UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 the registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		77-0181864 (I.R.S. employer Identification no.)
350 Ellis Street, Mountain View, California (Address of principal executive offices)		94043 (Zip Code)

     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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Shares of Symantec common stock, $0.01 par value per share, outstanding as of July 30, 2010: 789,341,729 shares.

 

 

SYMANTEC CORPORATION
FORM 10-Q
Quarterly Period Ended July 2, 2010
TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3
Condensed Consolidated Balance Sheets as of July 2, 2010 and April 2, 2010			3
Condensed Consolidated Statements of Income for the three months ended July 2, 2010 and July 3, 2009			4
Condensed Consolidated Statements of Cash Flows for the three months ended July 2, 2010 and July 3, 2009			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. Quantitative and Qualitative Disclosures about Market Risk			30
Item 4. Controls and Procedures			30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			30
Item 1A. Risk Factors			30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			31
Item 6. Exhibits			32
Signatures			34
EX-2.01
EX-10.01
EX-10.02
EX-10.03
EX-10.04
EX-31.01
EX-31.02
EX-32.01
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SYMANTEC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

		July 2,				April 2,
		2010				2010 *
		(Unaudited)
		(In millions)
ASSETS
Current assets:
Cash and cash equivalents		$	2,726			$	3,029
Short-term investments			13				15
Trade accounts receivable, net			573				856
Inventories			22				25
Deferred income taxes			172				176
Other current assets			249				250
Total current assets			3,755				4,351
Property and equipment, net			935				949
Intangible assets, net			1,172				1,179
Goodwill			4,860				4,605
Investment in joint venture			51				58
Other long-term assets			93				90
Total assets		$	10,866			$	11,232
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	213			$	214
Accrued compensation and benefits			284				349
Deferred revenue			2,650				2,835
Convertible senior notes			1,044				—
Income taxes payable			46				35
Other current liabilities			293				338
Total current liabilities			4,530				3,771
Long-term convertible senior notes			853				1,871
Long-term deferred revenue			348				371
Long-term deferred tax liabilities			186				195
Long-term income taxes payable			358				426
Other long-term obligations			53				50
Total liabilities			6,328				6,684
Commitments and contingencies
Stockholders’ equity:
Common stock			8				8
Additional paid-in capital			8,813				8,990
Accumulated other comprehensive income			165				159
Accumulated deficit			(4,448	)			(4,609	)
Total stockholders’ equity			4,538				4,548
Total liabilities and stockholders’ equity		$	10,866			$	11,232

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

SYMANTEC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

		Three Months Ended
		July 2,				July 3,
		2010				2009 *
		(Unaudited)
		(In millions, except per share data)
Net revenue:
Content, subscription, and maintenance		$	1,248			$	1,209
License			185				223
Total net revenue			1,433				1,432
Cost of revenue:
Content, subscription, and maintenance			217				209
License			3				5
Amortization of acquired product rights			45				98
Total cost of revenue			265				312
Gross profit			1,168				1,120
Operating expenses:
Sales and marketing			573				559
Research and development			208				221
General and administrative			92				89
Amortization of other purchased intangible assets			61				62
Restructuring and transformation			40				34
Loss and impairment of assets held for sale			—				3
Total operating expenses			974				968
Operating income			194				152
Interest income			2				2
Interest expense			(33	)			(32	)
Other income, net			1				6
Income before income taxes and loss from joint venture			164				128
(Benefit) provision for income taxes			(4	)			42
Loss from joint venture			7				12
Net income		$	161			$	74
Net income per share — basic		$	0.20			$	0.09
Net income per share — diluted		$	0.20			$	0.09
Weighted-average shares outstanding — basic			796				816
Weighted-average shares outstanding — diluted			805				827

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

SYMANTEC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three Months Ended
		July 2, 2010				July 3, 2009 *
		(Unaudited)
		(In millions)
OPERATING ACTIVITIES:
Net income		$	161			$	74
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			167				221
Amortization of discount on senior convertible notes			27				25
Stock-based compensation expense			35				49
Deferred income taxes			10				11
Income tax benefit from the exercise of stock options			(3	)			(1	)
Excess income tax benefit from the exercise of stock options			(1	)			(3	)
Loss from joint venture			7				12
Other			2				6
Net change in assets and liabilities, excluding effects of acquisitions:
Trade accounts receivable, net			285				229
Inventories			3				4
Accounts payable			4				16
Accrued compensation and benefits			(68	)			(90	)
Deferred revenue			(177	)			(142	)
Income taxes payable			(76	)			(19	)
Other assets			—				(22	)
Other liabilities			(41	)			1
Net cash provided by operating activities			335				371
INVESTING ACTIVITIES:
Purchase of property and equipment			(52	)			(54	)
Proceeds from sale of property and equipment			—				2
Cash (payments for) returned from acquisitions, net of cash acquired			(362	)			3
Purchase of equity investments			(6	)			(16	)
Purchases of available-for-sale securities			—				(2	)
Proceeds from sales of available-for-sale securities			2				183
Net cash (used in) provided by investing activities			(418	)			116
FINANCING ACTIVITIES:
Net proceeds from sales of common stock under employee stock benefit plans			10				11
Excess income tax benefit from the exercise of stock options			1				3
Tax payments related to restricted stock issuance			(17	)			(18	)
Repurchase of common stock			(200	)			(123	)
Repayment of other long-term liability			(1	)			(1	)
Net cash used in financing activities			(207	)			(128	)
Effect of exchange rate fluctuations on cash and cash equivalents			(13	)			40
Change in cash and cash equivalents			(303	)			399
Beginning cash and cash equivalents			3,029				1,793
Ending cash and cash equivalents		$	2,726			$	2,192

