UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File Number 0-17781

SYMANTEC CORPORATION

(Exact name of the registrant as specified in its charter)

Registrant’s telephone number, including area code:

(408) 517-8000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share, and Related Stock Purchase Rights

(Title of class)

     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 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.     o

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

      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 October 1, 2004 as reported on the Nasdaq National Market:

$18,094,697,000

      Number of shares outstanding of the registrant’s common stock as of May 27, 2005:

711,727,753

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the definitive Proxy Statement, to be delivered to stockholders in connection with our Annual Meeting of Stockholders for 2005, are incorporated by reference into Part III.

SYMANTEC CORPORATION

FORM 10-K

For the Fiscal Year Ended April 1, 2005

Table of Contents

      “Symantec,” “we,” “us,” and “our” refer to Symantec Corporation and all of its subsidiaries. This document contains references to trademarks and trade names of other companies.

Forward-Looking Statements and Factors That May Affect Future Results

      The discussion following below and throughout this report contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” and similar expressions identify forward-looking statements. In addition, statements that refer to projections of our future financial performance, anticipated growth and trends in our businesses, 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. We cannot guarantee future results, performance or achievements or that predictions or current expectations will 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 under Business Risk Factors beginning on page 34. We encourage you to read that section carefully.

PART I

Introduction

      Symantec is the global leader in information security providing a broad range of software, appliances, and services designed to help individuals, small and mid-sized businesses, and large enterprises secure and manage their information technology, or IT, infrastructure. Symantec’s Norton brand of products is the worldwide leader in consumer security and problem-solving solutions. Founded in 1982, we are incorporated in Delaware and we have offices in 38 countries worldwide.

      We file registration statements, periodic and current reports, proxy statements, and other materials with the Securities and Exchange Commission, or SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a web site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including our filings.

      Our Internet address is www.symantec.com. We make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, through our Investor Relations web site, located at www.symantec.com/invest/index.html, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. The contents of our website are not incorporated into, or otherwise to be regarded as a part of this Annual Report on Form 10-K.

Business Overview

      We currently view our business in five operating segments: Consumer Products, Enterprise Security, Enterprise Administration, Services, and Other. For financial information related to our operating segments, see Note 15 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

      Our Consumer Products segment focuses on delivering our Internet security and problem-solving products to individual users, home offices, and small businesses. Symantec’s Norton brand of consumer security products is a market leader in desktop protection, with integrated products that work seamlessly to protect customers’ computers from virus outbreaks or malicious hacker attacks. Most of the products that we are currently marketing or developing feature LiveUpdate^tm. This feature enables users to easily download security updates including virus definitions, firewall rules, Uniform Resource Locator , or URL, databases, and uninstall scripts. Retail customers typically get a 12-month subscription to these security updates with the purchase of any consumer product. Our consumer products run primarily on Windows® and Macintosh® operating systems. Our Consumer Products segment represented 51%, 47%, and 41% of net revenues during fiscal 2005, 2004, and 2003, respectively. Product offerings in the Consumer Products segment include Norton AntiVirus^tm, Norton Internet Security^tm, and Norton SystemWorks^tm.

      Our Enterprise Security segment provides security solutions for all tiers of a network: at the server tier behind the gateway and at the client tier, including desktop personal computers, or PCs, laptops, and handhelds. Our comprehensive software and appliance solutions include virus protection and content filtering, firewall and virtual private networking, or VPN, intrusion prevention, and security management. In addition, we have expanded our technology offerings to include integrated solutions at the gateway and client levels, which combine several of our individual technology solutions, and early warning solutions. At the gateway level, our products run on Windows NT®, Solaris®, and Linux® platforms. Our products at the server level operate on Windows NT, UNIX, Linux, and other key server platforms. At the client level, our products run

on the Windows platform. Our Enterprise Security segment represented 36%, 39%, and 42% of net revenues during fiscal 2005, 2004, and 2003, respectively.

      Our virus protection and content filtering technologies provide protection at the gateway, server, and client tiers against known and unknown threats. Users of our virus protection and filtering products are able to take action to protect their enterprise from risks associated with using Internet resources. This includes scanning or monitoring data that enters, leaves, or travels inside the organization, as well as detecting and eliminating malicious code that may be introduced into a company’s network. Products and services providing protection from virus attacks represent the most well-known and largest market component of the enterprise security area. Product offerings include Symantec AntiVirus^tm and Symantec AntiVirus^tm Scan Engine.

