Symantec’s Strategic Direction Presentation
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Symantec Widescreen Event Template 1 Symantec’s Strategic Direction and 3Q 2013 Earnings Presentation January 23, 2013 1 Welcome Helyn Corcos Vice President Investor Relations 2 3 2 1 3 3Q FY13 Earnings Highlight Strategic Direction and Operational Plan Questions & Answers Forward Looking Statements 4 This presentation contains statements regarding our intention to execute a new strategy, implement operational and organizational changes and our projected financial and business results, as well as our intention to return cash to shareholders through dividends and continued share buyback activity, which may be considered forward‐looking within the meaning of the U.S. federal securities laws. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from results expressed or implied in this presentation. Such risk factors include those related to: maintaining customer and partner relationships; the anticipated growth of certain market segments, particularly with regard to security and storage; the competitive environment in the software industry; changes to operating systems and product strategy by vendors of operating systems; fluctuations in currency exchange rates; the timing and market acceptance of new product releases and upgrades; the successful development of new products and integration of acquired businesses; and the degree to which these products and businesses gain market acceptance. Actual results may differ materially from those contained in the forward‐looking statements in this presentation. Additional information concerning these and other risk factors is contained in the Risk Factors section of our Form 10‐K for the year ended March 30, 2012 and in our Form 8-K filed on June 11, 2012. Any information regarding pre-release Symantec offerings, future updates or other planned modifications is subject to ongoing evaluation by Symantec and therefore subject to change. This information is provided without warranty of any kind, express or implied. Customers who purchase Symantec offerings should make their purchase decision based upon features that are currently available. We assume no obligation to update any forward‐looking information contained in this presentation. Use of GAAP and Non-GAAP Financial Information 5 Our results of operations have undergone significant changes due to a series of acquisitions, the impact of SFAS 123(R), impairment charges and other corporate events. To help our readers understand our past financial performance and our future results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non‐GAAP financial measures. The method we use to produce non‐GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Our non‐GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our non‐GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non‐GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Investors are encouraged to review the reconciliation of our non‐GAAP financial measures to the comparable GAAP results, which is attached to the financial review presentation, and which can also be found, along with other financial information, on the investor relations page of our website at www.symantec.com/invest. 6 3Q13 Earnings Highlights James Beer EVP and Chief Financial Officer Better than Expected Results for 3Q13 7 Revenue Drivers Constant currency adjusted revenue grew 5% Y/Y Organic, constant currency revenue grew 4% Y/Y Strength in EMEA, Information Management and Trust Services License, constant currency revenue grew 8% Y/Y driven by strength in Information Management solutions Subscription, constant currency revenue grew 5% and maintenance revenue grew 5% Y/Y… Enterprise, constant currency subscription revenue grew 12% Profitability Drivers Operating margin and EPS driven by higher revenue and lower spending 3Q’13 3Q’12 As Reported Growth Y/Y Revenue $1,791m $1,715m 4% Non-GAAP Operating Margin 25.6% 26.2% -60 bp Non-GAAP EPS $0.45 $0.42 7% Solid Revenue Results by Segment 8 3Q’13 3Q’12 FX Adjusted Growth Y/Y Consumer $530m $525m 2% Security and Compliance $527m $510m 4% Storage and Server Management $666m $618m 9% Services $68m $62m 9% Consumer… up-selling to premium suites and growing emerging backup, NortonLive services and mobile Security and Compliance… strength in Trust Services, MSS and Encryption Storage and Server Management Information Management revenue grew 12% Y/Y driven by double digit growth in NetBackup Storage Management revenue grew 1% Y/Y as customers continue to deploy more mission critical applications on Linux and virtualized infrastructures Services… driven by Business Critical