 and, as previously disclosed, our Chief Financial Officer is stepping down and is being replaced by a new Chief Financial Officer as of the date hereof. Although we strive to reduce the negative impact of changes in our leadership, the loss of any key employee could result in significant disruptions to our operations, including adversely affecting the timeliness of product releases, the successful implementation and completion of company initiatives, the effectiveness of our disclosure controls and procedures, our internal control over financial reporting, and our results of operations. In addition, hiring, training, and successfully integrating replacement sales and other personnel could be time consuming and expensive, may cause additional disruptions to our operations, and may be unsuccessful, which could negatively impact future financial results.
We operate in a highly competitive environment, and our competitors may gain market share in the markets for our solutions that could adversely affect our business and cause our revenues to decline.
We operate in intensely competitive markets that experience rapid technological developments, changes in industry standards, changes in customer requirements, and frequent new product introductions and improvements. If we are unable to anticipate or react to these competitive challenges, or if existing or new competitors gain market share in any of our markets, our competitive position could weaken, and we could experience a decline in our sales that could adversely affect our business and operating results. To compete successfully, we must maintain an innovative research and development effort to develop new solutions and enhance our existing solutions, effectively adapt to changes in the technology or product rights held by our competitors, appropriately respond to competitive strategies, and effectively adapt to technological changes and changes in the ways that our information is accessed, used, and stored by our customers. If we are unsuccessful in responding to our competitors or to changing technological and customer demands, our competitive position and our financial results could be adversely affected.
Our competitors include software and cloud-based vendors that offer solutions that directly compete with our offerings. In addition to competing with these vendors directly for sales to end-users of our solutions, we compete with them for the opportunity to have our solutions bundled with the offerings of our strategic partners, such as computer hardware original equipment manufacturers (OEMs) and internet service providers (ISPs). Our competitors could gain market share from us if any of these strategic partners replace our solutions with those of our competitors or if these partners more actively promote our competitors’ solutions than our own. In addition, software and cloud-based vendors who have bundled our solutions with theirs may choose to bundle their solutions with their own or other vendors’ solutions or may limit our access to standard interfaces and inhibit our ability to develop solutions for their platform. In the future, further product development by these vendors could cause our solutions to become redundant, which could significantly impact our sales and financial results.
We face growing competition from network equipment, computer hardware manufacturers, large operating system providers, and other technology companies, as well as from companies in the identity threat protection space such as credit bureaus. Many of these competitors are increasingly developing and incorporating into their products data protection software that competes at some levels with our offerings. Our competitive position could be adversely affected to the extent that our customers perceive the functionality incorporated into these products as replacing the need for our solutions.
Security protection is also offered by some of our competitors at prices lower than our prices or, in some cases is offered free of charge. Some companies offer lower-priced or free security products within their computer hardware or software products. Our competitive position could be adversely affected to the extent that our customers perceive these lower cost or free security products as replacing the need for more effective, full featured solutions, such as those that we provide. The expansion of these competitive trends could have a significant negative impact on our sales and operating results by causing, among other things, price reductions of our solutions, reduced profitability, and loss of market share.
Many of our competitors have greater financial, technical, sales, marketing, or other resources than we do and consequently, may have the ability to influence customers to purchase their products instead of ours. Further consolidation within our industry or other changes in the competitive environment could result in larger competitors that compete with us on several levels. We also face competition from many smaller companies that specialize in particular segments of the markets in which we compete.
Our cloud offerings present execution and competitive risks.
Our cloud offerings are critical to our business. Our competitors are rapidly developing and deploying cloud offerings for consumers and business customers. Pricing and delivery models are evolving. Devices and form factors influence how users access services in the cloud. We have made and are continuing to make significant investments in, and devoting significant resources to develop and deploy, our own cloud strategies. We cannot assure you that our ongoing investments in and development of our cloud infrastructure and related cloud offerings will achieve the expected returns for us or that we will be able to compete successfully in the marketplace. In addition to software development costs, we are incurring significant costs to build, execute upon, and maintain the infrastructure needed to support our cloud offerings. These costs may reduce the operating margins we have previously achieved. Whether we are successful in this business model depends on our execution in a number of areas, including:
Continuing to innovate and bring to market compelling cloud-based solutions that generate increasing traffic and market share; and

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Ensuring that our cloud offerings meet the reliability expectations of our customers and maintain the security of their data.
We invest in research and development activities in both the short and long term, and these investments may achieve delayed, or lower than expected, benefits which could harm our operating results.
While we continue to focus on managing our costs and expenses, we also continue to invest significantly in research and development activities, in both the short and long term, as we focus on organic growth through internal innovation in each of our business segments. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position, and that the level of these investments will increase in future periods. We recognize the costs associated with these research and development investments earlier than the anticipated benefits, and the return on these investments may be lower, or may develop more slowly, than we expect. If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our operating results may be adversely affected.
Changes in industry structure and market conditions could lead to charges related to discontinuance of certain of our products or businesses and asset impairments.
In response to changes in industry structure and market conditions, we may be required to strategically reallocate our resources and consider restructuring, disposing of, or otherwise exiting certain businesses. Any decision to limit investment in or dispose of or otherwise exit businesses may result in the recording of special charges, such as inventory and technology-related write-offs, workforce reduction costs, charges relating to consolidation of excess facilities, or claims from third parties who were resellers or users of discontinued products. Our estimates with respect to the useful life or ultimate recoverability of our carrying basis of assets, including purchased intangible assets, could change as a result of such assessments and decisions. Although in certain instances our supply agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed, our loss contingencies may include liabilities for contracts that we cannot cancel, reschedule or adjust with contract manufacturers and suppliers.
Further, our estimates relating to the liabilities for excess facilities are affected by changes in real estate market conditions. Additionally, we are required to evaluate goodwill impairment on an annual basis and between annual evaluations in certain circumstances, and future goodwill impairment evaluations may result in a charge to earnings.
Matters relating to or arising from our completed Audit Committee Investigation, including regulatory investigations and proceedings, litigation matters, and potential additional expenses, may adversely affect our business and results of operations.
As previously disclosed in our public filings, the Audit Committee completed its internal investigation in September 2018. In connection with the Audit Committee Investigation, we voluntarily contacted the SEC. The SEC commenced a formal investigation, and we continue to cooperate with that investigation. The outcome of such an investigation is difficult to predict. If the SEC commences legal action, we could be required to pay significant penalties and become subject to injunctions, a cease and desist order, and other equitable remedies. We can provide no assurances as to the outcome of any governmental investigation.
We have incurred, and will continue to incur, significant expenses related to legal and other professional services in connection with the ongoing SEC investigation, which may continue to adversely affect our business and financial condition. In addition, securities class actions and other lawsuits have been filed against us, our directors, and officers (see also, “We are subject to pending securities class action and stockholder derivative legal proceedings . . .” below). The outcome of the securities class actions and other litigation and regulatory proceedings or government enforcement actions is difficult to predict, and the cost to defend, settle, or otherwise resolve these matters may be significant. Plaintiffs or regulatory agencies or authorities in these matters may seek recovery of very large or indeterminate amounts or seek to impose sanctions, including significant monetary penalties. The monetary and other impact of these litigations, proceedings, or actions may remain unknown for substantial periods of time. Further, an unfavorable resolution of litigations, proceedings or actions could have a material adverse effect on our business, financial condition, and results of operations and cash flows. Any future investigations or additional lawsuits may also adversely affect our business, financial condition, results of operations, and cash flows.
We are subject to pending securities class action and stockholder derivative legal proceedings that may adversely affect our business.
Several securities class action and purported derivative lawsuits have been filed against us arising out of the announcement of the Audit Committee Investigation. In addition, we have received demands from purported stockholders to inspect corporate books and records under Delaware law. No specific amounts of damages have been alleged in these lawsuits. We will continue to incur legal fees in connection with these pending cases, including expenses for the reimbursement of legal fees of present and former officers and directors under indemnification obligations. The expense of continuing to defend such litigation may be significant. We intend to defend these lawsuits vigorously, but there can be no assurance that we will be successful in any defense. If any of the lawsuits related to our Audit Committee Investigation are decided adversely, we may be liable for significant damages directly or under our indemnification obligations, which could adversely affect our business, results of operations and cash flows. Further, the amount of time that will be required to resolve these lawsuits is unpredictable, and these actions may divert management’s attention from the day-to-day operations of our business, which could further adversely affect our business, results of operations, and cash flows.

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The delayed filing of some of our periodic SEC reports has made us currently ineligible to use a registration statement on Form S-3 to register the offer and sale of securities, which could adversely affect our ability to raise future capital or complete acquisitions.
As a result of the delayed filing of some of our periodic reports with the SEC in connection with the completed Audit Committee Investigation, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until December 2019, at the earliest. Registering the offer and sale of our securities prior to the time we are eligible to use Form S-3 may increase our transaction costs, and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our financial condition.
Our indemnification obligations and limitations of our director and officer liability insurance may have a material adverse effect on our financial condition, results of operations, and cash flows.
Under Delaware law, our certificate of incorporation, our bylaws, and certain indemnification agreements to which we are a party, we have an obligation to indemnify, or we have otherwise agreed to indemnify, certain of our current and former directors and officers with respect to past, current, and future investigations and litigation.
The scope of our indemnification obligations may be broader than the coverage available under our directors’ and officers’ liability insurance, or there may be insufficient coverage available. Further, in the event the directors and officers are ultimately determined not to be entitled to indemnification, we may not be able to recover any amounts we previously advanced to them.
We cannot provide any assurances that future indemnification claims, including the cost of fees, penalties or other expenses, will not exceed the limits of our insurance policies, that such claims are covered by the terms of our insurance policies or that our insurance carrier will be able to cover such claims. Further, should a coverage dispute arise, we may also incur significant expenses in relation to litigating or attempting to resolve any such dispute. Accordingly, we may incur significant unreimbursed costs to satisfy our indemnification obligations, which may have a material adverse effect on our financial condition, results of operations or cash flows.
We may need to change our pricing models to compete successfully.
The intense competition we face, in addition to general and economic business conditions, can put pressure on us to change our prices. If our competitors offer deep discounts on certain solutions or develop products or support offerings that the marketplace considers more valuable, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such changes may reduce margins and could adversely affect our operating results.
In addition, a weakening of economic conditions or significant uncertainty regarding the stability of financial markets could adversely impact our business, financial condition, and operating results in a number of ways. Impacts could include longer sales cycles, pressure to lower prices for our solutions, a reduction in the rate of adoption of our solutions by new customers, and a lower rate of current customers purchasing upgrades to our current solutions.
Any broad-based change to our prices and pricing policies could cause our revenues to decline or be delayed as our sales force implements and our customers adjust to the new pricing policies. We or our competitors may bundle solutions for promotional purposes or as a long-term go-to-market or pricing strategy or provide guarantees of prices. These practices could, over time, significantly constrain the prices that we can charge for certain of our offerings.
Defects, disruptions or risks related to our cloud offerings could impair our ability to deliver our services and could expose us to liability, damage our brand and reputation, or otherwise negatively impact our business.
Our cloud offerings may contain errors or defects that users identify after they begin using them that could result in unanticipated service interruptions, which could harm our reputation and our business. Since our customers use our cloud offerings for mission-critical protection from threats to electronic information, endpoint devices, and computer networks, any errors, defects, disruptions in service or other performance problems with our cloud offerings could significantly harm our reputation and may damage our customers’ businesses. If any such performance problems occur, customers could elect not to renew, or delay or withhold payment to us, we could lose future sales or customers may make warranty or other claims against us, which could result in an increase in our provision for doubtful accounts or warranty, an increase in collection cycles for accounts receivable or the expense and risk of litigation.
We currently serve our cloud-based customers from hosting facilities, including third-party hosting facilities, located across the globe. Damage to, or failure of, any significant element of these hosting facilities could result in interruptions in our service, which could harm our customers and expose us to liability. The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions in the delivery of our solutions. Global climate change may result in certain natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, and flooding. Interruptions or failures in our service delivery could cause customers to terminate their subscriptions with us, could adversely affect our renewal rates, and could harm our ability to attract new customers. Our business would also be harmed if our customers believe that our cloud offerings are unreliable.
Our solutions are complex and operate in a wide variety of environments, systems, applications, and configurations, which could result in failures of our solutions to function as designed.
Because we offer very complex solutions, undetected errors, failures or bugs may occur, especially when solutions are first introduced or when new versions are released. Our products are often 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 solutions or may expose undetected errors, failures, or bugs in our solutions. Our customers’