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

SYMANTEC CORPORATION

Note 1. Basis of Presentation

     The condensed consolidated financial statements of Symantec Corporation (“we,” “us,” “our,” and “the Company” refer to Symantec Corporation and all of its subsidiaries) as of July 2, 2010 and April 2, 2010, and for the three months ended July 2, 2010 and July 3, 2009, have been prepared in accordance with the instructions on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In accordance with those rules and regulations, we have omitted certain information and notes normally provided in our annual consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of our financial position and results of operations for the interim periods. The condensed consolidated financial statements for the three months ended July 3, 2009 have been adjusted for the impact of our joint venture’s adoption of new authoritative guidance on revenue recognition during the fourth quarter of fiscal 2010 as of the first quarter of fiscal 2010. These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended April 2, 2010. The results of operations for the three months ended July 2, 2010 are not necessarily indicative of the results expected for the entire fiscal year. All significant intercompany accounts and transactions have been eliminated.

Fiscal Year End

     We have a 52/53-week fiscal accounting year ending on the Friday closest to March 31. The three months ended July 2, 2010 and July 3, 2009 both consisted of 13 weeks. Our 2011 fiscal year consists of 52 weeks and ends on April 1, 2011.

Significant Accounting Policies

     There have been no changes in our significant accounting policies for the three months ended July 2, 2010 as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 2, 2010.

Recently Adopted Authoritative Guidance

     In the first quarter of fiscal 2011, we adopted new authoritative guidance which changes the model for determining whether an entity should consolidate a variable interest entity (“VIE”). The standard replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a VIE with an approach focused on identifying which enterprise has the power to direct the activities of a VIE and the obligation to absorb losses of the entity or the right to receive the entity’s residual returns. The adoption of this guidance did not have an impact on our consolidated financial statements for the three months ended July 2, 2010.

Note 2. Fair Value Measurements

     We measure assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

	•		Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
	•		Level 2: Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	•		Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

     All of our financial instruments are measured and recorded at fair value. For certain financial instruments, including cash and cash equivalents, accounts payable and other current liabilities, the carrying value approximates the fair value due to the relative short maturity of these instruments. For our other financial instruments and/or financial assets, specifically short-term investments, the fair value is determined using different assumptions as outlined above. Our equity investments ($28 million as of July 2, 2010) are carried at cost and measured at fair value when indicators of potential impairment exist. Our convertible senior notes and credit facility are carried at cost and fair value measurements are made on a nonrecurring basis.

Assets Measured and Recorded at Fair Value on a Recurring Basis

     The following table summarizes our assets that are measured at fair value on a recurring basis, by level, within the fair value hierarchy:

		As of July 2, 2010																As of April 2, 2010
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
		(In millions)
Cash equivalents:
Money market funds		$	1,856			$	—			$	—			$	1,856			$	2,046			$	—			$	—			$	2,046
Bank securities and deposits			—				199				—				199				—				216				—				216
Government securities			—				23				—				23				—				116				—				116
Total		$	1,856			$	222			$	—			$	2,078			$	2,046			$	332			$	—			$	2,378

     Level 1 available-for-sale securities are based on quoted market prices of the identical underlying security. Level 2 available-for-sale securities are priced using quoted market prices for similar instruments and nonbinding market prices that are corroborated by observable market data.

Note 3. Acquisitions

PGP Acquisition

     On June 4, 2010, we completed the acquisition of PGP Corporation (“PGP”), a nonpublic provider of email and data encryption software. In exchange for all of the voting equity interests of PGP, we paid a total purchase price of $306 million, excluding cash acquired. The results of operations of PGP are included since the date of acquisition as part of the Security and Compliance segment. Supplemental pro forma information for PGP was not material to our financial results and was therefore not included. For the three months ended July 2, 2010, we recorded acquisition-related transaction costs of $3 million, which were included in general and administrative expense.

     The following table presents the purchase price allocation included in our Condensed Consolidated Balance Sheet (in millions):

Net tangible assets (1)		$	7
Intangible assets (2)			74
Goodwill (3)			225
Total purchase price		$	306

GuardianEdge Acquisition

     On June 3, 2010, we completed the acquisition of a GuardianEdge Technologies, Inc. (“GuardianEdge”), a nonpublic provider of email and data encryption software. In exchange for all the voting equity interests, we paid a total purchase price of $73 million, excluding cash acquired. This includes $1 million in assumed equity awards at fair value. The results of operations of GuardianEdge are included since the date of acquisition as part of the Security and Compliance segment. Supplemental pro forma information for GuardianEdge was not material to our financial results and was therefore not included. For the three months ended July 2, 2010, we recorded acquisition-related transaction costs of $1 million, which were included in general and administrative expense.

     The following table presents the purchase price allocation included in our Condensed Consolidated Balance Sheet (in millions):

Net tangible assets (1)		$	3
Intangible assets (2)			30
Goodwill (3)			40
Total purchase price		$	73

Note 4. Goodwill and Intangible Assets

Goodwill

Goodwill is allocated by reportable segment as follows:

						Security and				Storage and Server
		Consumer				Compliance				Management				Services				Total
		(In millions)
Balance as of April 2, 2010		$	356			$	1,582			$	2,648			$	19			$	4,605
Goodwill acquired through business combinations (1)			—				265				—				—				265
Goodwill adjustments (2)			(10	)			—				—				—				(10	)
Balance as of July 2, 2010		$	346			$	1,847			$	2,648			$	19			$	4,860

     We apply a fair value based impairment test to the carrying value of goodwill and indefinite-lived intangible assets on an annual basis in the fourth quarter of each fiscal year or earlier if indicators of impairment exist. As of July 2, 2010, no indicators of impairment were identified.