      Through the acquisitions of Brightmail^tm and TurnTide^tm in fiscal 2005, we significantly augmented our family of Mail Security Solutions by adding software for application service providers, Internet service providers, or ISPs, portals, and enterprises as well as antispam routers, which are available in three deployment options, including server software, pre-configured appliances, and a hosted solution. Providing a comprehensive, multi-layered approach to combating unwanted email known as spam, our Mail Security solutions include technology that leverages more than 20 spam protection techniques, delivering antispam effectiveness rates of up to 95% and one of the industry’s highest accuracy rates against false positives (legitimate email being categorized as spam). Symantec’s global Brightmail Logistics and Operations Centers, or BLOCs, analyze spam across the globe and provide secure automatic spam filter updates every 10 minutes to help thwart attacks. The Symantec^tm Mail Security 8100 Series also uses traffic shaping technology to reduce spam entering a network. Our antispam solutions protect more than 300 million email user accounts worldwide. Product offerings include Symantec Mail Security 8100 and Symantec Mail Security 8200 appliances, Symantec Brightmail AntiSpam^tm, and Symantec Mail Security software, as well as Symantec Hosted Mail Security.

      Symantec’s early warning solutions provide organizations with customized and comprehensive notifications of vulnerabilities and new potential threats worldwide, and with countermeasures to prevent attacks before they occur, enabling them to mitigate risk and manage threats. Symantec analysts monitor potential threats 24 hours a day 7 days a week across more than 18,000 distinct product versions using information from more than 150 authoritative sources. They continuously correlate attack data from the security systems of more than 20,000 partners in 180 countries plus virus statistics from the Symantec Digital Immune System and many other human intelligence resources. These solutions are supported by Symantec^tm Security Response, our Internet security research and support organization. Product offerings include Symantec DeepSight^tm Alert Services and Symantec DeepSight^tm Threat Management System.

      Firewalls provide protection against unwanted intrusion while enabling the flow of approved traffic. VPN solutions are designed to enable employees and business partners to remotely access an enterprise network in a secure, cost effective manner. We offer firewall and VPN solutions that protect throughout the network, including at Internet gateways, gateways to sensitive internal networks, and at client devices. Product offerings include Symantec^tm Enterprise Firewall with VPN, Symantec^tm Firewall/ VPN Appliance, and Symantec^tm Clientless VPN Appliance.

      An integrated solution combines multiple security technologies with management, customer service and support, and advance research. Our integrated solutions combine full-inspection firewall technology, protocol

anomaly-based intrusion prevention and intrusion detection engines, award-winning virus protection, URL-based content filtering, antispam and internet protocol security, or IPsec, and compliant VPN technology with hardware-assisted high-speed encryption. Integrated solutions are designed to work together as a unified system, providing better overall protection, quicker response, and more efficient management. Product offerings include Symantec^tm Gateway Security and Symantec^tm Client Security.

      Organizations must protect information from unwanted users and hackers and control access to information to maintain business integrity. At the gateway and server levels, our intrusion detection products monitor systems for patterns of misuse and abuse and can warn organizations before systems are misused or information is stolen. Product offerings include Symantec^tm Network Security, Symantec^tm Network Security 7100 Series appliance, Symantec Intruder Alert^tm, and Symantec^tm Decoy Server.

      At the gateway and server levels, our policy compliance management solutions help customers define, manage, and enforce policies from a central location as well as probe for network vulnerabilities and suggest remedies to proactively reduce business risk. The initial step to reduce corporate risk is to effectively measure compliance with a business’s security policy and detect vulnerabilities where critical information resides.

      Symantec security management products provide a comprehensive solution allowing for the consolidation of security events, the containment of security threats, and the centralization of security policy enforcement. These products are built on an open, interoperable framework that enables us to work together with third party solutions to provide secure, manageable, and scalable enterprise security. Product offerings include Symantec Enterprise Security Manager^tm, Symantec^tm Event Manager, and Symantec^tm Incident Manager.

      Our Enterprise Administration segment offers open and modular products and services that enable companies to effectively and efficiently manage their IT infrastructures. Our solutions are used to optimize the security and availability of our customers’ information, while reducing operational costs, increasing IT quality of service, reducing complexity, and enhancing our customers’ ability to rapidly respond to constant business and technological change. This is typically accomplished by transforming existing manual IT processes into automated and unattended operations that can be performed on multiple systems simultaneously across the enterprise, in a dynamic and adaptive manner.