Services 8 Strong Cash Generation 9 3Q’13 3Q’12 As Reported Growth Y/Y Cash From Operating Activities $463m $403m 15% Cash, Cash Equivalents and Short Term Investments Balance $4,252m $2,380m 79% 43% of cash on shore… ~ 26% excluding $1 billion allocated to maturity of June 2013 convertible notes $200m to repurchase 11m shares at average price $17.94… $283m remaining in the current board authorized share repurchase plan 10 ~73% or $1.26b of March quarter revenue coming from balance sheet Guidance assumes FX rate of $1.32 per Euro 24.6% effective tax rate and 702m CSE… R&D tax credit drives down our tax rate in 4Q13 4Q FY13 Guidance 4Q’13 Expected Y/Y Growth FX Adjusted Growth Y/Y Revenue $1.70 to $1.74b 1 – 4% 1 – 3% GAAP EPS 18¢ to 19¢ - (75 – 76)% na Non-GAAP EPS 37¢ to 38¢ - 2.6 – 0% na Deferred Revenue $4.01 to $4.07b 1 – 2% 1 – 3% 10 11 VIDEO 12 Symantec 4.0 - Strategy Steve Bennett President and Chief Executive Officer Symantec 4.0 Financial Theme 13 Strategy and Operating Plan Agenda 14 Learning Journey Customers and Market Overview Offering Strategy Go-to-Market Strategy Organization Resource Allocation Financial View 15 Culver City Springfield Heathrow Dublin Pune Chennai Chengdu Beijing Tokyo Sydney Over 8000 employees in town hall and small team meetings Roseville London Paris Reading Barcelona Singapore Washington DC New York Baltimore Boston More than 1300 customers, including presenting at VISION Barcelona 36 Analyst meetings across all regions, speaking to Gartner, IDC, Forrester and others 78 financial analysts including attending Citi Investor Conference 251 partners at the Baltimore Partner Exchange Meetings with various House and Senate members, including General Alexander and presenting to over 900 attendees at the Symantec Government Symposium Mountain View Key Learnings… Strengths 16 Strong Assets Deep Expertise and Capability Portfolio of Leading Products Strong Brands Reach and Installed Base Key Learnings… Opportunities 17 Products and Services GTM and Global Strategy People and Organization 18 Evolution 19 A Revolution Market Trends, Competitive Landscape and Product Offerings 20 Stephen Gillett COO Francis deSouza President of Products & Services Voice of the Customer 21 Global economic uncertainty and enterprise security Full Emergence of Digital and Social Media Explosive data and intelligence growth Enterprise IT will need to adapt and evolve Global CIO’s continue to be concerned global economic conditions and enterprise security threats. Full emergence of Digital & Social media real and present issue: Arab Spring, Wikileaks, IP one tweet away. Strategic big data: Organizations: Organizations need to focus on non-traditional data types and external data. Hadoop & noSQL gain momentum. Big data meets social. Social graph, intent graph, consumption graph, interest graph and mobile graph. Actionable Analytics: Cloud, packaged analytics and big data accelerate in 2013 +. Can now perform analytics and simulation on every action taken in business. Mobile devices will have access to the data, supporting business decision making. Enterprise App Stores: By 2014, there will be more than 70 billion mobile app downloads from app stores every year. Also by 2014, most organizations will deliver mobile apps to workers via private application stores. 21 22 Enterprise Security Redefined boundaries between consumer and business Enterprise attack sophistication is increasing Technology realm transfer Dispersion of authority Hybrid IT and Cloud Computing: Evolves role of IT. IT departments must play bigger role. Mobility: Smartphones & Tablets are driving the next wave of computing which are also expanding the surface protection needed. Enterprises are adjusting to this new reality and you see a convergence of traditional consumer realm technologies permeating the enterprise (e.g. mobile POS, Smart Meters) and traditional enterprise IT being adopted by consumers (e.g. encryption, identity management). We have all heard about the Consumerization of IT, but there is also an equal and even more powerful force with the ITization of the consumer. Gartner predicts CMOs by 2017 will control more IT spend than CIO’s. 22 23 Countries and Government Governments are responsible for protecting their nation's critical infrastructure Attacks on citizens and institutions increasing in complexity Cyber has become the fifth domain for warfare — after land, sea, air, and space Governments around the world are responsible for protecting their nation's critical infrastructure — an infrastructure that is largely owned and managed by the private sector. Governments must defend their cyber domain. In a situation where the mission cannot be cut or shortchanged, governments must deal with the economic climate by cutting non-mission oriented services, e.g., IT. Governments are trying to bring more services to the citizens (automated income tax returns, driver's licenses, medicaid/medicare information) -- while protecting the privacy of the citizens and the integrity of the data. Convergence of threats between individuals, corporations and governments are increasing. Interconnected world. 