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computing 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. In addition, despite testing by us and others, errors, failures, or bugs may not be found in new solutions or releases until after they are delivered to customers. In the past, we have discovered software errors, failures, and bugs in certain of our solutions after their introduction and, in some cases, have experienced delayed or lost revenues as a result of these errors.
Errors, failures, or bugs in solutions released by us could result in negative publicity, damage to our brand and reputation, returns, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers or others. Many of our end-user customers use our solutions in applications that are critical to their businesses and may have a greater sensitivity to defects in our solutions than to defects in other, less critical, software products. In addition, if an actual or perceived breach of information integrity, security, or availability occurs in one of our end-user customer’s systems, regardless of whether the breach is attributable to our products, the market perception of the effectiveness of our solutions could be harmed. Alleviating any of these problems could require significant expenditures, our capital, and other resources and could cause interruptions, delays, or cessation of our licensing, which could cause us to lose existing or potential customers and could adversely affect our operating results.
Our products, solutions, cloud offerings, systems, and website may be subject to intentional disruption that could adversely impact our reputation and future sales.
Despite our precautions and significant ongoing investments to protect against security risks, data protection breaches, cyber-attacks, and other intentional disruptions of our solutions, we expect to be an ongoing target of attacks specifically designed to impede the performance and availability of our offerings and harm our reputation as a company. Similarly, experienced computer programmers or other sophisticated individuals or entities, including malicious hackers, state-sponsored organizations, and insider threats including actions by employees and third-party service providers, may attempt to penetrate our network security or the security of our systems and websites and misappropriate proprietary information or cause interruptions of our services, including the operation of our global civilian cyber intelligence threat network. Such attempts are increasing in number and in technical sophistication, and if successful could expose us and the affected parties, to risk of loss or misuse of proprietary or confidential information or disruptions of our business operations. While we invest and devote significant resources to maintain and continually enhance and update our methods to detect and alert us to such breaches, attacks, and disruptions, these efforts may not be sufficient, even with rapid detection, to prevent the damage such a breach of our products, solutions, cloud offerings, systems, and websites may cause.
Our inability to successfully recover from a disaster or other business continuity event could impair our ability to deliver our products and services and harm our business.
We are heavily reliant on our technology and infrastructure to provide our products and services to our customers. For example, we host many of our products using third-party data center facilities, and we do not control the operation of these facilities. These facilities are vulnerable to damage, interruption, or performance problems from earthquakes, hurricanes, floods, fires, power loss, telecommunications failures, and similar events. They are also subject to break-ins, computer viruses, sabotage, intentional acts of vandalism, and other misconduct. The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions in the delivery of our products and services.
Furthermore, our business administration, human resources, and finance services depend on the proper functioning of our computer, telecommunication, and other related systems and operations. A disruption or failure of these systems or operations because of a disaster or other business continuity event could cause data to be lost or otherwise delay our ability to complete sales and provide the highest level of service to our customers. In addition, we could have difficulty producing accurate financial statements on a timely basis, and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results, all of which could adversely affect the trading value of our stock. Although we endeavor to ensure there is redundancy in these systems and that they are regularly backed-up, there are no assurances that data recovery in the event of a disaster would be effective or occur in an efficient manner, including the operation of our global civilian cyber intelligence threat network. If these systems or their functionality do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.
Any errors, defects, disruptions, or other performance problems with our products and services could harm our reputation and may damage our customers’ businesses. For example, we may experience disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our websites simultaneously, fraud, or security attacks. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Interruptions in our products and services, including the operation of our global civilian cyber intelligence threat network, could impact our revenues or cause customers to cease doing business with us. In addition, our business would be harmed if any of the events of this nature caused our customers and potential customers to believe our services are unreliable. Our operations are dependent upon our ability to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. We could potentially lose customer data or experience material adverse interruptions to our operations or delivery of services to our clients in a disaster recovery scenario.

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We collect, use, disclose, store, or otherwise process personal information, which subjects us to privacy and data security laws and contractual commitments, and our actual or perceived failure to comply with such laws and commitments could harm our business.
We collect, use, store or disclose (collectively, process) an increasingly large amount of personal information, including from employees and customers, in connection with the operation of our business, particularly in relation to our identity and information protection offerings. We process an increasingly high volume, variety, and velocity of personal information as a result of our identity and information protection offerings that rely on large data repositories of personal information and consumer transactions. The personal information we process is subject to an increasing number of federal, state, local, and foreign laws regarding privacy and data security, as well as contractual commitments. Any failure or perceived failure by us to comply with such obligations may result in governmental enforcement actions, fines, litigation, or public statements against us by consumer advocacy groups or others and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.
Additionally, changes to applicable privacy or data security laws could impact how we process personal information and therefore limit the effectiveness of our solutions or our ability to develop new solutions. For example, the European Union General Data Protection Regulation imposes more stringent data protection requirements and provides for greater penalties for noncompliance of up to the greater of €20 million or four percent of worldwide annual revenues.
Data protection legislation is also becoming increasingly common in the U.S. at both the federal and state level. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018 (the CCPA), which will come into effect on January 1, 2020. The CCPA requires companies that process information on California residents to make new disclosures to consumers about their data collection, use, and sharing practices, allows consumers to opt out of certain data sharing with third parties, and provides a new cause of action for data breaches. However, California legislators have stated that they intend to propose amendments to the CCPA, and it remains unclear what, if any, modifications will be made to the CCPA or how it will be interpreted. Additionally, the Federal Trade Commission (the FTC) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. The burdens imposed by the CCPA and other similar laws that may be enacted at the federal and state level may require us to modify our data processing practices and policies and to incur substantial expenditures in order to comply.
 Global privacy and data protection legislation, enforcement, and policy activity are rapidly expanding and evolving, and may be inconsistent from jurisdiction to jurisdiction. We may be or become subject to data localization laws mandating that data collected in a foreign country be processed and stored only within that country. If any country in which we have customers were to adopt a data localization law, we could be required to expand our data storage facilities there or build new ones in order to comply. The expenditure this would require, as well as costs of compliance generally, could harm our financial condition.
Additionally, third parties with whom we work, such as vendors or developers, may violate applicable laws or our policies and such violations can place personal information of our customers at risk. In addition, our customers may also accidentally disclose their passwords or store them on a device that is lost or stolen, creating the perception that our systems are not secure against third-party access. This could have an adverse effect on our reputation and business. In addition, such third parties could be the target of cyberattack and other data breaches which could impact our systems or our customers’ records.
Our acquisitions and divestitures create special risks and challenges that could adversely affect our financial results.
As part of our business strategy, we may acquire or divest businesses or assets. These activities can involve a number of risks and challenges, including:
Complexity, time, and costs associated with managing these transactions, including the integration of acquired business operations, workforce, products, IT systems, and technologies;
Diversion of management time and attention;
Loss or termination of employees, including costs associated with the termination or replacement of those employees;
Assumption of liabilities of the acquired business or assets, including pending or future litigation, investigations or claims related to the acquired business or assets;
The addition of acquisition-related debt;
Increased or unexpected costs and working capital requirements;
Dilution of stock ownership of existing stockholders;
Unanticipated delays or failure to meet contractual obligations; and
Substantial accounting charges for acquisition-related costs, amortization of intangible assets, and higher levels of stock-based compensation expense.
We have invested and continue to invest and devote significant resources in the integration of businesses we acquire. The success of each acquisition depends in part on our ability to realize the anticipated business opportunities, including certain cost savings and operational efficiencies or synergies and growth prospects from integrating these businesses in an efficient and effective manner. If integration of our acquired businesses is not successful, we may not realize the potential benefits of an acquisition or suffer other adverse effects. To integrate acquired businesses, we must integrate and manage the personnel and

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business systems of the acquired operations. We also must effectively integrate the different cultures of acquired business organizations into our own in a way that aligns various interests and we may need to enter new markets in which we have no or limited experience and where competitors in such markets have stronger market positions. Moreover, to be successful, large complex acquisitions depend on large-scale product, technology, and sales force integrations that are difficult to complete on a timely basis or at all and may be more susceptible to the special risks and challenges described above.
In addition, we have in the past, and may in the future, divest businesses, product lines, or assets. Such initiatives may require significant separation activities that could result in the diversion of management’s time and attention, loss of employees, substantial separation costs, and accounting charges for asset impairments.
Any of the foregoing, and other factors, could harm our ability to achieve anticipated levels of profitability or other financial benefits from our acquired or divested businesses, product lines or assets or to realize other anticipated benefits of divestitures or acquisitions.
If we fail to manage our sales and distribution channels effectively, or if our partners choose not to market and sell our solutions to their customers, our operating results could be adversely affected.
We sell our solutions to customers around the world through multi-tiered sales and distribution networks.
Sales through these different channels involve distinct risks, including the following:
Direct Sales. A portion of our revenues from enterprise products is derived from sales by our direct sales force to end-users. Risks associated with direct sales include:
Longer sales cycles associated with direct sales efforts;
Difficulty in hiring, retaining, and motivating our direct sales force, particularly through periods of transition in our organization;
Substantial amounts of training for sales representatives to become productive in selling our solutions, including regular updates to our products, and associated delays and difficulties in recognizing the expected benefits of investments in new products and updates;
Increased administrative costs in processing orders and increased credit risk in pursuing payment from each end user; and
Increased responsibility for custom and export activities that may result in added costs.
Indirect Sales Channels. A portion of our revenues is derived from sales through indirect channels, including, but not limited to, distributors that sell our products to end-users and other resellers. This channel involves a number of risks, including:
Our resellers and distributors are generally not subject to minimum sales requirements or any obligation to market our solutions to their customers;
Our reseller and distributor agreements are generally nonexclusive and may be terminated at any time without cause;
Our lack of control over the timing of delivery of our solutions to end-users;
Our resellers and distributors may violate applicable law or regulatory requirements or otherwise cause damage to our reputation through their actions;
Our resellers and distributors frequently market and distribute competing solutions and may, from time to time, place greater emphasis on the sale of these solutions due to pricing, promotions, and other terms offered by our competitors; and
Any consolidation of electronics retailers can continue to increase their negotiating power with respect to software providers such as us.
OEM Sales Channels. A portion of our revenues is derived from sales through our OEM partners that incorporate our products into, or bundle our products with, their products. Our reliance on this sales channel involves many risks, including:
Our lack of control over the volume of products delivered and the timing of such delivery;
Most of our OEM partners are not subject to minimum sales requirements. Generally, our OEM partners do not have any obligation to market our products to their customers;
Our OEM partners may terminate or renegotiate their arrangements with us and new terms may be less favorable due to competitive conditions in our markets and other factors;
Sales through our OEM partners are subject to changes in general economic conditions, strategic direction, competitive risks, and other issues that could result in a reduction of OEM sales;
The development work that we must generally undertake under our agreements with our OEM partners may require us to invest significant resources and incur significant costs with little or no assurance of ever receiving associated revenues;
The time and expense required for the sales and marketing organizations of our OEM partners to become familiar with our solutions may make it more difficult to introduce those solutions to the market; and