Intangible assets, net

		As of July 2, 2010
														Weighted-Average
		Gross Carrying				Accumulated				Net Carrying				Remaining
		Amount				Amortization				Amount				Useful Life
		($ in millions)
Customer relationships		$	1,885			$	(1,030	)		$	855			4 years
Developed technology			1,683				(1,500	)			183			2 years
Definite-lived tradenames			131				(70	)			61			5 years
Patents			75				(56	)			19			3 years
Indefinite-lived tradenames			51				—				51			Indefinite
Indefinite-lived IPR&D			3				—				3			Indefinite
Total		$	3,828			$	(2,656	)		$	1,172			4 years

		As of April 2, 2010
														Weighted-Average
		Gross Carrying				Accumulated				Net Carrying				Remaining
		Amount				Amortization				Amount				Useful Life
		($ in millions)
Customer relationships		$	1,839			$	(973	)		$	866			4 years
Developed technology			1,635				(1,458	)			177			1 year
Definite-lived tradenames			128				(66	)			62			5 years
Patents			75				(54	)			21			3 years
Indefinite-lived tradenames			53				—				53			Indefinite
Total		$	3,730			$	(2,551	)		$	1,179			3 years

     During the three months ended July 2, 2010 and July 3, 2009, total amortization expense for intangible assets was $106 million and $160 million, respectively.

     Total future amortization expense for intangible assets that have definite lives, based on our existing intangible assets and their current estimated useful lives as of July 2, 2010, is estimated as follows (in millions):

Remainder of fiscal 2011		$	247
2012			311
2013			278
2014			134
2015			80
Thereafter			68
Total		$	1,118

Note 5. Supplemental Financial Information

Property and Equipment

		As of
		July 2,				April 2,
		2010				2010
		(In millions)
Property and equipment, net:
Computer hardware and software		$	1,273			$	1,237
Office furniture and equipment			186				185
Buildings			440				440
Leasehold improvements			236				245
			2,135				2,107
Less: accumulated depreciation and amortization			(1,345	)			(1,299	)
			790				808
Construction in progress			74				70
Land			71				71
Property and equipment, net:		$	935			$	949

     Depreciation expense was $59 million and $60 million for the three months ended July 2, 2010 and July 3, 2009, respectively.

Comprehensive Income

     The components of comprehensive income, net of tax, are as follows:

		Three Months Ended
		July 2,				July 3,
		2010				2009
		(In millions)
Net income		$	161			$	74
Foreign currency translation adjustments:
Translation adjustments arising during the period, net			6				5
Unrealized gain on available-for-sale securities			—				3
Other comprehensive income			6				8
Comprehensive income		$	167			$	82

Note 6. Restructuring

     Our restructuring costs and liabilities consist of severance, benefits, facilities and other costs. Severance and benefits generally include severance, outplacement services, health insurance coverage, effects of foreign currency exchange, and legal costs. Facilities costs generally include rent expense, less expected sublease income, and lease termination costs. Also included in Restructuring in our Condensed Consolidated Statements of Income are transition and transformation fees, consulting services, and other costs related to the outsourcing of back office functions. Restructuring expenses are included in the Other reporting segment.

     Charges for restructuring costs were $40 million and $34 million for the three months ended July 2, 2010 and July 3, 2009, respectively. These amounts include transition, transformation, consulting and other related costs of $5 million and $11 million for the three months ended July 2, 2010 and July 3, 2009, respectively. Transition and transformation related activities are expected to be substantially completed in the second half of fiscal 2011. Total remaining costs for transition and transformation activities are estimated to range from approximately $10 million to $15 million.

Restructuring Plans

     The following details restructuring plans that management has committed to and are not substantially completed:

2011 Restructuring Plan (“2011 Plan”)

     In the first quarter of fiscal 2011, management approved and initiated the following restructuring events:

•

Expansion of Consulting partner sales and delivery capabilities. This action was initiated to expand our partner eco-system to better leverage their customer reach and operational scale, which will result in a headcount reduction within our consulting services organization. It is intended for Symantec customers to have greater choice in their providers for technology services. These actions are expected to be substantially completed in the second half of fiscal 2011 and the total remaining costs for severance and benefits are estimated to range from $40 million to $50 million.

2010 Restructuring Plan (“2010 Plan”)

     In the fourth quarter of fiscal 2010, management approved and initiated the following restructuring events:

	•		Reduce operating costs through a workforce realignment. This action was initiated to more appropriately allocate resources to the Company’s key strategic initiatives. Charges related to this action are for severance and benefits. These actions are expected to be substantially completed in the second half of fiscal 2011. Total remaining costs for severance and benefits are estimated to range from $40 million to $60 million.
	•		Reduce operating costs through a facilities consolidation. This action was initiated to streamline our operations and deliver better and more efficient support to our customers and employees. Charges related to this action are for consolidating certain facilities in North America and Europe. These actions are expected to be substantially completed in the second half of fiscal 2011. Total remaining costs for facilities are estimated to range from $25 million to $35 million.

2008 Restructuring Plan (“2008 Plan”)

     In the third quarter of fiscal 2008, management approved and initiated the following restructuring events:

	•		Reduce operating costs through a worldwide headcount reduction. This action was initiated in the third quarter of fiscal 2008 and was substantially completed in the fourth quarter of fiscal 2008. Charges related to this action are for severance and benefits. Total remaining headcount reduction costs are not expected to be significant.
	•		Reduce operating costs, implement management structure changes, optimize the business structure, and discontinue certain products. Charges related to these actions are for severance and benefits. These actions were initiated in the third quarter of fiscal 2008 and are expected to be substantially completed in the second half of fiscal 2011. Total remaining costs for the severance and benefits are estimated to be up to $5 million.
	•		Outsource certain back office functions worldwide. Charges related to these actions are primarily for severance and benefits. These actions were initiated in the second quarter of fiscal 2009 and are expected to be substantially completed in the second half of fiscal 2011. Total remaining costs for severance and benefits are expected to range from $5 million to $10 million.