23 24 Changing Landscape and Market Trends Internet of “Things” Mobility Computing Ecosystems Digital & Social Life IOT: Original www content was from people (clicking, recording, taking pics). Not efficient. New era is devices connected directly, embedded sensors. RFID, 2D BarCodes, NFC. In 2012, over 50% of internet connections are not people but devices. Mobility: In 2013, mobile devices will pass PCs to be most common Web access tools. By 2015, over 80% of handsets in mature markets will be smart phones. By 2015, tablet shipments will be 50% of laptop shipments. Mobile commerce exploding. DL & Computing Ecosystems: Personal Cloud will be center of digital lives, for apps, content and preferences. Sync across devices. Services and information security become more important; devices become less important. 24 Changing Market Requires a New Model For Protection 25 Corporate Network Data Center PCs 26 Specialist Integrated Stack Providers Startups 27 How We Win Best of Need Scale Integration Cross Platform We Will Strengthen Our Offerings: More R&D 28 More R&D Better and Easier Customer Experience Right-for-Me Offerings New Offerings Better meet customer needs…faster organic growth We Will Strengthen Our Offerings: More R&D 29 Leverage Innovation Zero-based mindset Encryption More Innovation Whole company scope Resource best growth opportunities Eliminate redundancy Increase R&D spend Redeploy and hire Advanced research File System DLP Security Intelligence Endpoint Protection Centers of Excellence More R&D Better and Easier Customer Experience Right-for-Me Offerings New Offerings Better meet customer needs…faster organic growth We Will Strengthen Our Offerings: Better and Easier Customer Experience 30 Focus product teams on end-to-end customer use experience Simplified licensing Self-healing technology To Use, Upgrade and Maintain To Get Help and Support Simplified support options Expanded support channels ex. Web, chat, community support Knowledge management More R&D Better and Easier Customer Experience Right-for-Me Offerings New Offerings Better meet customer needs…faster organic growth We Will Strengthen Our Offerings: Right-For-Me Offerings 31 Tailored Offerings Choice of Deployment Option Consumers Small Businesses Large Enterprise Governments Software Appliance Cloud Hybrids Geographies Specific Industries…verticals More R&D Better and Easier Customer Experience Right-for-Me Offerings New Offerings Better meet customer needs…faster organic growth New Offerings Will Address Broader Customer Needs 32 Integrated, modular, solving bigger jobs Customer can buy existing products OR new integrated offerings Turn on new capability as needed More R&D Better and Easier Customer Experience Right-for-Me Offerings New Offerings Better meet customer needs…faster organic growth Symantec Addresses Unmet, Underserved Needs In Three Areas 33 Make it simple for me to be productive & protected at home and work Keep my business safe and compliant Keep my business information and applications up and running User Productivity & Protection Information Security Information Management: Availability & Scalability How Current Offerings Map to Customer Jobs Current Offering Examples Norton 360 Norton Mobile Security Norton Data Services Endpoint Protection Enterprise Mobility Endpoint Encryption User Authentication Managed Security Services Data Loss Prevention Mail and Web Security O3 Control Compliance Suite Critical System Protection Trust Services Storage Foundation HA NetBackup Enterprise Vault/eDiscovery Backup Exec BE.cloud FileStore User Productivity & Protection Information Security Information Management: Availability & Scalability 34 We Will Deliver New Integrated, Modular Offerings Over the Next 6-24 Months User Productivity & Protection Information Security Information Management: Availability & Scalability 35 New Higher-Value Offerings Mobile Workforce Productivity Norton Protection Norton Cloud Information Security Service Identity/Content-aware Security Gateway Data Center Security Business Continuity Integrated Backup Cloud-based Info Management Object Storage Platform Enables authorized users to access corporate resources from any corporate or personal mobile device, PC