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Our OEM partners may develop, market, and distribute their own solutions and market and distribute products of our competitors, which could reduce our sales.
If we fail to manage our sales and distribution channels successfully, these channels may conflict with one another or otherwise fail to perform as we anticipate, which could reduce our sales and increase our expenses as well as weaken our competitive position. Some of our distribution partners have experienced financial difficulties in the past, and if our partners suffer financial difficulties in the future because of general economic conditions or for other reasons, these partners may delay paying their obligations to us, and we may have reduced revenues or collections that could adversely affect our operating results. In addition, reliance on multiple channels subjects us to events that could cause unpredictability in demand, which could increase the risk that we may be unable to plan effectively for the future, and could adversely affect our operating results.
We face heightened regulation in our Consumer Cyber Safety segment, which could impede our ability to market and provide our solutions or adversely affect our business, financial position, and results of operations.
We are subject to heightened regulation in our Consumer Cyber Safety segment as a result of the sale of our identity and information protection products, which we sell as a result of our acquisition of LifeLock, including a wide variety of federal, state, and local laws and regulations, including the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Federal Trade Commission Act (FTC Act), and comparable state laws that are patterned after the FTC Act. Moreover, LifeLock entered into consent decrees and similar arrangements with the FTC and 35 states’ attorneys general in 2010 and a settlement with the FTC in 2015 relating to allegations that certain of LifeLock’s advertising and marketing practices constituted deceptive acts or practices in violation of the FTC Act, which impose additional restrictions on the LifeLock business, including prohibitions against making any misrepresentation of “the means, methods, procedures, effects, effectiveness, coverage, or scope of” LifeLock’s identity theft protection services. Any of the laws and regulations that apply to our business are subject to revision or new or changed interpretations, and we cannot predict the impact of such changes on our business.
Additionally, the nature of our identity and information protection products subjects us to the broad regulatory, supervisory, and enforcement powers of the Consumer Financial Protection Bureau which may exercise authority with respect to our services, or the marketing and servicing of those services, by overseeing our financial institution or credit reporting agency customers and suppliers, or by otherwise exercising its supervisory, regulatory, or enforcement authority over consumer financial products and services.
Our international operations involve risks that could increase our expenses, adversely affect our operating results, and require increased time and attention of our management.
We derive a substantial portion of our revenues from customers located outside of the U.S., and we have significant operations outside of the U.S., including engineering, sales, customer support, and production. Our international operations are subject to risks in addition to those faced by our domestic operations, including:
Potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights than U.S. laws or that may not be adequately enforced;
Requirements of foreign laws and other governmental controls, including tariffs, trade barriers and labor restrictions, and related laws that reduce the flexibility of our business operations;
Potential changes in trade relations arising from policy initiatives or other political factors;
Regulations or restrictions on the use, import, or export of encryption technologies that could delay or prevent the acceptance and use of encryption products and public networks for secure communications;
Local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited from engaging in by the Foreign Corrupt Practices Act and other anti-corruption laws and regulations;
Central bank and other restrictions on our ability to repatriate cash from our international subsidiaries or to exchange cash in international subsidiaries into cash available for use in the U.S.;
Fluctuations in currency exchange rates, economic instability, and inflationary conditions could reduce our customers’ ability to obtain financing for our products or could make our products more expensive or could increase our costs of doing business in certain countries;
Limitations on future growth or inability to maintain current levels of revenues from international sales if we do not invest sufficiently in our international operations;
Longer payment cycles for sales in foreign countries and difficulties in collecting accounts receivable;
Difficulties in staffing, managing, and operating our international operations;
Difficulties in coordinating the activities of our geographically dispersed and culturally diverse operations;
Seasonal reductions in business activity in the summer months in Europe and in other periods in other countries;
Costs and delays associated with developing software and providing support in multiple languages; and
Political unrest, war, or terrorism, or regional natural disasters, particularly in areas in which we have facilities.

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A significant portion of our transactions outside of the U.S. is denominated in foreign currencies. Accordingly, our revenues and expenses will continue to be subject to fluctuations in foreign currency rates. We have in the past and expect in the future to be affected by fluctuations in foreign currency rates, especially if international sales grow as a percentage of our total sales or our operations outside the U.S. continue to increase.
For example, the United Kingdom’s (U.K.) planned exit from the European Union (EU) (Brexit) has caused and may continue to cause significant volatility in global financial markets and will likely have an adverse impact on labor and trade in addition to creating further short-term uncertainty and currency volatility. In the absence of a future trade deal, the U.K.’s trade with the European Union and the rest of the world would be subject to tariffs and duties set by the World Trade Organization. Any adjustments we make to our business and operations as a result of Brexit could result in significant time and expense to complete. While we have not experienced any material financial impact from Brexit on our business to date, we cannot predict its future implications. Any impact from Brexit on our business and operations over the long term will depend, in part, on the outcome of tariff, tax treaties, trade, regulatory, and other negotiations the U.K. conducts.
If we do not protect our proprietary information and prevent third parties from making unauthorized use of our products and technology, our financial results could be harmed.
Most of our software and underlying technology is proprietary. We seek to protect our proprietary rights through a combination of confidentiality agreements and procedures and through copyright, patent, trademark, and trade secret laws. However, these measures afford only limited protection and may be challenged, invalidated, or circumvented by third parties. Third parties may copy all or portions of our products or otherwise obtain, use, distribute, and sell our proprietary information without authorization.
Third parties may also develop similar or superior technology independently by designing around our patents. Our shrink-wrap license agreements are not signed by licensees and therefore may be unenforceable under the laws of some jurisdictions. Furthermore, the laws of some foreign countries do not offer the same level of protection of our proprietary rights as the laws of the U.S., and we may be subject to unauthorized use of our products in those countries. The unauthorized copying or use of our products or proprietary information could result in reduced sales of our products. Any legal action to protect proprietary information that we may bring or be engaged in with a strategic partner or vendor could adversely affect our ability to access software, operating system, and hardware platforms of such partner or vendor, or cause such partner or vendor to choose not to offer our products to their customers. In addition, any legal action to protect proprietary information that we may bring or be engaged in, could be costly, may distract management from day-to-day operations, and may lead to additional claims against us, which could adversely affect our operating results.
From time to time we are a party to lawsuits and investigations, which typically require significant management time and attention and result in significant legal expenses, and which could negatively impact our business, financial condition, results of operations, and cash flows.
We have initiated and been named as a party to lawsuits, including patent litigation, class actions, and governmental claims, and we may be named in additional litigation. The expense of initiating and defending, and in some cases settling, such litigation may be costly and divert management’s attention from the day-to-day operations of our business, which could adversely affect our business, results of operations, and cash flows. In addition, an unfavorable outcome in such litigation could result in significant fines, settlements, monetary damages, or injunctive relief that could negatively impact our ability to conduct our business, results of operations, and cash flows.
Third parties claiming that we infringe their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products.
From time to time, third parties may claim that we have infringed their intellectual property rights, including claims regarding patents, copyrights, and trademarks. Because of constant technological change in the segments in which we compete, the extensive patent coverage of existing technologies, and the rapid rate of issuance of new patents, it is possible that the number of these claims may grow. In addition, former employers of our former, current, or future employees may assert claims that such employees have improperly disclosed to us confidential or proprietary information of these former employers. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations. If we are not successful in defending such claims, we could be required to stop selling, delay shipments of, or redesign our products, pay monetary amounts as damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our customers. We cannot assure you that any royalty or licensing arrangements that we may seek in such circumstances will be available to us on commercially reasonable terms or at all. We have made and expect to continue making significant expenditures to investigate, defend, and settle claims related to the use of technology and intellectual property rights as part of our strategy to manage this risk.
In addition, we license and use software from third parties in our business. These third-party software licenses may not continue to be available to us on acceptable terms or at all and may expose us to additional liability. This liability, or our inability to use any of this third-party software, could result in delivery delays or other disruptions in our business that could materially and adversely affect our operating results.
Changes to our effective tax rate could increase our income tax expense and reduce (increase) our net income (loss).
Our effective tax rate could be adversely affected by several factors, many of which are outside of our control, including:

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Changes to the U.S. federal income tax laws, including impacts of the Tax Cuts and Jobs Act (H.R.1) (the 2017 Tax Act) arising from future interpretations of the 2017 Tax Act;
Changes to other tax laws, regulations, and interpretations in multiple jurisdictions in which we operate, including actions resulting from the Organisation for Economic Co-operation and Development’s base erosion and profit shifting project, proposed actions by international bodies such as digital services taxation, as well as the requirements of certain tax rulings;
Changes in the relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;
The tax effects of purchase accounting for acquisitions and restructuring charges that may cause fluctuations between reporting periods; and
Tax assessments, or any related tax interest or penalties, that could significantly affect our income tax expense for the period in which the settlements take place.
We report our results of operations based on our determination of the aggregate amount of taxes owed in the tax jurisdictions in which we operate. From time to time, we receive notices that a tax authority in a particular jurisdiction believes that we owe a greater amount of tax than we have reported to such authority. We are regularly engaged in discussions and sometimes disputes with these tax authorities. If the ultimate determination of our taxes owed in any of these jurisdictions is for an amount in excess of the tax provision we have recorded or reserved for, our operating results, cash flows, and financial condition could be adversely affected.
We cannot predict our future capital needs, and we may be unable to obtain financing, which could have a material adverse effect on our business, results of operations, and financial condition.
Adverse economic conditions or a change in our business performance may make it more difficult to obtain financing for our operations, investing activities (including potential acquisitions or divestitures), or financing activities. Any required financing may not be available on terms acceptable to us, or at all. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our financial or operational flexibility and would also require us to fund additional interest expense. If additional financing is not available when required or is not available on acceptable terms, we may be unable to successfully develop or enhance our software and services through acquisitions in order to take advantage of business opportunities or respond to competitive pressures, which could have a material adverse effect on our software and services offerings, revenues, results of operations, and financial condition.
Failure to maintain our credit ratings could adversely affect our liquidity, capital position, ability to hedge certain financial risks, borrowing costs, and access to capital markets.
Our credit risk is evaluated by the major independent rating agencies, and such agencies have in the past and could in the future downgrade our ratings. We cannot assure you that we will be able to maintain our current credit ratings, and any additional actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, may have a negative impact on our liquidity, capital position, ability to hedge certain financial risks, and access to capital markets. In addition, changes by any rating agency to our outlook or credit rating could increase the interest we pay on outstanding or future debt.
There are risks associated with our outstanding and future indebtedness that could adversely affect our financial condition.
As of March 29, 2019, we had an aggregate of $4.5 billion of outstanding indebtedness that will mature in calendar years 2020 through 2025, including approximately $4.0 billion in aggregate principal amount of existing senior notes and $0.5 billion of outstanding term loans under our senior credit facilities, and we may incur additional indebtedness in the future and/or enter into new financing arrangements. In addition, as of March 29, 2019, we had $1.0 billion available for borrowing under our revolving credit facility. Our ability to meet expenses, to remain in compliance with the covenants under our debt instruments, and to pay interest and repay principal for our substantial level of indebtedness depends on, among other things, our operating performance, competitive developments, and financial market conditions, all of which are significantly affected by financial, business, economic, and other factors. We are not able to control many of these factors. Accordingly, our cash flow may not be sufficient to allow us to pay principal and interest on our debt, including the notes, and meet our other obligations.
Our level of indebtedness could have important consequences, including the following:
We must use a substantial portion of our cash flow from operations to pay interest and principal on the term loans and revolving credit facility, our existing senior notes, and other indebtedness, which reduces funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, and potential acquisitions;
We may be unable to refinance our indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes;
We are exposed to fluctuations in interest rates because borrowings under our senior credit facilities bear interest at variable rates;
Our leverage may be greater than that of some of our competitors, which may put us at a competitive disadvantage and reduce our flexibility in responding to current and changing industry and financial market conditions;