Acquisition-related Plans

     As a result of business acquisitions, management may deem certain job functions to be redundant and facilities to be in excess either at the time of acquisition or for a period of time after the acquisition in conjunction with our integration efforts. As of July 2, 2010, acquisition-related restructuring liabilities, primarily related to excess facility obligations at several locations around the world, are expected to be paid over the respective lease terms, the longest of which extends through fiscal 2018.

Restructuring Summary

		Restructuring Liability
						Costs,												Cumulative
		April 2,				Net of				Cash				July 2,				Incurred to
		2010				Adjustments(1)				Payments				2010				Date
		(In millions)
2011 Restructuring Plan:
Severance		$	—			$	4			$	(3	)		$	1			$	4
2010 Restructuring Plan:
Severance			20				17				(28	)			9				40
Facilities			—				12				(1	)			11				11
2008 Restructuring Plan:
Severance			3				—				(2	)			1				96
Acquisition-related Restructuring Plans:
Severance			1				2				—				3				4
Facilities			12				—				(4	)			8				27
Total		$	36			$	35			$	(38	)		$	33
Transition, transformation and other costs							5												54
Total Restructuring Charges						$	40
Balance Sheet:
Other current liabilities		$	28											$	20
Other long-term liabilities			8												13
		$	36											$	33

Note 7. Commitments and Contingencies

Indemnification

     As permitted under Delaware law, we have agreements whereby we agree to indemnify our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under these indemnification agreements is not limited; however, we have directors’ and officers’ insurance coverage that reduces our exposure and may enable us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.

     We provide limited product warranties, and the majority of our software license agreements contain provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that our software infringes the intellectual property rights of a third party. Historically, payments made under these provisions have been immaterial. We monitor the conditions that are subject to indemnification to identify if a loss has occurred.

Litigation

     For a discussion of our pending tax litigation with the Internal Revenue Service relating to the 2000 and 2001 tax years of Veritas, see Note 11.

     On July 7, 2004, a purported class action complaint entitled Paul Kuck, et al. v. Veritas Software Corporation, et al. was filed in the United States District Court for the District of Delaware. The lawsuit alleges violations of federal securities laws in connection with Veritas’ announcement on July 6, 2004 that it expected results of operations for the fiscal quarter ended June 30, 2004 to fall below earlier estimates. The complaint generally seeks an unspecified amount of damages. Subsequently, additional purported class action complaints have been filed in Delaware federal court, and, on March 3, 2005, the Court entered an order consolidating these actions and appointing lead plaintiffs and counsel. A consolidated amended complaint (“CAC”), was filed on May 27, 2005, expanding the class period from April 23, 2004 through July 6, 2004. The CAC also named another officer as a defendant and added allegations that Veritas and the named officers made false or misleading statements in press releases and SEC filings regarding the company’s financial results, which allegedly contained revenue recognized from contracts that were unsigned or lacked essential terms. The

defendants to this matter filed a motion to dismiss the CAC in July 2005; the motion was denied in May 2006. In April 2008, the parties filed a stipulation of settlement. On July 31, 2008, the Court held a final approval hearing and, on August 5, 2008, the Court entered an order approving the settlement. An objector to the fees portion of the settlement has lodged an appeal. In fiscal 2008, we recorded an accrual in the amount of $21.5 million for this matter and, pursuant to the terms of the settlement, we established a settlement fund of $21.5 million on May 1, 2008.

     We are also involved in a number of other judicial and administrative proceedings that are incidental to our business. Although adverse decisions (or settlements) may occur in one or more of the cases, it is not possible to estimate the possible loss or losses from each of these cases. The final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our financial condition or results of operations.

Note 8. Stock Repurchases

     The following table summarizes our stock repurchases:

		Three Months Ended
		July 2, 2010
		(In millions, except
		per share data)
Total number of shares repurchased			14
Dollar amount of shares repurchased		$	200
Average price paid per share		$	14.49
Range of price paid per share		$	13.81 to 15.31

     We have had stock repurchase programs in the past and have repurchased shares on a quarterly basis since the fourth quarter of fiscal 2004 under new and existing programs. Our most recent program was authorized by our Board of Directors on October 27, 2009 to repurchase up to $1 billion of our common stock. This program does not have an expiration date, and as of July 2, 2010, $547 million remained authorized for future repurchases.

Note 9. Segment Information

     As of July 2, 2010, our five reportable segments are the same as our operating segments and are as follows:

	•		Consumer. Our Consumer segment focuses on delivering our Internet security, PC tune-up, and backup products to individual users and home offices.
	•		Security and Compliance. Our Security and Compliance segment focuses on providing large, medium, and small-sized businesses with solutions for endpoint security and management, compliance, messaging management, and data loss prevention solutions. These products allow our customers to secure, provision, and remotely access their laptops, PCs, mobile devices, and servers. We also provide our customers with solutions delivered through our Software-as-a-Service (“SaaS”) security offerings.
	•		Storage and Server Management. Our Storage and Server Management segment focuses on providing large, medium and small-sized businesses with storage and server management, backup, archiving, and data protection solutions across heterogeneous storage and server platforms, as well as solutions delivered through our SaaS offerings.
	•		Services. Our Services segment provides customers with implementation services and solutions designed to assist them in maximizing the value of their Symantec software. Our offerings include consulting, business critical services, education, and managed security services.
	•		Other. Our Other segment is comprised of sunset products and products nearing the end of their life cycle. It also includes general and administrative expenses; amortization of acquired product rights, intangible assets, and other assets; goodwill impairment charges; charges such as stock-based compensation and restructuring; and certain indirect costs that are not charged to the other operating segments. Our provision for income taxes, loss from joint venture, and non-operating items, such as interest income and interest expense, are also allocated to this segment.