      Our solutions allow customers to manage virtually any function at any point in the lifecycle of their computing systems and devices, from network auto-discovery and IT asset management, to operating system provisioning and application deployment, ongoing security updates and configuration management, rapid backup and disaster recovery, de-provisioning, and help desk remote control. Our Enterprise Administration segment represented 11%, 12%, and 15% of net revenues during fiscal 2005, 2004, and 2003, respectively. Product offerings include Symantec Client Migration, Symantec Ghost^tm Solution Suite, pcAnywhere^tm, the ON iCommand^tm product family, the LiveState^tm Recovery product family, PartitionMagic^tm Pro, VolumeManager^tm, ServerMagic^tm for NetWare®, and OEM Factory Solutions.

      Our Services segment provides information security solutions that incorporate advanced technology, security best practices and expertise, and global resources to help enable e-business success. Through its comprehensive offerings, our Services segment delivers holistic security assessments, planning and implementation, proactive solutions for security management and response, and knowledge transfer to develop internal security skills. Our Services segment represented 2% of net revenues during each of fiscal 2005, 2004, and 2003. Services offerings include Symantec^tm Managed Security Services, Symantec^tm Consulting Services, and Symantec^tm Education Services.

      Our Other segment is comprised of sunset products and products nearing the end of their life cycle.

Sales, Marketing, and Customers

      We sell our consumer products to individuals and small offices/home offices around the world through a multi-tiered distribution network. Our products are available to customers through channels that include distributors, retailers, direct marketers, Internet-based resellers, original equipment manufacturers, or OEMs, educational institutions, and ISPs. We separately sell annual content update subscriptions directly to end users primarily via the Internet. We also sell some of our products and product upgrades through direct mail/email and over the Internet, in conjunction with channel partners.

      We sell our enterprise products and services to medium and large corporate customers around the world through our direct sales force, corporate resellers, value-added resellers, and system integrators. In addition, our indirect sales force works closely with our major distributor and reseller accounts to coordinate the flow of orders, inventory levels, and sales to customers.

      We maintain distribution relationships with major independent distributors. We also work closely with retailers to execute channel marketing promotions and other cooperative marketing activities.

      Our agreements with distributors and resellers are generally nonexclusive and may be terminated by either party at any time without cause. These distributors are not within our control and are not obligated to purchase products from us. They also distribute other vendors’ product lines.

      In fiscal 2005, one reseller, Digital River, Inc., and two distributors, Ingram Micro, Inc. and Tech Data Product Management, Inc., including their subsidiaries, each accounted for more than 10% of our total net revenues. In fiscal 2004 and 2003, two distributors, Ingram Micro, Inc. and Tech Data Product Management, Inc., including their subsidiaries, each accounted for more than 10% of our total net revenues.

      Our marketing activities include:

      For our consumer products, we typically offer two types of rebate programs within most countries: volume incentive rebates to channel partners and promotional rebates to distributors and end-users. The distributor or reseller earns a volume incentive rebate primarily based upon their sale of products to end-users. We also offer rebates to individual users of various products acquired through major retailers. We regularly offer upgrade

rebates to existing customers purchasing a new version of a product. Both volume incentive rebates and end-user rebates are accrued as an offset to revenue when revenue is originally recorded.

International Sales

      Revenues from sales outside of the United States represented 52% of our net revenues during each of fiscal 2005 and 2004, and represented 49% of our net revenues during fiscal 2003. Of these revenues, sales in the Europe, Middle East, and Africa, or EMEA, region represented 33% of our net revenues during each of fiscal 2005 and 2004, and represented 30% of our net revenues during fiscal 2003. Additional financial information regarding our international sales is provided in Note 15 of the Notes to Consolidated Financial Statements.

      We sell our products through authorized distributors, which may be restricted to specified territories. For most of our consumer products, we translate the documentation, software, and packaging into the local language and prepare marketing programs for each local market. We have marketing offices in Australia, Austria, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Ireland, Israel, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Turkey, United Arab Emirates, and the United Kingdom. These local offices facilitate our marketing and distribution in international markets. Our international operations are subject to various risks common to international operations, including but not restricted to:

Symantec Security Response

      Symantec Security Response is a team of dedicated intrusion experts, security engineers, virus hunters, and global technical support teams that work in tandem to provide extensive coverage for enterprises and consumers. Symantec Security Response provides customers with comprehensive, global, 24 hours a day 7 days a week Internet security expertise to guard against today’s blended Internet threats, which are threats that are multi-faceted in their operating methods and effects.

      Symantec Security Response delivers knowledgeable, proactive security protection through product security policies and best practice guidelines that can be updated and distributed through automated processes. Additionally, Symantec Security Response provides rapid reactive security protection through its incident response program, including emergency security signatures and policies, as well as outbound communications such as alerting services.