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We may be more vulnerable to an economic downturn and adverse developments in our business;
We may be unable to comply with financial and other covenants in our debt agreements, which could result in an event of default that, if not cured or waived, may result in acceleration of certain of our debt and would have an adverse effect on our business and prospects and could force us into bankruptcy or liquidation; and
Changes by any rating agency to our outlook or credit rating could negatively affect the value of our debt and/or our common stock, adversely affect our access to debt markets, and increase the interest we pay on outstanding or future debt.
There can be no assurance that we will be able to manage any of these risks successfully.
In addition, we conduct a significant portion of our operations through our subsidiaries, which are generally not guarantors of our debt. Accordingly, repayment of our indebtedness will be dependent in part on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment, or otherwise. In general, our subsidiaries will not have any obligation to pay amounts due on our debt or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity, and under certain circumstances legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. In the event that we do not receive distributions from our subsidiaries, we may be unable to make the required principal and interest payments on our indebtedness.
Our existing credit agreements impose operating and financial restrictions on us.
The existing credit agreements contain covenants that limit our ability and the ability of our restricted subsidiaries to:
Incur additional debt;
Create liens on certain assets to secure debt;
Enter into certain sale and leaseback transactions;
Pay dividends on or make other distributions in respect of our capital stock or make other restricted payments; and
Consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.
All of these covenants may adversely affect our ability to finance our operations, meet or otherwise address our capital needs, pursue business opportunities, react to market conditions, or otherwise restrict activities or business plans. A breach of any of these covenants could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and, to the extent such indebtedness is secured in the future, proceed against any collateral securing that indebtedness.
Some of our products contain “open source” software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Certain of our products are distributed with software licensed by its authors or other third parties under so-called “open source” licenses, which may include, by way of example, the GNU General Public License, GNU Lesser General Public License, the Mozilla Public License, the BSD License, and the Apache License.
Some of these licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software if we combine our proprietary software with open source software in a certain manner. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software. We have established processes to help alleviate these risks, including a review process for screening requests from our development organizations for the use of open source, but we cannot be sure that all open source is submitted for approval prior to use in our products. In addition, many of the risks associated with usage of open source cannot be eliminated and could, if not properly addressed, negatively affect our business.
Our contracts with the U.S. government include compliance, audit, and review obligations. Any failure to meet these obligations could result in civil damages and/or penalties being assessed against us by the government.
We sell products and services through government contracting programs directly and via partners, though we no longer hold a GSA contract. In the ordinary course of business, sales under these government contracting programs may be subject to audit or investigation by the U.S. government. Noncompliance identified as a result of such reviews (as well as noncompliance identified on our own) could subject us to damages and other penalties, which could adversely affect our operating results and financial condition.
Item 1B. Unresolved Staff Comments
There are no unresolved issues with respect to any Commission staff’s written comments that were received at least 180 days before the end of our fiscal year to which this report relates and that relate to our periodic or current reports under the Exchange Act.

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Item 2. Properties
Not applicable.
Item 3. Legal Proceedings
Information with respect to this Item may be found under the heading “Litigation contingencies” in Note 16 to the Consolidated Financial Statements in this Annual Report on Form 10-K which information is incorporated into this Item 3 by reference.
Item 4. Mine Safety Disclosures
Not applicable.

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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Stockholders of record
Our common stock is traded on the Nasdaq Global Select Market under the symbol “SYMC.” As of March 29, 2019, there were 1,601 stockholders of record.
Stock performance graph
The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Composite Index and the S&P Information Technology Index for the five fiscal years ended March 29, 2019 (assuming the initial investment of $100 in our common stock and in each of the other indices on the last day of trading for fiscal 2014 and the reinvestment of all dividends). The comparisons in the graph below are based on historical data and are not indicative of, nor intended to forecast the possible future performance of our common stock.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Among Symantec Corporation, the S&P 500 Index
and the S&P Information Technology Index
symc33117-_chartx10899a03.jpg
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Symantec under the Securities Act or the Exchange Act.
Dividends
During fiscal 2019 and 2018, we declared and paid aggregate cash dividends and dividend equivalents of $217 million or $0.30 per common share, and $211 million or $0.30 per common share, respectively. All future dividends are subject to the approval of our Board of Directors.

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Repurchases of our equity securities
Through our stock repurchase programs we have repurchased shares of our common stock since the fourth quarter of fiscal 2004. Under these programs, shares may be repurchased on the open market and through accelerated stock repurchase transactions. In January 2019, our Board of Directors increased their authorization by $500 million. As of March 29, 2019, we have $1,048 million remaining authorized to be completed in future periods with no expiration date. Stock repurchases during the three months ended March 29, 2019, were as follows:
(In millions, except per share data)
Total Number of Shares Purchased (1)
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Program
 
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
December 29, 2018 to January 25, 2019

 
$

 

 
$
800

January 26, 2019 to February 22, 2019

 
$

 

 
$
1,300

February 23, 2019 to March 29, 2019
11

 
$
22.68

 
11

 
$
1,048

Total number of shares repurchased
11

 
 
 
11

 
 
 
(1) The number of shares purchased is reported on trade date. As of March 29, 2019, approximately 1 million share repurchases at the average price per share of $22.95 were executed but not settled until April 2019.
Item 6. Selected Financial Data
The following selected consolidated financial data is derived from our Consolidated Financial Statements. This data should be read in conjunction with our Consolidated Financial Statements and related notes included in this annual report and with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Historical results may not be indicative of future results.
Five-Year Summary
Summary of Operations:
Year Ended (1)
(In millions, except per share data)
March 29, 2019 (2)
 
March 30, 2018 (3)
 
March 31, 2017 (4)
 
April 1, 2016 (5)
 
April 3,
2015
Net revenues
$
4,731

 
$
4,834

 
$
4,019

 
$
3,600

 
$
3,956

Operating income (loss)
$
380

 
$
49

 
$
(100
)
 
$
457

 
$
154

Income (loss) from continuing operations (3)
$
16

 
$
1,127

 
$
(236
)
 
$
(821
)
 
$
109

Income from discontinued operations, net of income taxes (5)
$
15

 
$
11

 
$
130

 
$
3,309

 
$
769

Net income (loss)
$
31

 
$
1,138

 
$
(106
)
 
$
2,488

 
$
878

 
 
 
 
 
 
 
 
 
 
Income (loss) per share - basic: (6)
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.03

 
$
1.83

 
$
(0.38
)
 
$
(1.23
)
 
$
0.16

Discontinued operations
$
0.02

 
$
0.02

 
$
0.21

 
$
4.94

 
$
1.12

Net income (loss) per share - basic
$
0.05

 
$
1.85

 
$
(0.17
)
 
$
3.71

 
$
1.27

 
 
 
 
 
 
 
 
 
 
Income (loss) per share - diluted: (6)
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.02

 
$
1.69

 
$
(0.38
)
 
$
(1.23
)
 
$
0.16

Discontinued operations
$
0.02

 
$
0.02

 
$
0.21

 
$
4.94

 
$
1.10

Net income (loss) per share - diluted
$
0.05

 
$
1.70

 
$
(0.17
)
 
$
3.71

 
$
1.26

 
 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.30

 
$
0.30

 
$
0.30

 
$
4.60

 
$
0.60

Consolidated Balance Sheets Data:
 
 
 
 
 
 
 
 
 
(In millions)
March 29, 2019
 
March 30, 2018
 
March 31, 2017
 
April 1,
2016
 
April 3, 2015
Cash, cash equivalents and short-term investments
$
2,043

 
$
2,162

 
$
4,256

 
$
6,025

 
$
3,860

Total assets
$
15,938

 
$
15,759

 
$
18,174

 
$
11,767

 
$
13,233

Long-term debt
$
3,961

 
$
5,026

 
$
6,876

 
$
2,207

 
$
1,746

Total stockholders’ equity
$
5,738

 
$
5,023

 
$
3,487

 
$
3,676

 
$
5,935


(1)
We have a 52/53-week fiscal year. Our fiscal 2019, 2018, 2017, and 2016 each consisted of 52 weeks, whereas fiscal 2015 was a 53-week year.
(2)
We adopted the new revenue recognition accounting standard on a modified retrospective basis during the first quarter of fiscal 2019. The results for fiscal 2019 are presented under the new revenue recognition accounting standard, while prior years are not adjusted.
(3)
In fiscal 2018, we sold Website Security (WSS) and Public Key Infrastructure (PKI) solutions and recognized a gain of $653 million before income taxes associated with the sale (see Note 4 to the Consolidated Financial Statements), and we recognized an income tax benefit of $659 million as a result of the enactment of the Tax Cuts and Jobs Act (H.R.1) (the 2017 Tax Act) (see Note 11 to the Consolidated Financial Statements).
(4)
In fiscal 2017, we acquired Blue Coat and LifeLock, and the results of operations of those entities were included from their respective dates of acquisition (see Note 4 to the Consolidated Financial Statements).
(5)
In fiscal 2016, we recorded $1.1 billion in income tax expense related to unremitted earnings of foreign subsidiaries from the proceeds of the sale of our Veritas information management business. This charge was presented in loss from continuing operations in the Consolidated Statements of Operations. As a result of the sale, a net gain of $3.0 billion was presented as part of income from discontinued operations, net of income taxes.
(6)
Net income per share amounts may not add due to rounding.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Please read the following discussion and analysis of our financial condition and results of operations together with our Consolidated Financial Statements and related Notes thereto included under Item 15 of this Annual Report on Form 10-K.
OVERVIEW
Symantec Corporation is a global leader in cyber security. We provide cyber security products, services, and solutions to organizations and individuals worldwide. Founded in 1982, we have operations in more than 45 countries.
Our segments consist of:
Enterprise Security. Our Enterprise Security segment focuses on providing our Integrated Cyber Defense solutions to help business and government customers unify cloud and on-premises security to deliver a more effective cyber defense solution, while driving down cost and complexity.
Consumer Cyber Safety. Our Consumer Cyber Safety segment focuses on providing cyber safety solutions under our Norton LifeLock brand to help consumers protect their devices, online privacy, identities, and home networks.
For additional information about our offerings, see the discussion in Item 1. Business, under the heading “Products and Services.”
Fiscal calendar and basis of presentation
We have a 52/53-week fiscal year ending on the Friday closest to March 31. Fiscal 2019, 2018, and 2017 in this report refers to fiscal year ended March 29, 2019, March 30, 2018, and March 31, 2017, respectively, each of which was a 52-week year.
Our financial results for fiscal 2019 are presented in accordance with the new revenue standard that was adopted under the modified retrospective method at the beginning of fiscal 2019. Prior period results have not been restated. Refer to Note 2 of our notes to Consolidated Financial Statements for further details about our recent adoption of this accounting guidance.
Key financial metrics
The following table provides our key financial metrics for fiscal 2019 compared with fiscal 2018:
(In millions, except for percentages and per share amounts)
Fiscal 2019
 