     The accounting policies of the segments are described in our Annual Report on Form 10-K for the fiscal year ended April 2, 2010 and have not changed as of July 2, 2010. There were no intersegment sales for the three months ended July 2, 2010.

Segment information

     The following table summarizes our operating segments:

										Storage and
						Security and				Server												Total
		Consumer				Compliance				Management				Services				Other				Company
		($ in millions)
Three months ended July 2, 2010:
Net revenue		$	473			$	340			$	524			$	96			$	—			$	1,433
Percentage of total net revenue			33	%			24	%			36	%			7	%			0	%			100	%
Operating income (loss)			225				78				240				4				(353	)			194
Operating margin of segment			48	%			23	%			46	%			4	%			*
Three months ended July 3, 2009:
Net revenue		$	447			$	336			$	553			$	96			$	—			$	1,432
Percentage of total net revenue			31	%			23	%			39	%			7	%			0	%			100	%
Operating income (loss)			223				78				261				5				(415	)			152
Operating margin of segment			50	%			23	%			47	%			5	%			*

Note 10. Stock-based Compensation

     The following table summarizes the total stock-based compensation expense recognized in our Condensed Consolidated Statements of Income:

		Three Months Ended
		July 2,				July 3,
		2010				2009
		(In millions, except per share data)
Cost of revenue — Content, subscription, and maintenance		$	3			$	4
Cost of revenue — License			1				1
Sales and marketing			14				18
Research and development			10				17
General and administrative			7				9
Total stock-based compensation expense			35				49
Tax benefit associated with stock-based compensation expense			(10	)			(13	)
Net stock-based compensation expense		$	25			$	36
Net stock-based compensation expense per share — basic		$	0.03			$	0.04
Net stock-based compensation expense per share — diluted		$	0.03			$	0.04

     The following table summarizes additional information pertaining to our stock-based compensation:

		Three Months Ended
		July 2,				July 3,
		2010				2009
		($ in millions, except per grant data)
Restricted stock units (“RSUs”)
Weighted-average fair value per grant		$	14.52			$	15.38
Fair value of RSUs granted			118				145
Total fair value of RSUs vested(1)			63				63
Total unrecognized compensation expense			197				132
Weighted-average remaining vesting period			3 years				3 years
Stock options
Weighted-average fair value per grant		$	3.99			$	5.16
Total intrinsic value of stock options exercised(1)			7				15
Total unrecognized compensation expense			45				80
Weighted-average remaining vesting period			3 years				2 years

Note 11. Income Taxes

     The effective tax rate was approximately (2) % and 33% for the three months ended July 2, 2010 and July 3, 2009, respectively.

     The tax expense for the three months ended July 2, 2010 was significantly reduced by the following benefits recognized in the first quarter of fiscal 2011: (1) $38.5 million additional tax benefit arising from the Veritas v. Commissioner Tax Court decision (see further discussion below), and (2) $10.5 million tax benefit from current quarter discrete events primarily related to tax settlements and lapses of statutes of limitations. The tax expense for the three months ended July 3, 2009 included a $7 million tax expense related to the U.S. tax treatment of certain stock based compensation under Xilinx v. Commissioner (see further discussion below).

     The provision for both three-month periods ended July 2, 2010 and July 3, 2009 otherwise reflects a forecast tax rate of 27%. The forecast tax rates for both periods presented reflect the benefits of lower-taxed foreign earnings and losses from our joint venture with Huawei (“joint venture”), domestic manufacturing incentives, and research and development credits (the U.S. federal R&D tax credit expired on December 31, 2009), partially offset by state income taxes.

     On May 27, 2009, the U.S. Court of Appeals for the Ninth Circuit overturned a 2005 U.S. Tax Court ruling in Xilinx v. Commissioner, holding that stock-based compensation related R&D must be shared by the participants of a R&D cost sharing arrangement. The Ninth Circuit held that related parties to such an arrangement must share stock option costs, notwithstanding the U.S. Tax Court’s finding that unrelated parties in such an arrangement would not share such costs. Symantec has a similar R&D cost sharing arrangement in place. The Ninth Circuit’s reversal of the U.S. Tax Court’s decision changed our estimate of stock option related tax benefits previously recognized under the authoritative guidance on income taxes. As a result of the Ninth Circuit’s ruling, we increased our liability for unrecognized tax benefits, recording a tax expense of approximately $7 million and a reduction of additional paid-in capital of approximately $30 million in the first quarter of fiscal 2010. On January 13, 2010, the Ninth Circuit Court of Appeals withdrew its issued opinion. On March 22, 2010, the Ninth Circuit Court of Appeals issued a revised decision affirming the decision of the Tax Court. The Ninth Circuit’s decision agreed with the Tax Court’s finding that related companies are not required to share such costs. As a result of the Ninth Circuit’s revised ruling, we released the liability established in our first quarter of fiscal 2010, which resulted in a $7 million tax benefit and increase of additional paid-in capital of approximately $30 million in the fourth quarter of fiscal 2010. For fiscal 2010, there was no net income tax expense impact.

     On March 29, 2006, we received a Notice of Deficiency from the IRS claiming that we owe $867 million of additional taxes, excluding interest and penalties, for the 2000 and 2001 tax years based on an audit of Veritas. On June 26, 2006, we filed a petition with the U.S. Tax Court protesting the IRS claim for such additional taxes. In the fourth quarter of fiscal 2007, we agreed to pay $7 million out of $35 million originally assessed by the IRS in connection with several of the lesser issues covered in the assessment. The IRS agreed to waive the assessment of penalties. During July 2008, we completed the trial phase of the Tax Court case, which dealt

with the remaining issue covered in the assessment. At trial, the IRS changed its position with respect to this remaining issue, which decreased the remaining amount at issue from $832 million to $545 million, excluding interest. We filed our post-trial briefs in October 2008 and rebuttal briefs in November 2008 with the U.S. Tax Court.