      Symantec Security Response issues a semi-annual report providing an analysis and discussion of trends in Internet attacks, vulnerabilities, malicious code activity, and additional security risks. The Symantec Internet Security Threat Report is one of the most comprehensive sources of Internet threat data in the world leveraging unparalleled sources to identify emerging trends in attacks and malicious code activity including:

      The research centers for Symantec Security Response are focused on collecting and analyzing the latest malware threats, from network security threats and vulnerabilities to viruses and worms. When a new threat or vulnerability is discovered, Symantec Security Response experts provide rapid emergency response, focusing on communication with customers and delivery of security updates for our security products. Research centers are located around the world, including the United States, Asia Pacific, and Europe. To ensure that customers are utilizing the most recent technologies available for addressing security issues, Symantec Security Response experts leverage our sophisticated back-end product architecture. This architecture allows users to receive the latest security updates — including intrusion detection signatures and virus definitions — automatically in the event of a new security threat or outbreak. LiveUpdate technology simplifies and speeds the process of receiving and implementing security updates for our security product offerings at the server, gateway, and desktop levels.

      With more than 300 experts in Internet security, desktop computer systems, and network management, our global technical support team is available around the clock. Our technical support experts provide customers with information on product implementation and usage, as well as countermeasures and identification tools for new threats.

      We maintain centralized support facilities throughout the world to drive rapid response to complex queries. Support is available in multiple languages, including Dutch, English, French, German, Italian, Japanese, Korean, Mandarin, Portuguese, and Spanish.

      Our enterprise security support program offers annual support contracts to enterprise customers worldwide, including content, upgrades, and technical support. Our standard technical support includes 1) unlimited hot-line service delivered by telephone, fax, email, and over the Internet; 2) immediate patches for severe problems; 3) periodic software updates; 4) access to our technical knowledge base and frequently asked question, or FAQ, facility; and 5) an invitation to the annual user group meeting. Customers may augment their standard annual support contract with services such as 24 hours a day 7 days a week telephone and web support, advanced alerting services, additional designated callers, or contacts, and additional language support, as well as a Technical Account Manager assigned to work closely with an organization and act as a focal point for all issues.

      Our consumer product support program provides free self-help online services to all consumer customers worldwide, as well as free email support. A team of product experts, editors, and language translators are dedicated to maintaining the robustness of the online knowledge base. Generally, telephone product support is provided for a fee by an outside vendor. For customers that subscribe to them, the latest virus definitions and application bug fixes and/or patches for most of our currently marketed and developed products are downloaded automatically through LiveUpdate, created by Symantec Security Response.

      We revise these fee-based support programs from time to time as customer requirements change and as market trends dictate. These programs may vary slightly by region.

Recent Acquisitions and Divestitures

      Since our initial public offering on June 23, 1989, we have completed acquisitions of 38 businesses. Our recent acquisitions included:

      We accounted for each of these acquisitions as a business purchase and, accordingly, we have included the operating results of these businesses in our consolidated financial statements from their respective dates of acquisition. See Note 3 of the Notes to Consolidated Financial Statements for further discussion of the above acquisitions. We also have acquired several other businesses in the past, including Peter Norton Computing, Inc. on August 31, 1990. We continue to use the Norton brand name for certain consumer products developed and marketed by us.

      In April 2003, we purchased certain assets related to Roxio Inc.’s GoBack^tm computer recovery software business. In addition, in August 2003, we purchased a security technology patent as part of a legal settlement in Hilgraeve, Inc. v. Symantec Corporation.

      On December 16, 2004, we announced a definitive agreement with VERITAS Software Corporation, or VERITAS, a leading independent supplier of storage and infrastructure software products and services. Under this agreement, we would acquire all of the outstanding stock of VERITAS in exchange for 1.1242 shares of Symantec common stock for each outstanding share of VERITAS common stock. In addition, we would assume all outstanding VERITAS stock options with an exercise price less than or equal to $49.00 per share, as well as each outstanding option that was granted under certain specified VERITAS option plans, as adjusted in accordance with the exchange ratio. All other outstanding VERITAS stock options would be cancelled. The estimated purchase price is $13 billion, which includes the estimated fair value of Symantec common stock to be issued and VERITAS options to be assumed, as well as estimated direct transaction costs. We derived this estimate using an average market price per share of Symantec common stock of $25.87, which was based on an average of the closing prices for a range of trading days (December 14, 2004 through December 20, 2004, inclusive) around the announcement date (December 16, 2004) of the proposed transaction. The final purchase price would be determined based upon the number of VERITAS shares and options outstanding at the closing date. Completion of the transaction is subject to customary closing conditions that include, among others, receipt of required approvals from Symantec and VERITAS stockholders. Under terms specified in the merger agreement, Symantec or VERITAS may terminate the agreement and as a result either Symantec or VERITAS may be required to pay a $440 million termination fee to the other party in certain circumstances. While we currently anticipate that we will be in a position to complete the merger on or prior to June 30, 2005, we believe that there may be administrative benefits to completing the merger at the beginning of our second quarter of fiscal 2006. Symantec and VERITAS have therefore discussed the possibility of closing the merger during the first week of that fiscal quarter. Unless otherwise indicated, the discussions in this document relate to Symantec as a stand-alone entity and do not reflect the impact of the pending business combination transaction with VERITAS.