Fiscal 2018
Net revenues
$
4,731

 
$
4,834

Operating income
$
380

 
$
49

Net income
$
31

 
$
1,138

Net income per share - diluted
$
0.05

 
$
1.70

Net cash provided by operating activities
$
1,495

 
$
950

 
 
 
 
 
As of
 
March 29, 2019
 
March 30, 2018
Cash, cash equivalents and short-term investments
$
2,043

 
$
2,162

Contract liabilities
$
3,056

 
$
3,103

Net revenues decreased 2% primarily due to the divestiture of our website security (WSS) and public key infrastructure (PKI) solutions in fiscal 2018, partially offset by increased revenue from our identity and information protection solutions.
Operating income increased $331 million primarily due to increased revenue from our identity and information protection solutions in our Consumer Cyber Safety segment, lower stock-based compensation expense, and lower restructuring, transition, and other costs, partially offset by the negative impact to Enterprise Security segment operating income due to the fiscal 2018 divestiture of WSS and PKI solutions.
Net income and diluted net income per share decreased primarily due to the absence in fiscal 2019 of the gain on the divestiture of WSS and PKI solutions and a net income tax benefit as a result of the passage of the 2017 Tax Act, both of which occurred during fiscal 2018.
Net cash provided by operating activities increased $545 million due to higher net income adjusted for non-cash items, partially offset by unfavorable net changes in operating assets and liabilities.
Cash, cash equivalents and short-term investments decreased $119 million compared to March 30, 2018, primarily due to cash used for repayment of debt, stock repurchases, and payments of dividends, partially offset by cash from operations.
Contract liabilities decreased $47 million compared to March 30, 2018, primarily due to a decrease of $169 million in the March 30, 2018 balances as a result of the adoption of the new revenue recognition standard, partially offset by higher billings versus recognized revenue during fiscal 2019.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S. (GAAP) requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on a regular basis and make changes accordingly. Management believes that the accounting estimates employed, and the resulting amounts are reasonable; however, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position, and cash flows.
A summary of our significant accounting policies is included in Note 1 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. Management believes the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of our Consolidated Financial Statements.
Revenue recognition
We recognize revenue primarily pursuant to the requirements under the authoritative guidance on contracts with customers. Revenue recognition requirements are very complex and require us to make estimates and assumptions.
We enter into arrangements with multiple performance obligations, which may include hardware, software licenses, cloud services, support and maintenance, and professional services. We allocate revenue to each performance obligation on a relative fair value basis based on management’s estimate of stand-alone selling price (SSP). Judgments are required to determine the SSP for each performance obligation. The determination of SSP is made by taking into consideration observable prices in historical transactions. When observable prices in historical transactions are not available or are inconsistent, we estimate SSP based on observable prices in historical transactions of similar products, pricing discount practices, product margins, and other factors that may vary over time depending upon the unique facts and circumstances related to each performance obligation. Changes to the performance obligations in an arrangement, the judgments required to estimate the SSP for the respective performance obligations, and increasing variability in contractual arrangements could materially impact the amount and timing of revenue recognition.
Valuation of goodwill, intangible assets, and long-lived assets
Business combinations. We allocate the purchase price of acquired businesses to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. Any residual purchase price is recorded as goodwill. Goodwill is allocated to reporting units expected to benefit from the business combination. The allocation of purchase price requires management to make significant estimates and assumptions in determining the fair values of the assets acquired and liabilities assumed especially with respect to intangible assets.
Critical estimates in valuing intangible assets include, but are not limited to, future expected cash flows from customer relationships, developed technology, trade names, and acquired patents; and discount rates. Management estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates, or actual results.
Income taxes
We are subject to tax in multiple U.S. and foreign tax jurisdictions. We are required to estimate the current tax exposure as well as assess the temporary differences between the accounting and tax treatment of assets and liabilities, including items such as accruals and allowances not currently deductible for tax purposes. We apply judgment in the recognition and measurement of current and deferred income taxes which includes the following critical accounting estimates.
We use a two-step process to recognize liabilities for uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If we determine that the tax position will more likely than not be sustained on audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various outcomes. We re-evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.
As of December 28, 2018, we have completed our accounting for the effects of the enactment of the 2017 Tax Act in accordance with U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118, and the amounts are no longer considered provisional. We continue to evaluate any new guidance from the U.S. Department of Treasury and the IRS as issued.

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Stock-based compensation
Stock-based compensation expense is measured at the grant date based on the fair value of the award. We recognize stock-based compensation cost over the award’s requisite service period on a straight-line basis except for performance-based restricted stock units (PRUs) with graded vesting which we recognize on a graded basis. For awards with performance conditions, the amount of compensation cost we recognize over the requisite service period is based on the actual achievement of the performance condition or management’s best estimate of the achievement if not yet known. No compensation cost is ultimately recognized for forfeited awards in which employees do not render the requisite service. We estimate the number of stock-based awards that will be forfeited due to employee turnover. Our forfeiture assumption is primarily based on historical experience.
The fair value of each restricted stock unit (RSU) and PRU that does not contain a market condition is equal to the market value of our common stock on the date of grant. The fair value of each PRU that contains a market condition is estimated using the Monte Carlo simulation option pricing model. The fair values of RSUs and PRUs are not discounted by the dividend yield because our RSUs and PRUs are entitled to dividend equivalents to be paid in the form of cash upon vesting for each share of the underlying unit.
We use the Black-Scholes model to determine the fair value of unvested stock options assumed in acquisitions. The determination of the fair value of awards using the Black-Scholes model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. If the acquired companies lack sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term, we estimate the expected life of assumed options using the “simplified method”. For vested options, this represents the midpoint between the valuation date and the contractual term. For unvested options, this represents the midpoint between the average vesting time and full contractual term. Expected volatility is based on the average of historical volatility over the most recent period commensurate with the expected life of the option and the implied volatility of traded options. The risk-free interest rate is equal to the U.S. Treasury rates for the period equal to the expected life. The options assumed are without dividend equivalents, and their fair values are discounted by our dividend yield.
We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may have refinements to our estimates which could materially impact our future stock-based compensation expense.
Loss contingencies
We are subject to contingencies that expose us to losses, including various legal and regulatory proceedings, asserted and potential claims that arise in the ordinary course of business. An estimated loss from such contingencies is recognized as a charge to income if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. We review the status of each significant matter quarterly, and we may revise our estimates. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material impact on our consolidated financial statements for that reporting period.

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RESULTS OF OPERATIONS
Pursuant to instruction 1 of the instructions to paragraph 303(a) of Regulation S-K, discussion of the results of operations from fiscal year 2018 to fiscal year 2017 has been omitted. Such omitted discussion can be found under Item 7 of our annual report on Form 10-K for the fiscal year ended March 30, 2018, filed with the Commission on October 26, 2018.
Fiscal 2019 compared to fiscal 2018
The following table sets forth our Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated:
 
Fiscal Year
 
2019
 
2018
Net revenues
100
 %
 
100
 %
Cost of revenues
22

 
21

Gross profit
78

 
79

Operating expenses:
 
 
 
Sales and marketing
32

 
33

Research and development
19

 
20

General and administrative
9

 
12

Amortization of intangible assets
4

 
5

Restructuring, transition and other costs
5

 
8

Total operating expenses
70

 
78

Operating income
8

 
1

Interest expense
(4
)
 
(5
)
Gain on divestiture

 
14

Other expense, net
(1
)
 

Income from continuing operations before income taxes
2

 
9

Income tax expense (benefit)
2

 
(14
)
Income from continuing operations

 
23

Income from discontinued operations, net of income taxes

 

Net income
1
 %
 
24
 %
 
Note: The percentages may not add due to rounding.
Net revenues
 
Fiscal Year
 
Variance in
(In millions, except for percentages)
2019
 
2018
 
Dollars
 
Percent
Net revenues
$
4,731

 
$
4,834

 
$
(103
)
 
(2
)%
Net revenues decreased primarily due to a $231 million decrease from our Enterprise Security segment as a result of the divestiture of our WSS and PKI solutions, partially offset by an increase of $128 million from our Consumer Cyber Safety segment. The adoption of the new revenue accounting standard had a favorable impact of $47 million on our fiscal 2019 revenues.

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Net revenues by geographical region
Percentage of revenue by geographic region as presented below is based on the billing location of the customer.
 
Fiscal Year
 
2019
 
2018
Americas
64
%
 
63
%
EMEA
21
%
 
22
%
APJ
15
%
 
16
%
 
Percentages may not add to 100% due to rounding.
The Americas include U.S., Canada, and Latin America; EMEA includes Europe, Middle East, and Africa; APJ includes Asia Pacific and Japan.
Cost of revenues
 
Fiscal Year
 
Variance in
(In millions, except for percentages)
2019
 
2018
 
Dollars
 
Percent
Cost of revenues
$
1,050

 
$
1,032

 
$
18

 
2
%
Our cost of revenues increased primarily due to a $51 million increase in our Consumer Cyber Safety segment, partially offset by a $37 million decrease from the divestiture of our WSS and PKI solutions.
Operating expenses
 
Fiscal Year
 
Variance in
(In millions, except for percentages)
2019
 
2018
 
Dollars
 
Percent
Sales and marketing
$
1,493

 
$
1,593

 
$
(100
)
 
(6
)%
Research and development
913

 
956

 
(43
)
 
(4
)%
General and administrative
447

 
574

 
(127
)
 
(22
)%
Amortization of intangible assets
207

 
220

 
(13
)
 
(6
)%
Restructuring, transition and other costs
241

 
410

 
(169
)
 
(41
)%
Total
$
3,301

 
$
3,753

 
$
(452
)
 
(12
)%
Sales and marketing expense decreased primarily due to a $51 million decrease in stock-based compensation expense and a $41 million decrease as a result of the divestiture of our WSS and PKI solutions.
Research and development expense decreased primarily due to a $66 million decrease in stock-based compensation expense.
General and administrative expense decreased primarily due to a $130 million decrease in stock-based compensation expense.
Amortization of intangible assets decreased primarily due to the intangible assets sold with the divestiture of WSS and PKI solutions.
Restructuring, transition and other costs reflect a decrease of $70 million in fiscal 2019 compared to fiscal 2018 in severance and other restructuring costs. In addition, fiscal 2018 costs included $88 million of transition related costs related to our fiscal 2018 divestiture of our WSS and PKI solutions compared to $3 million in fiscal 2019.