     On December 10, 2009, the U.S. Tax Court issued its opinion, finding that our transfer pricing methodology, with appropriate adjustments, was the best method for assessing the value of the transaction at issue between Veritas and its offshore subsidiary. The Tax Court judge provided guidance as to how adjustments would be made to correct the application of the method used by Veritas. We remeasured and decreased our liability for unrecognized tax benefits accordingly, resulting in a $78.5 million tax benefit in the third quarter in fiscal 2010. The Tax Court ruling is subject to appeal. In June 2010, we reached an agreement with the IRS concerning the amount of the adjustment related to the U.S. Tax Court decision. As a result of the agreement, we further reduced our liability for unrecognized tax benefits, resulting in an additional $38.5 million tax benefit in the first quarter in fiscal 2011.

     In July 2008, we reached an agreement with the IRS concerning our eligibility to claim a lower tax rate on a distribution made from a Veritas foreign subsidiary prior to the July 2005 acquisition. The distribution was intended to be made pursuant to the American Jobs Creation Act of 2004, and therefore eligible for a 5.25% effective U.S. federal rate of tax, in lieu of the 35% statutory rate. The final impact of this agreement is not yet known since this relates to the taxability of earnings that are otherwise the subject of transfer pricing matters at issue in the IRS examination of Veritas tax years 2002-2005 (see discussion below). To the extent that we owe taxes as a result of these transfer pricing matters in years prior to the distribution, we anticipate that the incremental tax due from this negotiated agreement will decrease. We currently estimate that the most probable outcome from this negotiated agreement will be that we will owe $13 million or less, for which an accrual has already been made.

     On December 2, 2009, we received a Revenue Agent’s Report from the IRS for the Veritas 2002 through 2005 tax years assessing additional taxes due. We agree with $30 million of the tax assessment, excluding interest, but will contest the other $80 million of tax assessed and all penalties. The unagreed issues concern transfer pricing matters comparable to the one that was resolved in our favor in the Veritas v. Commissioner Tax Court decision. On January 15, 2010, we filed a protest with the IRS in connection with the $80 million of tax assessed and currently await a response from the IRS.

     We continue to monitor the progress of ongoing tax controversies and the impact, if any, of the expected tolling of the statute of limitations in various taxing jurisdictions.

     We made a payment of $130 million to the IRS in May 2006 to address the Veritas matters described above for our 2000-2005 tax years.

Note 12. Earnings per Share

     The components of earnings per share are as follows:

		Three Months Ended
		July 2,				July 3,
		2010				2009
		(In millions, except per share data)
Net income per share — basic:
Net income		$	161			$	74
Net income per share — basic		$	0.20			$	0.09
Net income per share — diluted:
Net income		$	161			$	74
Net income per share — diluted		$	0.20			$	0.09
Weighted average outstanding common shares — basic			796				816
Shares issuable from assumed exercise of options			5				8
Dilutive impact of restricted stock and restricted stock units			4				3
Total weighted-average shares outstanding — diluted			805				827
Anti-dilutive weighted-average stock options			54				56

     The effect of the warrants issued and options purchased in connection with the convertible senior notes were excluded from earnings per share for the reasons discussed in our Annual Report on Form 10-K for the fiscal year ended April 2, 2010.

Note 13. Subsequent Event

     On May 19, 2010, we signed a definitive agreement to acquire certain assets of VeriSign, Inc. (“VeriSign”), a publicly-held US-based provider of internet authentication and domain naming services. The acquired assets relate to the authentication business of VeriSign. As part of the agreement, we will also acquire VeriSign’s 54% interest in VeriSign Japan KK. We anticipate a purchase price of approximately $1.28 billion to be paid in cash related to this acquisition, which is subject to regulatory approvals and other closing conditions. We expect the acquisition to close during the second quarter of our fiscal 2011.

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

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, or the Securities Act, and 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,” “projects,” and similar expressions. In addition, statements that refer to projections of our future financial performance, anticipated growth and trends in our businesses and in our industries, the anticipated impacts of acquisitions, 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, including those that we discuss in Risk Factors, set forth in Part I, Item 1A, of our annual report on Form 10-K for the fiscal year ended April 2, 2010. We encourage you to read that section carefully.

Fiscal Calendar

     We have a 52/53-week fiscal accounting year ending on the Friday closest to March 31. The three months ended July 2, 2010 and July 3, 2009 both consisted of 13 weeks.

OVERVIEW

Our Business

     Symantec is a global provider of security, storage, and systems management solutions that help businesses and consumers secure and manage their information. We provide customers worldwide with software and services that protect, manage and control information risks related to security, data protection, storage, compliance, and systems management. We help our customers manage cost, complexity, and compliance by protecting their IT infrastructure as they seek to maximize value from their IT investments.

Our Operating Segments

     Our operating segments are significant strategic business units that offer different products and services, distinguished by customer needs. Since the fourth quarter of fiscal 2008, we have operated in five operating segments: Consumer, Security and Compliance, Storage and Server Management, Services, and Other. For further descriptions of our operating segments, see Note 9 of the Notes to Condensed Consolidated Financial Statements in this quarterly report. Our reportable segments are the same as our operating segments.