      For further discussion of our recent acquisitions, see Note 3 of the Notes to Consolidated Financial Statements.

      In August 2001, we sold assets and transferred liabilities and employees related to our Web Access Management product line to PassGo Technologies, Ltd. and agreed to license them the related technology for a period of four years through August 2005.

Product Development, Partnerships, Investments and Acquisitions

      We use a multiple product sourcing strategy that includes:

      We develop software products that are designed to operate on a variety of operating systems. We typically develop new products and enhancements of existing products through focused product development groups. Each product development group is responsible for its own design, development, documentation, and quality assurance. Our research and development expenditures for each of the last three years are further discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Research and Development Expenses.”

      Independent contractors are used for aspects of the product development process. In addition, elements of some of our products are licensed from third parties.

      We invest in companies with emerging technologies and companies that promote the sale and use of our products and services. These investments are made in lieu of an acquisition when timing is inappropriate or when the business models and sectors fall outside of our strategic requirements. We pursue investments that we believe will be complementary and can enhance both financial returns and market growth.

      We use strategic acquisitions as necessary to provide certain technology, people, and products for our overall product and services strategy. We consider both time to market and potential market share growth when evaluating acquisitions of technologies, product lines, or companies. We have completed a number of acquisitions of technologies, companies, and products in the past, and we have also disposed of technologies and products. We may acquire and/or dispose of other technologies, companies and products in the future. For further discussion of our acquisitions, see Note 3 of the Notes to Consolidated Financial Statements.

Competition

      Our markets are competitive and are subject to rapid changes in technology. They are influenced by the constant change in Internet security threats and the strategic direction of major software and operating system providers, network equipment and computer hardware manufacturers, ISPs, application service providers, and key application software vendors. Our competitiveness depends on our ability to deliver products that meet our customers’ needs by enhancing our existing solutions and services and offering reliable, scalable, and standardized new solutions on a timely basis. We have limited resources, and as a result, we must deploy our available resources thoughtfully. The principal competitive factors in our Consumer Products, Enterprise Security, and Enterprise Administration segments are quality, integration of advanced technology, time to market, price, reputation, financial stability, breadth of product offerings, customer support, brand recognition, and sales and marketing teams. In our Services segment, the principal competitive factors include technical capability, customer responsiveness, price, ability to attract and retain talented and experienced personnel, financial stability and reputation within the industry.

      In the enterprise security and administration markets, we compete against many companies who offer competing products to our technology solutions and competing services to our response and support. In the area of antivirus and filtering products, some of the companies we compete against are Computer Associates, McAfee (formerly Network Associates), Sophos, Trend Micro, and WebSense. In addition, Microsoft has recently

announced and has launched the internal testing of an online suite that includes automated protection, maintenance, and performance tuning. This consumer subscription service, Windows OneCare, is expected to be a fee-based service available to the general public by the end of calendar 2005. Microsoft has also recently introduced a free antispyware product for the consumer market. In the area of firewall and VPN, some of the companies we compete against are Check Point Software, Cisco, Juniper, SonicWALL, and WatchGuard. In the area of intrusion detection and security management, some of the companies we compete against are Bindview, Internet Security Systems, NetIQ, and Tipping Point (recently acquired by 3Com). In the areas of remote management, imaging provisioning, backup, recovery, and asset management, some of the companies we compete against are Altiris, Laplink, Marimba (recently acquired by BMC Software), and VERITAS.

      In addition, we face indirect or potential competition from operating system providers and network equipment and computer hardware manufacturers, who provide or may provide various security solutions and functions in their current and future products. These competitors have significant advantages due to their ability to influence or control the computing platforms, security layers, and network tiers on, or in, which security products operate. In addition, these competitors generally have significantly greater financial, marketing, or technological resources than we do. We believe that our ability to compete in the enterprise security and administration markets going forward depends in part on providing comprehensive, solution-oriented integrated offerings that secure and manage customers’ most important asset — their information.