or Mac while protecting data, applications, devices and identities 36 New Higher-Value Offering: Mobile Workforce Productivity Employee Owned/BYOD Corporate Owned Enterprise Applications Cloud Services Endpoint protection Corporate Personal Mobile device management Mobile container Mobile application Management Enterprise app store Endpoint encryption Endpoint DLP User authentication Integrated Solves an important customer problem and builds competitive advantage 37 Provides visibility into, and comprehensive protection from, advanced threats leveraging Symantec and 3rd-party products New Higher-Value Offering: Information Security Service Enterprise Apps Symantec Security Offerings 3rd-Party Products and Tools Symantec Global Security Intelligence Network Analysis Correlation Visibility Dashboard Threat Detection Prioritization and Workflow Incident Management Risk Management Integrated Solves an important customer problem and builds competitive advantage 38 New Higher-Value Offering: Business Continuity Applications Platforms Storage Windows Backup Unix/Linux Backup Virtual Backup Clustering Virtual HA Replication Disaster Recovery Service Orchestration Integrated Solves an important customer problem and builds competitive advantage Delivers high availability, performance, and scalability for business applications in virtual, private cloud environments Examples of New or Expanded Centers of Excellence 39 Cloud Platform & Capabilities Hardware Supply Chain Information Fabric Global Security Intelligence Network Solve Bigger Problems Better and Easier Right-for-Me Offerings How This Benefits Customers How They Want to Buy 40 Evaluated entire portfolio Two key criteria Stand-alone offering or part of a larger, modular future offering Asset to solve new, important customer problems? 41 Symantec 4.0 Portfolio Strategy Portfolio review continues over time Will deal with anything that doesn’t fit Nothing to announce today 42 Applied “Right for GEO” manner Customer Segment Commercial Global Consumer and Small Business Verticals Enterprise Global & Enterprise… Symantec direct + Customer led channel involvement New Verticals business… Telco/ISPs, SIs, XaaS, National Public Sector Channel-led… dedicated Symantec team supports Combination of direct through e-business and channel-led Simplified Go-to-Market (GTM) Strategy 43 Expanded high quality/ lower cost models Telesales e-Business In product New business growth Field paid only on new over time Separate renewals org New global sales and partner enablement organization New Marketing and Sales Capabilities New, enhanced partner program More selective based on capabilities Better enablement & Symantec support New performance-based incentives Expanded Marketing Total customer experience New centers of excellence Strategic Pricing & Licensing Offerings Customers Beyond Current Point Products to Integrated Offerings Beyond Short-Term Bookings to Lasting Customer Value Organizational Strategy 44 July 25th to Present Common company level objectives Financial results + customers + partners + employees New staff performance objectives Changed staff meeting cycle Trained 95% of directors and VPs on SYMC 4.0 leadership Today Symantec 4.0 strategy and plan New org structure and leadership team New organization simplification initiative Splitting Chairman and CEO roles New Organization Design: Objectives 45 Improve Teamwork Increase Customer Focus Functionalize Upgrade Growth Capability Office of the CEO Senior leadership decision on talent + collaboration skills Consumer & business world merging Customer jobs vs. segments Break up BU structure that created silos Global in thinking and actions… GEO leaders Upgrade process capability Consolidation for leverage Centers of excellence Eliminate redundancies Right talent… Fewer, bigger roles for our best and brightest Marketing Sales process management IT Cloud Ops HR Strengthen leadership… Improve Organic Growth Capabilities… Minimize Execution Risk Creation of the Office of the CEO 46 New Roles or Major Changes Office of the CEO COO President Products & Services CFO 46 46 New Structure 11 Direct Reports to the CEO 47 New Roles or Major Changes Product & Services COO Verticals Business Strategic Sales NA Enterprise Sales EMEA APJ CFO HR Legal Strategy & Corp Dev CEO 47 47 President of Products and Services Organization CEO New Roles or Major Changes Products Mobile Information Security Information Management CTO Business Critical Services Enterprise & Norton Endpoint PD Education Enterprise & Norton Endpoint PM Global/Vertical Offering Integration 48 49 COO Organization CEO COO Consumer Sales Renewals e-Business CIO Cloud Ops CMO Sales