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Non-operating income (expense), net
 
Fiscal Year
 
Variance in
(In millions)
2019
 
2018
 
Dollars
Interest expense
$
(208
)
 
$
(256
)
 
$
48

Gain on divestiture

 
653

 
(653
)
Interest income
42

 
24

 
18

Loss from equity interest
(101
)
 
(26
)
 
(75
)
Foreign exchange loss
(18
)
 
(28
)
 
10

Other
13

 
21

 
(8
)
Total other income (expense), net
$
(272
)
 
$
388

 
$
(660
)
Non-operating income (expense), net, decreased primarily due to the absence of the fiscal 2018 $653 million gain on the divestiture of our WSS and PKI solutions. In addition, our loss from our equity interest received in connection with the divestiture of our WSS and PKI solutions increased $75 million, which was partially offset by a $48 million decrease in interest expense as a result of lower outstanding borrowings due to repayments.
Provision for income taxes
We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax jurisdictions. A substantial portion of our international earnings were generated from subsidiaries organized in Ireland and Singapore. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict.
 
Fiscal Year
(In millions, except for percentages)
2019
 
2018
Income from continuing operations before income taxes
$
108

 
$
437

Provision for (benefit from) income taxes
$
92

 
$
(690
)
Effective tax rate on income from continuing operations
85
%
 
(158
)%
The increase in our effective tax rate in fiscal 2019 compared to fiscal 2018 was primarily due to one-time benefits from the 2017 Tax Act in fiscal 2018. In addition, increases in tax expense in fiscal 2019 are attributable to the valuation allowance on capital losses for which we cannot yet recognize a tax benefit.
Segment operating results
We do not allocate certain operating expenses to our operating segments that we manage separately at the corporate level and that are not used in evaluating the results of, or in allocating resources to, our segments. These unallocated expenses primarily consist of stock-based compensation expense, amortization of intangible assets, restructuring, transition and other costs, and acquisition-related costs in all periods presented. See Note 15 for more information.
Enterprise Security segment
 
Fiscal Year
 
Variance in
(In millions, except for percentages)
2019
 
2018
 
Dollars
 
Percent
Net revenues
$
2,323

 
$
2,554

 
$
(231
)
 
(9
)%
Percentage of total net revenues
49
%
 
53
%
 

 

Operating income
$
269

 
$
473

 
$
(204
)
 
(43
)%
Operating margin
12
%
 
19
%
 
 
 
 
Revenue decreased primarily due to a $238 million decrease as a result of the fiscal 2018 divestiture of our WSS and PKI solutions, partially offset by a $47 million favorable impact from the adoption of the new revenue recognition standard. Operating income decreased primarily due to the divestiture of our WSS and PKI solutions which contributed $141 million to segment operating income in fiscal 2018.

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Consumer Cyber Safety segment
 
Fiscal Year
 
Variance in
(In millions, except for percentages)
2019
 
2018
 
Dollars
 
Percent
Net revenues
$
2,408

 
$
2,280

 
$
128

 
6
%
Percentage of total net revenues
51
%
 
47
%
 
 
 
 
Operating income
$
1,145

 
$
1,111

 
$
34

 
3
%
Operating margin
48
%
 
49
%
 
 
 
 
Revenue increased primarily due to a $161 million increase in revenue from sales of our identity and information protection products, partially offset by a $33 million decrease in revenue from sales of our consumer security solutions. Operating income increased primarily due to increased revenue, partially offset by higher allocated corporate costs and increased cost of revenues.
Performance Metrics
We regularly monitor a number of metrics in order to measure our current performance and estimate our future performance. Our metrics may be calculated in a manner different than similar metrics used by other companies.
The following table summarizes supplemental key performance metrics for our Consumer Cyber Safety segment:
(In millions, except for per user amounts and percentages)
Fiscal 2019
 
Fiscal 2018
Average direct customer count
20.7

 
21.2

Direct average revenue per user (ARPU)
$
8.74

 
$7.99/$8.23 (1)

Annual retention rate
85
%
 
83
%
 
(1) Represents a non-GAAP financial measure. Estimated net revenue generated from direct customers during fiscal year 2018 used in the calculation of ARPU excluded a reduction in revenue related to contract liability purchase accounting adjustments required by GAAP, as further discussed below.
Average direct customer count presents the average of the total number of direct customers at the end of the most recently completed fiscal quarter and the end of the corresponding period in the prior fiscal year. We define direct customers as those customers in our Consumer Cyber Safety segment who have a direct billing relationship with us, including online acquisition and retention, affiliates, co-marketing, and original contract manufacturer channels.
ARPU is calculated as estimated direct customer revenues for the period divided by the average direct customer count for the same period, expressed as a monthly figure. We estimate direct customer net revenues to be $2.2 billion on a GAAP basis and $2.1 billion on a non-GAAP basis in fiscal year 2019 and 2018, respectively. Non-GAAP fiscal 2018 estimated direct customer revenues used in the calculation of ARPU is adjusted only to exclude a reduction in revenue of $60 million related to purchase accounting adjustments related to the February 2017 acquisition of LifeLock. ARPU for fiscal 2018 would have been $7.99 without this adjustment. We believe the adjustment is useful to investors to reflect ARPU trends in our business by improving the comparability of ARPU between periods. Fiscal 2019 did not include any adjustments to estimated direct customer revenue as the purchase accounting adjustments were fully amortized prior to that period. Non-GAAP estimated direct customer revenues and ARPU have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP estimated direct customer revenues or other GAAP measures. We monitor APRU because it helps us understand the rate at which we are monetizing our consumer customer base.
Annual retention rate is defined as the number of direct customers who have more than a one-year tenure as of the end of the most recently completed fiscal period divided by the total number of direct customers as of the end of the period from one year ago. We monitor annual retention rate to evaluate the effectiveness of our strategies to improve renewals of subscriptions.
Fiscal 2018 compared to fiscal 2017
The following table summarizes our continuing operations for fiscal 2018 compared with fiscal 2017:

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(In millions, except for percentages and per share amounts)
Fiscal 2018
 
Fiscal 2017
Net revenues
$
4,834

 
$
4,019

Operating income (loss)
$
49

 
$
(100
)
Income (loss) from continuing operations
$
1,127

 
$
(236
)
Income (loss) per share from continuing operations - diluted
$
1.69

 
$
(0.38
)
Net cash provided by (used in) continuing operating activities
$
957

 
$
(145
)
 
 
 
 
 
As of
 
March 30, 2018
 
March 31, 2017
Cash, cash equivalents and short-term investments
$
2,162

 
$
4,256

Deferred revenue
$
3,103

 
$
2,787

Net revenues grew 20% in fiscal 2018 compared to fiscal 2017 primarily as a result of the inclusion of revenue from our Consumer Cyber Safety segment identity and information protection products acquired through our LifeLock acquisition at the end of fiscal 2017 for a full year and increased revenues from sales of our Enterprise Security segment network and web security solutions which included products acquired in our fiscal 2017 acquisition of Blue Coat, partially offset by a decrease in revenue as a result of the divestiture of our Enterprise Security segment WSS and PKI solutions.
Operating income increased primarily as a result of increased net revenues and our cost reduction initiatives and integration synergy program we announced in fiscal 2017. This increase was partially offset by increased operating expenses as a result of our fiscal 2017 acquisitions, including stock-based compensation, amortization of intangible assets, and advertising and promotional expenses. The increase in operating income was also partially offset by increased transition costs primarily due to costs related to our enterprise resource planning and supporting systems and separation costs related to the divestiture of our WSS and PKI solutions.
Income from continuing operations and diluted income per share from continuing operations increased primarily as a result of the $653 million gain on the divestiture of our WSS and PKI solutions and a net tax benefit of $690 million primarily as a result of the 2017 Tax Act. Partially offsetting the increase in the diluted income per share from continuing operations was a higher diluted share count due to including the dilutive effect of potentially issuable common shares under our equity award programs and convertible debt. Such potentially issuable common shares were excluded from our net loss per share computation in fiscal 2017 as they would have been anti-dilutive.
Cash, cash equivalents and short-term investments decreased primarily as a result of our $3.2 billion of debt repayments as part of our plan to deleverage our balance sheet and $401 million paid for acquisitions, partially offset by $933 million in net cash proceeds from the divestiture of our WSS and PKI solutions and cash flow from continuing operating activities of $957 million.
Cash flow from continuing operating activities increased primarily due to a one-time tax payment of $887 million related to the gain on sale from the divestiture of our Veritas information management business in fiscal 2017 and an increase in deferred revenue.
Deferred revenue increased $316 million primarily due to our shift in sales contracts to a higher mix of solutions subject to ratable versus point in time revenue recognition and longer contract duration in our Enterprise Security segment, which resulted in less in-period revenue recognized, and due to higher billings towards the end of the fiscal year, reflecting seasonal sales cycles in that segment. These factors were partially offset by a decrease of $319 million in deferred revenue as a result of the divestiture of our WSS and PKI solutions.
Segment operating results
Enterprise Security segment
 
Fiscal Year
 
Variance in
(In millions, except for percentages)
2018
 
2017
 
Dollars
 
Percent
Net revenues
$
2,554

 
$
2,355

 
$
199

 
8
%
Percentage of total net revenues
53
%
 
59
%
 
 
 
 
Operating income
$
473

 
$
187

 
$
286

 
153
%
Operating margin
19
%
 
8
%
 
 
 
 
Revenue increased $199 million primarily due to increases of $331 million in revenue from sales of our network and web security solutions and $36 million from sales of endpoint and information protection solutions, partially offset by a $184 million decrease in revenue as a result of the divestiture of our WSS and PKI solutions. Revenue during fiscal 2018 was also unfavorably affected by a shift in the mix of sales towards subscription and cloud-delivered solutions subject to ratable revenue recognition, which resulted in less in-period recognized revenue and more revenue deferred to the balance sheet as compared

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to fiscal 2017. Operating income increased $286 million primarily due to higher revenue discussed above, a $51 million decrease in sales and marketing expenses and a $38 million decrease in cost of revenues.
Consumer Cyber Safety segment
 
Fiscal Year
 
Variance in
(In millions, except for percentages)
2018
 
2017
 
Dollars
 
Percent
Net revenues
$
2,280

 
$
1,664

 
$
616

 
37
%
Percentage of total net revenues
47
%
 
41
%
 
 
 
 
Operating income
$
1,111

 
$
839

 
$
272

 
32
%
Operating margin
49
%
 
50
%
 
 
 