Financial Results and Trends

     Revenue was flat for the three months ended July 2, 2010 as compared to the same period last year. During the end of the quarter sales were negatively impacted by the lengthening of procurement cycles driven by continued cautiousness among IT buyers. In particular, this affected sales of our storage management solutions given that these products are extensively utilized by our large enterprise customers. Offsetting this decline was growth in our Consumer business, driven by our multi-channel strategy. During the first quarter of fiscal 2011, we completed the transition to our internally-developed eCommerce platform for the company’s Norton-branded consumer products worldwide, excluding Japan. The fees we had previously paid to Digital River had been recorded as an offset to revenue; however, we incur expenses resulting from our eCommerce platform that appear as a cost of revenue and an operating expense. We continued to experience significantly higher year-over-year OEM placement fee payments resulting from an increase in PC unit shipments on which our products are included.

     Fluctuations in the U.S. dollar compared to foreign currencies unfavorably impacted our international revenue by approximately $23 million for the three months ended July 2, 2010 as compared to the same period last year. We are unable to predict the extent to which revenue in future periods will be impacted by changes in foreign currency exchange rates. If our level of international sales and expenses increase in the future, changes in foreign exchange rates may have a potentially greater impact on our revenue and operating results.

     Our net income was $161 million for the three months ended July 2, 2010 and was positively impacted by a decrease of $43 million in cost of revenue related to certain acquired product rights from our acquisition of Veritas becoming fully amortized during the first quarter of fiscal 2010. Net income was also positively impacted by $49 million of tax benefits primarily resulting from the reversal of accrued liabilities related to the Veritas Software tax assessment for 2000 and 2001.

Critical Accounting Estimates

     There have been no changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the three months ended July 2, 2010 as compared to those disclosed in 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 April 2, 2010.

Recently Adopted Authoritative Guidance

     Information with respect to Recently Adopted Authoritative Guidance is in Note 1 of Notes to Condensed Consolidated Financial Statements in this Form 10-Q, which information is incorporated herein by reference.

RESULTS OF OPERATIONS

Total Net Revenue

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Net revenue		$	1,433			$	1,432			$	1				0	%

     Net revenue was flat for the three months ended July 2, 2010, as compared to the same period last year, driven by the items discussed above under “Financial Results and Trends.”

     The changes in revenue for the three months ended July 2, 2010 are further described in the segment discussions that follow.

Content, subscription, and maintenance revenue

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Content, subscription, and maintenance revenue		$	1,248			$	1,209			$	39				3	%
Percentage of total net revenue			87	%			84	%

     Content, subscription, and maintenance revenue increased for the three months ended July 2, 2010, as compared to the same period last year, primarily as a result of strength in our Consumer segment where we completed the transition to our new eCommerce platform during the three months ended July 2, 2010 and continued to benefit from our broad range of distribution agreements with retailers and PC manufacturers. The growth in content, subscription, and maintenance revenue also reflects the expansion of our hosted services customer base, as well as for the reasons discussed above under “Financial Results and Trends.”

License revenue

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
License revenue		$	185			$	223			$	(38	)			(17	)%
Percentage of total net revenue			13	%			16	%

     License revenue decreased for the three months ended July 2, 2010, as compared to the same period last year, primarily due to the lengthening of procurement cycles driven by continued cautiousness among IT buyers, particularly with respect to the storage management products within the Storage and Server Management segment, as well as for the reasons discussed above under “Financial Results and Trends.”

Net revenue and operating income by segment

Consumer segment

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Consumer revenue		$	473			$	447			$	26				6	%
Percentage of total net revenue			33	%			31	%
Consumer operating income		$	225			$	223			$	2				1	%
Percentage of Consumer revenue			48	%			50	%

     Consumer revenue increased for the three months ended July 2, 2010, as compared to the same period last year, primarily due to increases in revenue from our premium security suite and for the reasons discussed above under “Financial Results and Trends.”

     Our electronic channel sales are derived from OEMs, subscriptions, upgrades, online sales, and renewals. For the three months ended July 2, 2010, electronic channel revenue increased as compared to the same period last year. Electronic sales accounted for approximately 83% of Consumer revenue for the three months ended July 2, 2010, as compared to 80% in the same period last year.

     Operating income for the Consumer segment was flat for the three months ended July 2, 2010, as compared to the same period last year. Total expenses for the segment increased, primarily as a result of higher OEM placement fees and costs associated with our new proprietary eCommerce platform.

Security and Compliance segment

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Security and Compliance revenue		$	340			$	336			$	4				1	%
Percentage of total net revenue			24	%			23	%
Security and Compliance operating income		$	78			$	78			$	—				0	%
Percentage of Security and Compliance revenue			23	%			23	%

     Security and Compliance revenue and operating income was flat for the three months ended July 2, 2010, as compared to the same period last year, as stronger sales in our Symantec Hosted Services and data loss prevention offerings were largely offset by weakness in the small and medium-sized businesses, as well as the items discussed above under “Financial Results and Trends.”

Storage and Server Management segment

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Storage and Server Management revenue		$	524			$	553			$	(29	)			(5	)%
Percentage of total net revenue			36	%			39	%
Storage and Server Management operating income		$	240			$	261			$	(21	)			(8	)%
Percentage of Storage and Server Management revenue			46	%			47	%

     Storage and Server Management revenue decreased for the three months ended July 2, 2010, as compared to the same period last year, primarily due to the lengthening of procurement cycles driven by continued cautiousness among IT buyers, particularly with respect to our storage management products, as well as the items discussed above under “Financial Results and Trends.”

     Operating income for the Storage and Server Management segment decreased for the three months ended July 2, 2010, as compared to the same period last year, as the decrease in revenue exceeded the decrease in expenses. The decrease in expenses was due to our ongoing focus on cost efficiency.

     Services segment

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Services revenue		$	96			$	96			$	—				0	%
Percentage of total net revenue			7	%			7	%
Services operating income		$	4			$	5			$	(1	)			(20	)%
Percentage of Services revenue			4	%			5	%

     Services revenue and operating income was consistent for the three months ended July 2, 2010, as compared to the same period last year.