      Some of the companies that offer competing products to our Consumer Products offerings include Check Point Software, Computer Associates, Doctor Ahn, Internet Security Services, Kroll, McAfee (formerly Network Associates), Norman, Panda, and Trend Micro. With the constantly evolving Internet-based security threat environment, several other companies have entered the market and may become significant competitors in the future.

      Our Enterprise Security Services compete with companies such as Counterpane, IBM, Internet Security Systems, Ubizen, and VeriSign.

      Price competition is intense for most of our products and services. We expect price competition to continue to increase and become even more significant in the future, which may reduce our profit margins.

      We also face competition from a number of other products that offer levels of functionality different from those offered by our products or that were designed for a somewhat different group of end-users than those targeted by us. Microsoft has added security features to new versions of its operating system products that provide some of the same functions offered in our products. Microsoft’s acquisition of GeCad’s antivirus technology could lead it to include antivirus functions in future versions of its operating system products or as a stand-alone consumer product. In addition, vendors of other operating systems, such as Red Hat® Linux, Solaris, and Unix-based operating systems, may also incorporate some of the advanced utilities or other functionality offered in our products. Also, certain ISPs provide security functionality to their subscribers at no additional fee.

      While we plan to continue to improve our products by providing enhanced functionality to current and future operating systems, these efforts may be unsuccessful and any improved products may not be commercially accepted by users. We will continue to cooperate with operating system vendors to make our products compatible with those operating systems while at the same time differentiating our utility products from features included in those operating systems. Our efforts in this regard may be unsuccessful.

      The demand for some of our products, including those currently under development, may decrease if, among other reasons:

      In addition, we compete with other computer software companies, operating system providers, and network equipment and computer hardware manufacturers for access to retail distribution channels and for the attention of customers at the retail level and in corporate accounts. We also compete with other software companies, operating system providers, and network equipment and computer hardware manufacturers to acquire products or companies and to publish software developed by third parties.

      Some of our existing and potential competitors have greater financial, marketing, or technological resources than we do. We believe that competition in the industry will continue to intensify as other major software companies expand their product lines into additional product categories, and as operating system providers and network equipment and computer hardware manufacturers attempt to leverage their strengths at the computing platform, security layer, and network tier to compete more aggressively in the market for security solutions.

Manufacturing

      Our product development groups produce a set of master compact disc read-only memory, or CD-ROMs, or diskettes, and documentation for each product that is then duplicated or replicated and packaged into products by our logistics organization. United States purchasing of all raw materials is performed by an outside organization. This outside contractor, under the supervision of our domestic logistics organization, performs all of our domestic manufacturing and order fulfillment. Manufacturing includes the replication of CD-ROMs, printing of documentation materials and retail boxes, and assembly of the final packages. Purchasing is done by Symantec personnel for products manufactured in our Dublin, Ireland facility. For most products distributed outside of North and South America, our Dublin, Ireland manufacturing facility performs diskette duplication, assembly of the final packages, and order fulfillment. Our Dublin, Ireland manufacturing facility also subcontracts to outside organizations for the replication of CD-ROMs and printing of documentation materials and retail boxes.

Intellectual Property

      We regard our software as proprietary. We attempt to protect our software technology by relying on a combination of copyright, patent, trade secret and trademark laws, restrictions on disclosure, and other methods. In particular, we have a substantial number of registered trademarks and currently hold a substantial number of patents in the United States, as well as patent holdings in other countries, which expire at various times over the next twenty years. We regularly file other applications for patents and trademarks in order to protect proprietary intellectual property that we believe are important to our business. We also license some intellectual property from third parties for use in our products.

      We face a number of risks relating to our intellectual property, including unauthorized use and unauthorized copying, or piracy, of our software solutions. Litigation may be necessary to enforce our intellectual property rights, to protect trade secrets or trademarks, or to determine the validity and scope of the proprietary rights of others. Patents that have been issued to us could be determined to be invalid and may not be enforceable against competitive products in every jurisdiction. Furthermore, other parties have asserted and may, in the future, assert infringement claims against us. For further discussion of our current litigation, see Note 14 of the Notes to Consolidated Financial Statements. These claims and any litigation may result in invalidation of our proprietary rights. Litigation, even if not meritorious, could result in substantial costs and diversion of resources and management attention. In addition, third party licenses may not continue to be available to us on commercially acceptable terms, or at all.