 
Revenue increased $616 million due to a $639 million increase in revenue from sales of our identity and information protection products acquired at the end of fiscal 2017, offset by a $23 million decrease in revenue related to our consumer security products. Our revenue growth reflects the benefit of the shift to subscription-based contracts and bundling of our consumer products, which is helping to mitigate the trend of declining revenues from sales of stand-alone security products. Operating income increased $272 million primarily due to sales of our identity and information protection products, partially offset by higher related cost of sales and operating expenses.
LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS
Liquidity
We have historically relied on cash generated from operations, borrowings under credit facilities, issuances of debt, and proceeds from divestitures for our liquidity needs.
As of March 29, 2019, we had cash, cash equivalents and short-term investments of $2.0 billion, of which $0.5 billion was held by our foreign subsidiaries. Our cash, cash equivalents and short-term investments are managed with the objective to preserve principal, maintain liquidity, and generate investment returns. The participation exemption system under current U.S. federal tax regulations generally allows us to make distributions of non-U.S. earnings to the U.S. without incurring additional U.S. federal tax, however these distributions may be subject to applicable state or non-U.S. taxes. We have not recognized deferred income taxes for local country income and withholding taxes that could be incurred on distributions of certain non-U.S. earnings or for outside basis differences in our subsidiaries, because we plan to indefinitely reinvest such earnings and basis differences.
We also have an undrawn credit facility of $1.0 billion which expires in May 2021.
Our principal cash requirements are primarily to meet our working capital needs, support on-going business activities, including the payment of taxes, fund capital expenditures, service existing debt, and invest in business acquisitions. As a part of our plan to deleverage our balance sheet, we may from time to time make optional repayments of our debt obligations, which may include repurchases of our outstanding debt, depending on various factors such as market conditions.
Our capital allocation strategy is to balance driving stockholder returns, managing financial risk, and preserving our flexibility to pursue strategic options, including acquisitions. Historically this has included a quarterly cash dividend, the repayment of debt and the repurchase of our common stock.
Cash flows
The following table summarizes our cash flow activities in fiscal 2019 compared to fiscal 2018.
 
Fiscal Year
(In millions)
2019
 
2018
Net cash provided by (used in):
 
 
 
Operating activities
$
1,495

 
$
957

Investing activities
$
(241
)
 
$
(21
)
Financing activities
$
(1,209
)
 
$
(3,475
)
Increase (decrease) in cash and cash equivalents
$
17

 
$
(2,473
)
Our cash flow activities in fiscal 2018 compared to fiscal 2017 were discussed under Liquidity, Capital Resources and Cash Requirement in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 30, 2018.
Cash from operating activities
Our cash flows for fiscal 2019 reflected net income of $31 million adjusted by non-cash items, including amortization and depreciation of $615 million, stock-based compensation of $352 million, and loss from equity interest of $101 million.
Changes in operating assets and liabilities during fiscal 2019 consisted primarily of the following:

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Accounts receivable decreased $113 million, reflecting lower billings and higher collections in the last months of fiscal 2019 compared to the corresponding period in fiscal 2018. Days sales outstanding (DSO) decreased to 54 days in the fourth quarter of fiscal 2019, compared to 61 days in the corresponding period in fiscal 2018. DSO is calculated by dividing ending accounts receivable by revenue per day for a given quarter.
Contract liabilities increased $215 million, reflecting higher billings versus recognized revenue.
Our cash flows for fiscal 2018 reflected net income of $1.1 billion adjusted by non-cash amortization and depreciation of $640 million, stock-based compensation of $610 million, offset by a deferred tax benefit of $1.8 billion, primarily as a result of the enactment of the 2017 Tax Act in December 2017, and a gain on divestiture of $653 million.
Changes in operating assets and liabilities during fiscal 2018 consisted primarily of the following:
Accounts receivable increased $170 million, reflecting higher billings in the last months of fiscal 2018 and our shift in sales to solutions with ratable revenue recognition in our Enterprise Security segment.
Contract liabilities increased $541 million, reflecting our shift in sales contracts to a higher mix of solutions subject to ratable versus point in time revenue recognition and longer contract duration in our Enterprise Security segment, which resulted in less in-period revenue recognized, and higher billings towards the end of the fiscal year, reflecting seasonal sales cycles in that segment. These factors were partially offset by a decrease of $319 million in divestiture of our WSS and PKI solutions.
Income taxes payable increased $880 million, reflecting the one-time transition tax of $896 million under the 2017 Tax Act.
Cash from investing activities
Our cash flows from investing activities consisted primarily of capital expenditures of $207 million, payments for acquisitions of $180 million, partially offset by proceeds from maturities and sales of short-term investments of $139 million. Our investing activities in fiscal 2018 primarily included $933 million in net proceeds from divestiture of our WSS and PKI solutions, partially offset by $401 million paid for acquisitions and net purchases of $387 million of short-term investments.
Cash from financing activities
Our financing activities in fiscal 2019 primarily consisted of debt repayments of $600 million, repurchases of common stock of $234 million, payments of dividends and dividend equivalents of $217 million, and tax payments related to the vesting of equity awards of $173 million. Our financing activities in fiscal 2018 primarily consisted of debt repayments of $3.2 billion.
Cash requirements
Debt - As of March 29, 2019, our total outstanding principal amount of indebtedness was $4.5 billion, summarized as follows. See Note 8 to the Consolidated Financial Statements for further information on our debt.
(In millions)
March 29, 2019
Senior Term Loans
$
500

Senior Notes
2,250

Convertible Senior Notes
1,750

Total debt
$
4,500

Debt covenant compliance - The Senior Term Loan A-5 agreement contains customary representations and warranties, non-financial covenants for financial reporting, affirmative and negative covenants, including a covenant that we maintain a ratio of consolidated funded debt to consolidated adjusted earnings before interest, taxes, depreciation, and amortization of not more than 6.00 to 1.0 through December 31, 2018, then 5.25 to 1.0 thereafter, and restrictions on subsidiary indebtedness, liens, stock repurchases and dividends (with exceptions permitting our regular quarterly dividend). As of March 29, 2019, we were in compliance with all debt covenants.
Dividends - On May 9, 2019, we announced a cash dividend of $0.075 per share of common stock to be paid in June 2019. Any future dividends will be subject to the approval of our Board of Directors.
Stock repurchases - Under our stock repurchase program, we may purchase shares of our outstanding common stock through open market and through accelerated stock repurchase transactions, open market transactions (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act), and privately-negotiated transactions. As of March 29, 2019, the remaining balance of our stock repurchase authorization is $1,048 million and does not have an expiration date. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and other investment opportunities.

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Contractual obligations
The following is a schedule of our significant contractual obligations as of March 29, 2019:
 
Payments Due by Period
(In millions)
Total
 
Less than 1 Year
 
1 - 3 Years
 
3 - 5 Years
 
Over 5 Years
Debt (1)
$
4,500

 
$

 
$
3,000

 
$
400

 
$
1,100

Interest payments on debt (2)
609

 
170

 
239

 
118

 
82

Purchase obligations (3)
1,071

 
525

 
320

 
217

 
9

Long-term income taxes payable (4)
703

 
65

 
134

 
294

 
210

Operating leases (5)
244

 
55

 
89

 
58

 
42

Total
$
7,127

 
$
815

 
$
3,782

 
$
1,087

 
$
1,443

 
(1)
See Note 8 to the Consolidated Financial Statements for further information on our debt.
(2)
Interest payments were calculated based on the contractual terms of the related Senior Notes, Convertible Senior Notes, and Senior Term Facility. Interest on variable rate debt was calculated using the interest rate in effect as of March 29, 2019. See Note 8 to the Consolidated Financial Statements for further information on the Senior Notes, Convertible Senior Notes, and Senior Term Facility.
(3)
These amounts are associated with agreements for purchases of goods or services generally including agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. The table above also includes agreements to purchase goods or services that have cancellation provisions requiring little or no payment. The amounts under such contracts are included in the table above because management believes that cancellation of these contracts is unlikely, and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.
(4)
These amounts represent the transition tax on previously untaxed foreign earnings of foreign subsidiaries under the 2017 Tax Act which may be paid through July 2025. See Note 11 to the Consolidated Financial Statements for further information on our income taxes and the impact from the recently enacted legislation.
(5)
We have entered into various non-cancelable operating lease agreements that expire on various dates through fiscal 2029. The amounts in the table above exclude expected sublease income.
Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of March 29, 2019, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $373 million in long-term income taxes payable has been excluded from the contractual obligations table. See Note 11 to the Consolidated Financial Statements for further information.
Indemnifications
In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us. Refer to Note 16 to the Consolidated Financial Statements for further information on our indemnifications.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various market risks related to fluctuations in interest rates and foreign currency exchange rates. We may use derivative financial instruments to mitigate certain risks in accordance with our investment and foreign exchange policies. We do not use derivatives or other financial instruments for trading or speculative purposes.
Interest rate risk
Our short-term investments primarily consist of corporate bonds. An increase in interest could have an adverse impact on its market value. As of March 29, 2019, the fair value of our short-term investments was $252 million. A hypothetical increase in the corporate bonds’ yield curve of 50 basis points would not result in a significant reduction in fair value.
As of March 29, 2019, we had $4.0 billion in aggregate principal amount of fixed-rate Senior Notes and Convertible Senior Notes outstanding, with a carrying amount and a fair value of $4.0 billion, based on Level 2 inputs. Since these notes bear interest at fixed rates, they do not result in any financial statement risk associated with changes in interest rates. However, the fair value of these notes fluctuates when interest rates change.
As of March 29, 2019, we also had $500 million outstanding debt with variable interest rates based on the London InterBank Offered Rate (LIBOR). A reasonably possible hypothetical adverse change of 50 basis points in LIBOR would not result in a significant increase in interest expense on an annualized basis.
In addition, we have a $1.0 billion revolving credit facility that if drawn bears interest at a variable rate based on LIBOR and would be subject to the same risks associated with adverse changes in LIBOR.

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Foreign currency exchange rate risk
We conduct business in numerous currencies through our worldwide operations, and our entities hold monetary assets or liabilities, earn revenues, or incur costs in currencies other than the entity’s functional currency primarily in Euro, Japanese Yen, and British Pound. In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services we provide. Our cash flow, results of operations and certain of our intercompany balances that are exposed to foreign exchange rate fluctuations may differ materially from expectations, and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities. As a result, we are exposed to foreign exchange gains or losses which impacts our operating results.
We have a foreign exchange exposure management program designed to identify material foreign currency exposures, manage these exposures, and reduce the potential effects of currency fluctuations on our reported consolidated cash flows and results of operations through which we enter into foreign exchange forward contracts on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries with up to twelve months in duration. We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that entirely offsets the effects of the changes in foreign exchange rates. The gains and losses on these foreign exchange contracts are recorded in interest and other, net in our statement of operations.
As of March 29, 2019, we had open foreign currency forward contracts with notional amounts of $1.1 billion to hedge foreign currency balance sheet exposure, with an insignificant fair value. A hypothetical ten percent depreciation of foreign currency would result in a reduction in fair value of our forward contracts of $84 million for fiscal 2019. This analysis disregards the possibilities that the rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area.
In addition, to help protect the net investment in a foreign operation from adverse changes in foreign currency exchange rates, during fiscal 2019, we initiated a program under which we may enter into foreign currency forward and option contracts to offset the changes in the carrying amounts of these investments due to fluctuations in foreign currency exchange rates. As of March 29, 2019, the notional amount of the related outstanding forward contracts was $116 million, and their fair value was not significant. These contracts reduce, but do not entirely eliminate, the impact of currency exchange rate movements on investments in foreign operations. The foreign currency gains and losses on these contracts are recorded in other comprehensive income.
For additional details related to our derivative instruments, please see “Note 9 - Derivatives” to our Consolidated Financial Statements included in this report.