Process & Enablement Customer Care Communications New Roles or Major Changes 50 Operational Plan James Beer Chief Financial Officer Opportunities to Drive Efficiency & Redeploy Resources 51 Company-wide Opportunities Drove Duplication and Complexity Partially integrated acquisitions Siloed organization; redundancy Too much management People doing the same thing in each silo as well as 51 Opportunities to Drive Efficiency & Redeploy Resources 52 Product Development 2 Significant duplication today… 24 cloud service platforms and 54 data center locations 1 Consolidated $1.8 billion spending pool 3 Align point product spending with market opportunity 52 Opportunities to Drive Efficiency & Redeploy Resources 53 Sales & Marketing 1 Simplify pricing & licensing … 31 price lists and 41 license meters 5 Field sales real estate consolidation 3 4 Streamline route to market structure … 23 distinct sales channels 6 Fewer individualized compensation plans 2 Build high performance and cost effective renewals team Consolidate worldwide marketing spend Build effective renewals team with greater accountability (better performance more cost effective), higher renewals, more cost effective 53 Opportunities to Drive Efficiency & Redeploy Resources Cross-company 54 Management ranks have expanded steadily High cost Slow decision making, removed from front line reality Organization Simplification Initiative Move from 10 layers of management to 6-7 Move from average of 4 spans to ~8 1 2 Use the same format. 54 Existing offerings New integrated offerings Product delivery capabilities Cloud infrastructure platform Hardware Supply Chain Information Fabric Global security intelligence network IT a strategic enabler Insource some activity Applications and infrastructure HR… building talent and organizational capability Process capability Marketing Pricing resources Customer analytics Brand building Sales Process improvements Renewals team e-Business expansion 55 Investments to Build Organic Growth Engine Product Development General & Administrative Sales & Marketing People Infrastructure Products G&A > HR…invest in building our talent and capability 55 FY12A FY17E Median High R&D 14% 16% 13% 17% S&M 41% 27% 28% 50% G&A 6% 5% 8% 13% 56 Expense to Revenue Ratios Benchmark1 Invest to drive faster organic growth Symantec 1Benchmark includes 3 year averages for BMC, CA, CVLT, CRM, ORCL, MSFT, SAP, INTU, CTXS, ADBE Not all same colors. All FY17 greens. Take off benchmark box for G&A. Take off Low benchmark. Investing in what is right for us to do. Invest to align with our strategy to drive faster organic growth. Should we have a note that shows who is part of the benchmark. 56 Commitment to 5%+ organic revenue growth and 30%+ operating margins Organic revenue… 5%+ CAGR FY15-17 Operating margins… 30% goal in FY15 Financial Plan 57 FY14 - A Transition Year… Expect 0-2% revenue growth Operating margins grow 200 bps Free cash flow impacted by ~$275 million severance payments Incremental CapEx $100-$150 million 57 Capital Allocation 58 CapEx and acquisitions that support strategy + meet IRR hurdles Return excess cash to shareholders 15%+ IRR hurdle Target returning 50% of free cash flow longer-term Over time, ~50/50 balance between dividends and repurchases Strategy Strategy Elements 58 Capital Allocation 59 Initiating dividend with targeted yield of 2.5% in 1Q14 New $1B share repurchase authorization Continue opportunistic buybacks Expect to return $800m Will invest $375-425m for severance and CapEx investments Announcing Today FY14 59 60 Symantec 4.0 Operating Theme… Better and Easier How we play… As a Team… Making High Quality, Timely Decisions Symantec-wide objectives and performance metrics One Symantec strategy with cascading organizational strategies and operational priorities Individual accountability… to their role and the team What we do… People and Partnerships… Internal and external… creating customer value How we think… Innovation + Execution…. Global and Local… Big and Small Innovation everywhere with special focus on customer driven and technology innovation Excellence in execution through people, process and technology Act big where there is value… act small everywhere else Eliminate complexity not valued by customers or partners Create and leverage global centers of excellence How we organize… Simplified and Streamlined Inverted triangle organizational philosophy Lean and effective management structure Culture of learning and sharing to make us better Symantec 4.0 Company Theme 61 Enabling people, businesses and countries… to protect and manage their digital information… so they can focus their time and energy achieving their aspirations 62 Q&A