Employees

      As of March 31, 2005, we employed approximately 6,500 people worldwide, including approximately 3,300 in sales, marketing, and related activities, 1,700 in product development, 400 in services, and 1,100 in management, manufacturing, administration, and finance.

      In connection with the relocation of our Leiden, Netherlands operations to Dublin, Ireland in early fiscal 2003, a group of employees in the Leiden facility joined a union to negotiate the proposed terms of the transfer of operations to our Dublin facility, focusing primarily on severance benefits for employees that did not relocate to Dublin. In addition, the Italian Trade Union and a French Symantec Works Council both have agreements with Symantec that govern parts of the employment relationship in the respective countries. Except for these instances, no other employees are represented by a labor union. We believe that relations with our employees are good.

      The following table sets forth the location, approximate square footage and use of each significant location used by Symantec:

      We also lease additional properties throughout the world, primarily in North America and Europe, for which the square footage is individually insignificant. We also lease 148,000 square feet in Oregon, which is currently vacant. We are currently building a facility in Culver City, California which we expect to occupy in 2007, and we recently purchased a facility in Dublin, Ireland that we expect to occupy by the end of 2005.

      We believe that our existing facilities are adequate for current needs and that the productive capacity in such facilities is substantially being utilized.

      Information with respect to this Item may be found in Note 14 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K, which information is incorporated into this Item 3 by reference.

      No matters were submitted to a vote of the security holders during the fourth quarter of fiscal 2005.

PART II

      Our common stock is traded on the Nasdaq National Market under the symbol “SYMC.” The high and low sales prices set forth below are as reported on the Nasdaq National Market. All sales prices have been adjusted to reflect the two-for-one stock splits, effected as stock dividends, that became effective November 30, 2004 and November 19, 2003.

      As of March 31, 2005, there were 785 stockholders of record of Symantec common stock. Symantec has never declared or paid any cash dividends on its capital stock. We currently intend to retain future earnings for use in our business, and, therefore, we do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

      Stock repurchases during the three-month period ended April 1, 2005 were as follows:

      On January 16, 2001, our Board of Directors replaced an earlier stock repurchase authorization with a new authorization to repurchase up to $700 million of Symantec common stock, not to exceed 60.0 million shares, with no expiration date. On January 20, 2004, our Board of Directors increased the dollar amount of our stock repurchase authorization from $700 million to $940 million, without any specific limit on the number of shares to be repurchased. On October 19, 2004, our Board of Directors increased the dollar amount of our stock repurchase authorization by $300 million, without any specific limit on the number of shares to be repurchased. In connection with the stock repurchase authorizations, we have a repurchase plan under Rule 10b5-1 to facilitate stock repurchases up to $60 million per quarter. Pending the completion of the

proposed merger with VERITAS, we will be subject to a regulatory limitation that limits the level of quarterly repurchases allowed.

      During fiscal 2005, we repurchased 7.8 million shares under the amended stock repurchase authorization, at prices ranging from $21.05 to $30.77 per share, for an aggregate amount of $192 million. During fiscal 2004, we repurchased 3.0 million shares under the amended stock repurchase authorization, at prices ranging from $19.52 to $20.82 per share, for an aggregate amount of $60 million. During fiscal 2003, we repurchased 8.8 million shares at prices ranging from $6.99 to $7.49 per share, for an aggregate amount of $64 million.

      On March 28, 2005, the Board of Directors increased the dollar amount of authorized stock repurchases by $3 billion effective upon completion of the VERITAS merger, without any specific limit on the number of shares to be repurchased. We expect to repurchase shares pursuant to this authorization for cash as business conditions warrant between the date of the completion of the merger and March 31, 2006. Excluding the post-merger authorization, as of March 31, 2005, $475 million remained authorized by our Board of Directors.

      The following selected consolidated financial data is derived from Symantec’s consolidated financial statements. This data is qualified in its entirety by and should be read in conjunction with the more detailed consolidated financial statements and related notes included elsewhere herein 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.

      During the past five fiscal years, we have made the following acquisitions:

      Each of these acquisitions was accounted for as a business purchase and, accordingly, the operating results of these businesses have been included in our consolidated financial statements since their respective dates of acquisition.

      In April 2003, we purchased certain assets related to Roxio Inc.’s GoBack^tm computer recovery software business. In addition, in August 2003, we purchased a security technology patent as part of a legal settlement in Hilgraeve, Inc. v. Symantec Corporation.

      On August 24, 2001, we divested our Web Access Management product line.