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Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements and related disclosures included in Part IV, Item 15 of this annual report are incorporated by reference into this Item 8.
Selected Quarterly Financial Data (Unaudited)
 
Fiscal 2019
 
Fiscal 2018
(In millions, except per share data)
Fourth Quarter
 
Third Quarter
 
Second Quarter
 
First Quarter
 
Fourth Quarter
 
Third Quarter (1)
 
Second Quarter
 
First Quarter
Net revenues
$
1,189

 
$
1,211

 
$
1,175

 
$
1,156

 
$
1,210

 
$
1,209

 
$
1,240

 
$
1,175

Gross profit
910

 
945

 
919

 
907

 
946

 
960

 
978

 
918

Operating income (loss)
107

 
169

 
102

 
2

 
6

 
96

 
(9
)
 
(44
)
Income tax expense (benefit)
22

 
38

 
36

 
(4
)
 
(7
)
 
(606
)
 
(53
)
 
(24
)
Income (loss) from continuing operations
30

 
59

 
(8
)
 
(65
)
 
(58
)
 
1,311

 
(16
)
 
(110
)
Income (loss) from discontinued operations, net of income taxes
4

 
6

 

 
5

 
(1
)
 
31

 
4

 
(23
)
Net income (loss)
34

 
65

 
(8
)
 
(60
)
 
(59
)
 
1,342

 
(12
)
 
(133
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) per share - basic: (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.05

 
$
0.09

 
$
(0.01
)
 
$
(0.10
)
 
$
(0.09
)
 
$
2.12

 
$
(0.03
)
 
$
(0.18
)
Discontinued operations
$
0.01

 
$
0.01

 
$

 
$
0.01

 
$
(0.00
)
 
$
0.05

 
$
0.01

 
$
(0.04
)
Net income (loss) per share - basic
$
0.05

 
$
0.10

 
$
(0.01
)
 
$
(0.10
)
 
$
(0.10
)
 
$
2.17

 
$
(0.02
)
 
$
(0.22
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) per share - diluted: (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.05

 
$
0.09

 
$
(0.01
)
 
$
(0.10
)
 
$
(0.09
)
 
$
1.97

 
$
(0.03
)
 
$
(0.18
)
Discontinued operations
$
0.01

 
$
0.01

 
$

 
$
0.01

 
$
(0.00
)
 
$
0.05

 
$
0.01

 
$
(0.04
)
Net income (loss) per share - diluted
$
0.05

 
$
0.10

 
$
(0.01
)
 
$
(0.10
)
 
$
(0.10
)
 
$
2.01

 
$
(0.02
)
 
$
(0.22
)
 
(1)
During the third quarter of fiscal 2018, we recognized a gain on divestiture of our WSS and PKI solutions of $658 million and an income tax benefit of $810 million as a result of the enactment of the 2017 Tax Act.
(2)
Net income (loss) per share amounts may not add due to rounding.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures
The SEC defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our management (with the participation of our Chief Executive Officer and Chief Financial Officer) has conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act). Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.
b) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for Symantec. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 29, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Our management has concluded that, as of March 29, 2019, our internal control over financial reporting was effective at the reasonable assurance level based on these criteria.
The effectiveness of our internal control over financial reporting as of March 29, 2019 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which is included in Part IV, Item 15 of this Annual Report on Form 10-K.
c) Changes in Internal Control over Financial Reporting
Effective March 31, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Changes were made to the relevant business processes and the related control activities, including information systems, in order to monitor and maintain appropriate controls over financial reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended March 29, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
d) Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
Item 9B. Other Information
Our Board of Directors has scheduled our 2019 Annual Meeting of Stockholders, or the 2019 Annual Meeting, to be held on September 10, 2019. The record date, time and location of the 2019 Annual Meeting will be as set forth in our proxy statement for the 2019 Annual Meeting.
The 2019 Annual Meeting is being held more than 30 days before the anniversary of our most recent Annual Meeting of Stockholders, which was held on December 3, 2018. As a result, we have set a new deadline for the receipt of any stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act for inclusion in our proxy materials for the 2019 Annual Meeting. The new deadline for the submission of such stockholder proposals is the close of business on June 3, 2019.
In addition, in accordance with our Bylaws, because the scheduled date of the 2019 Annual Meeting is more than 30 calendar days before the one-year anniversary of the previous year’s Annual Meeting of Stockholders, if a stockholder desires to make a proposal from the floor during the 2019 Annual Meeting, or if an eligible stockholder or group of stockholders wants to submit nominees for inclusion in our proxy materials for the 2019 Annual Meeting pursuant to the proxy access provisions of our Bylaws, our Bylaws provide that the stockholder or group of stockholders must provide timely written notice to our Corporate Secretary no later than the close of business on June 3, 2019.


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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item will be included under the caption “Directors, Executive Officers, and Corporate Governance” in our proxy statement for the 2019 Annual Meeting to be filed with the SEC within 120 days of the fiscal year ended March 29, 2019 (the 2019 Proxy Statement) and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this item will be included under the caption “Executive Compensation” in our 2019 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be included under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in our 2019 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included under the caption “Certain Relationships and Related Transactions, and Director Independence” in our 2019 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this item will be included under the caption “Principal Accountant Fees and Services” in our 2019 Proxy Statement and is incorporated herein by reference.

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PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)
1. Financial Statements
Upon written request, we will provide, without charge, a copy of this annual report, including the Consolidated Financial Statements and financial statement schedule. All requests should be sent to:
Symantec Corporation
Attn: Investor Relations
350 Ellis Street
Mountain View, California 94043
(650) 527-8000
The following documents are filed as part of this report:
 
 
Page
1.
Consolidated Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
 
2.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Symantec Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Symantec Corporation and subsidiaries (the Company) as of March 29, 2019 and March 30, 2018, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended March 29, 2019 and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of March 29, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 29, 2019 and March 30, 2018, and the results of their operations and their cash flows for each of the years in the three-year period ended March 29, 2019, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 29, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue from contracts with customers in fiscal year 2019 due to the adoption of Accounting Standards Update 2014-09 “Revenue from Contracts with Customers (Topic 606)”.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting under Item 9A. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/   KPMG LLP
We have served as the Company’s auditor since 2002.
Santa Clara, California
May 24, 2019

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SYMANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except par value per share amounts)
 
March 29, 2019
 
March 30, 2018
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
1,791

 
$
1,774

Short-term investments
252

 
388

Accounts receivable, net
708

 
809

Other current assets
435

 
522

Total current assets
3,186

 
3,493

Property and equipment, net
790

 
778

Intangible assets, net
2,250

 
2,643

Goodwill
8,450

 
8,319

Other long-term assets
1,262

 
526

Total assets
$
15,938

 
$
15,759

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Accounts payable
$
165

 
$
168

Accrued compensation and benefits
257

 
262

Current portion of long-term debt
491

 

Contract liabilities
2,320

 
2,368

Other current liabilities
533

 
372

Total current liabilities
3,766

 
3,170

Long-term debt
3,961

 
5,026

Long-term contract liabilities
736

 
735

Deferred income tax liabilities
577

 
592

Long-term income taxes payable
1,076

 
1,126

Other long-term liabilities
84

 
87

Total liabilities
10,200

 
10,736

Commitments and contingencies (Note 16)


 


Stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value: 1 shares authorized; 0 shares issued and outstanding

 

Common stock and additional paid-in capital, $0.01 par value: 3,000 shares authorized; 630 and 624 shares issued and outstanding as of March 29, 2019 and March 30, 2018, respectively
4,812

 
4,691

Accumulated other comprehensive income (loss)
(7
)
 
4

Retained earnings
933

 
328

Total stockholders’ equity
5,738

 
5,023

Total liabilities and stockholders’ equity
$
15,938

 
$
15,759

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

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SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
 
Year Ended
 
March 29, 2019
 
March 30, 2018
 
March 31, 2017
Net revenues
$
4,731

 
$
4,834

 
$
4,019

Cost of revenues
1,050

 
1,032

 
853

Gross profit
3,681

 
3,802

 
3,166

Operating expenses:
 
 
 
 
 
Sales and marketing
1,493

 
1,593

 
1,459

Research and development
913

 
956

 
823

General and administrative
447

 
574

 
564

Amortization of intangible assets
207

 
220

 
147

Restructuring, transition and other costs
241

 
410

 
273

Total operating expenses
3,301

 
3,753

 
3,266

Operating income (loss)
380

 
49

 
(100
)
Interest expense
(208
)
 
(256
)
 
(208
)
Gain on divestiture

 
653

 

Other income (expense), net
(64
)
 
(9
)
 
46

Income (loss) from continuing operations before income taxes
108

 
437

 
(262
)
Income tax expense (benefit)
92

 
(690
)
 
(26
)
Income (loss) from continuing operations
16

 
1,127

 
(236
)
Income from discontinued operations, net of income taxes
15

 
11

 
130

Net income (loss)
$
31

 
$
1,138

 
$
(106
)
 
 
 
 
 
 
Income (loss) per share - basic:
 
 
 
 
 
Continuing operations
$
0.03

 
$
1.83

 
$
(0.38
)
Discontinued operations
$
0.02

 
$
0.02

 
$
0.21

Net income (loss) per share - basic
$
0.05

 
$
1.85

 
$
(0.17
)
 
 
 
 
 
 
Income (loss) per share - diluted:
 
 
 
 
 
Continuing operations
$
0.02

 
$
1.69

 
$
(0.38
)
Discontinued operations
$
0.02

 
$
0.02

 
$
0.21

Net income (loss) per share - diluted (1)
$
0.05

 
$
1.70

 
$
(0.17
)
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
Basic
632

 
616

 
618

Diluted
661

 
668

 
618

 
(1) Net income (loss) per share amounts may not add due to rounding.
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
 
Year Ended
 
March 29, 2019
 
March 30, 2018
 
March 31, 2017
Net income (loss)
$
31

 
$
1,138

 
$
(106
)
Other comprehensive income (loss), net of taxes:
 
 
 
 
 
Foreign currency translation adjustments:
 
 
 
 
 
Translation adjustments
(13
)
 
(4
)
 
(8
)
Reclassification adjustments for net loss included in net income (loss)

 
5

 

Net foreign currency translation adjustments
(13
)
 
1

 
(8
)
Unrealized gain (loss) on available-for-sale securities:
 
 
 
 
 
Unrealized gain (loss)
3

 
(5
)
 
(2
)
Reclassification adjustments for gain included in net income (loss)

 
(4
)
 

Net unrealized gain (loss) on available-for-sale securities
3

 
(9
)
 
(2
)
Other comprehensive loss from equity method investee
(1
)
 

 

Other comprehensive loss, net of taxes
(11
)
 
(8
)
 
(10
)
Comprehensive income (loss)
$
20

 
$
1,130

 
$
(116
)
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

45