     Other segment

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Other revenue		$	—			$	—			$	—				*
Percentage of total net revenue			0	%			0	%
Other operating loss		$	(353	)		$	(415	)		$	62				(15	)%
Percentage of Other revenue			*				*

     Revenue from our Other segment consists primarily of sunset products and products nearing the end of their life cycle. The operating loss of our Other segment includes general and administrative expenses; amortization of acquired product rights, other intangible assets, and other assets; charges such as stock-based compensation and restructuring; and certain indirect costs that are not charged to the other operating segments.

     Net revenue by geographic region

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Americas (U.S., Canada and Latin America)		$	796			$	784			$	12				2	%
Percentage of total net revenue			56	%			55	%
EMEA (Europe, Middle East, Africa)		$	408			$	433			$	(25	)			(6	)%
Percentage of total net revenue			28	%			30	%
Asia Pacific/Japan		$	229			$	215			$	14				7	%
Percentage of total net revenue			16	%			15	%

     Fluctuations in the U.S. dollar compared to foreign currencies unfavorably impacted our international revenue by $23 million.

     Americas revenue increased for the three months ended July 2, 2010, as compared to the same period last year, primarily due to increased revenue related to our Consumer segment, partially offset by decreased revenue related to our Storage and Server Management segment.

     EMEA revenue decreased for the three months ended July 2, 2010, as compared to the same period last year, primarily due to the impact of the change in foreign currency exchange rates and for the reasons discussed above under “Financial Results and Trends.”

     Asia Pacific Japan revenue increased for the three months ended July 2, 2010, as compared to the same period last year, primarily due to strength in our Consumer and Security and Compliance segments.

     Our international sales are and will continue to be a significant portion of our net revenue. As a result, net revenue will continue to be affected by foreign currency exchange rates as compared to the U.S. dollar. We are unable to predict the extent to which revenue in future periods will be impacted by changes in foreign currency exchange rates. If international sales become a greater portion of our total sales in the future, changes in foreign currency exchange rates may have a potentially greater impact on our revenue and operating results.

Cost of Revenue

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Cost of revenue		$	265			$	312			$	(47	)			(15	)%
Gross margin			82	%			78	%

     Cost of revenue consists primarily of the amortization of acquired product rights, fee-based technical support costs, costs of billable services, payments to OEMs under revenue-sharing arrangements, manufacturing, and direct material costs, and royalties paid to third parties under technology licensing agreements.

     Cost of revenue decreased for the three months ended July 2, 2010, as compared to the same period last year, primarily due to a decrease in amortization of acquired product rights related to our acquisition of Veritas.

Cost of content, subscription, and maintenance

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Cost of content, subscription, and maintenance		$	217			$	209			$	8				4	%
As a percentage of related revenue			17	%			17	%

     Cost of content, subscription, and maintenance consists primarily of fee-based technical support costs, costs of billable services, and payments to OEMs under revenue-sharing agreements. Cost of content, subscription, and maintenance as a percentage of related revenue remained consistent for the three months ended July 2, 2010, as compared to the same period last year. However, the increase in total costs is primarily due to higher technical support costs and credit card processing fees, offset by a decrease in royalties.

     Cost of license

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Cost of license		$	3			$	5			$	(2	)			(40	)%
As a percentage of related revenue			2	%			2	%

     Cost of license consists primarily of royalties paid to third parties under technology licensing agreements, manufacturing and direct material costs. Cost of license remained consistent as a percentage of the related revenue for the three months ended July 2, 2010, as compared to the same period last year.

     Amortization of acquired product rights

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Amortization of acquired product rights		$	45			$	98			$	(53	)			(54	)%
Percentage of total net revenue			3	%			7	%

     Acquired product rights are comprised of developed technologies and patents from acquired companies. The decrease in amortization for the three months ended July 2, 2010 as compared to the same period last year is primarily due to certain acquired product rights from our acquisition of Veritas becoming fully amortized during the first quarter of fiscal 2010.

Operating Expenses

     Operating expenses overview

     Our operating expenses during the three months ended July 2, 2010 were favorably impacted by the restructuring plans discussed below.

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Sales and marketing expense		$	573			$	559			$	14				3	%
Percentage of total net revenue			40	%			39	%
Research and development expense		$	208			$	221			$	(13	)			(6	)%
Percentage of total net revenue			15	%			15	%
General and administrative expense		$	92			$	89			$	3				3	%
Percentage of total net revenue			6	%			6	%

     As a percentage of revenue, sales and marketing, research and development and general and administrative expenses remained consistent during the three months ended July 2, 2010.

     Sales and marketing expense increased slightly during the three months ended July 2, 2010, as compared to the same period last year, as a result of increased OEM placement fees and costs associated with the deployment of our new proprietary eCommerce platform.

     Research and development expense decreased during the three months ended July 2, 2010, as compared to the same period last year, as a result of a shift of labor to lower cost regions.

     General and administrative expense increased slightly for the three months ended July 2, 2010, as compared to the same period last year, due to acquisition-related expenses from our fiscal 2011 acquisitions.

Amortization of other purchased intangible assets

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Amortization of other purchased intangible assets		$	61			$	62			$	(1	)			(2	)%
Percentage of total net revenue			4	%			4	%

     Other purchased intangible assets are comprised of customer relationships and tradenames. Amortization was flat for the three months ended July 2, 2010 compared to the same period last year.

Restructuring and transformation

		Three Months Ended
		July 2,				July 3,				Change in
		2010				2009				$				%
						($ in millions)
Severance		$	23			$	18
Facilities and other			12				5
Transition, transformation and other costs			5				11
Restructuring and transformation		$	40			$	34			$	6				18	%
Percentage of total net revenue			3	%			2	%