Five-Year Summary

      Symantec is the global leader in information security providing a broad range of software, appliances, and services designed to help individuals, small and mid-sized businesses, and large enterprises secure and manage their information technology, or IT, infrastructure. Symantec’s Norton brand of products is the worldwide leader in consumer security and problem-solving solutions. Founded in 1982, we have offices in 38 countries worldwide.

      We have a 52/53-week fiscal accounting year. Accordingly, all references as of and for the periods ended March 31, 2005, 2004, and 2003 reflect amounts as of and for the periods ended April 1, 2005, April 2, 2004, and March 28, 2003, respectively. The fiscal accounting years ended April 1, 2005 and March 28, 2003 are each comprised of 52 weeks of operations, while the fiscal accounting year ended April 2, 2004 is comprised of 53 weeks of operations. The fiscal accounting year ending March 31, 2006 will comprise 52 weeks of operations.

Critical Accounting Estimates

      The preparation of our consolidated financial statements and related notes in accordance with generally accepted accounting principles requires us to make estimates, which include 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 are believed to be reasonable under the circumstances and we evaluate our estimates on a regular basis and make changes accordingly. Historically, our estimates relative to our critical accounting estimates have not differed materially from actual results; however, actual results may differ from these estimates under different conditions. If actual results differ from these estimates and other considerations used in estimating amounts reflected in Symantec’s consolidated financial statements, the resulting changes could have a material adverse

effect on Symantec’s consolidated statement of income, and in certain situations, could have a material adverse effect on liquidity and Symantec’s financial condition.

      A critical accounting estimate is based on judgments and assumptions about matters that are highly uncertain at the time the estimate is made. Different estimates that reasonably could have been used, or changes in accounting estimates could materially impact the financial statements. We believe that the estimates described below represent our critical accounting estimates, as they have the greatest potential impact on our consolidated financial statements. We also refer you to our “Summary of Significant Accounting Policies” beginning on page 63 in this Annual Report on Form 10-K.

      Management has discussed the development and selection of its critical accounting estimates with the Audit Committee of Symantec’s Board of Directors, and the Audit Committee has reviewed the disclosure presented below relating to them.

      We recognize revenue in accordance with generally accepted accounting principles that have been prescribed for the software industry. Revenue recognition requirements in the software industry are very complex and they require us to make many estimates.

      We expect our distributors and resellers to maintain adequate inventory to meet future customer demand, which is generally 4 to 6 weeks of customer demand based on recent buying trends. We ship product to our distributors and resellers at their request and based on their valid purchase orders. Our distributors and resellers base the quantity of their orders on their estimates to meet future customer demand, which may exceed our expected level of a 4 to 6 week supply. We offer limited rights of return if the inventory held by our distributors and resellers is below the expected level of a 4 to 6 week supply. We estimate future returns under these limited rights of return in accordance with Statement of Financial Accounting Standards, or SFAS, No. 48, Revenue Recognition When Right of Return Exists. We typically offer liberal rights of return if inventory held by our distributors and resellers exceeds the expected level. Because we cannot reasonably estimate the amount of excess inventory that will be returned, we do not recognize revenue or record accounts receivable for the amount in excess of the expected inventory levels. On the same basis, we reduce the associated cost of revenues, which is primarily related to materials, and include this amount in inventory. We recognize these revenues and the associated cost of revenues when the liberal rights of return expire, which is when the inventory levels no longer exceed the expected level of a 4 to 6 week supply. If we made different estimates, material differences may result in the amount and timing of our net revenues and cost of revenues for any period presented.

      As of each of the fiscal years ended March 31, 2005, 2004, and 2003, the amount of net revenues not recognized related to excess inventory represented no more than 3% of total net revenues recognized during each of the years then ended. Associated costs that were included in inventory as of each of the fiscal years ended March 31, 2005, 2004, and 2003 represented no more than 2% of the total cost of revenues recorded during each of the years then ended.

      In arrangements that include multiple elements, including perpetual software licenses and maintenance and/or services, and packaged products with content updates, we allocate and defer revenue for the undelivered items based on vendor-specific objective evidence, or VSOE, of fair value of the undelivered elements, and recognize the difference between the total arrangement fee and the amount deferred for the undelivered items as revenue. Our deferred revenue consists primarily of the unamortized balance of enterprise product maintenance and consumer product content updates and totaled $1.3 billion as of March 31, 2005, of which $115 million was represented as long-term deferred revenue, on the Consolidated Balance Sheet. VSOE of each element is based on the price for which the undelivered element is sold separately. We determine fair value of the undelivered elements based on historical evidence of our stand-alone sales of these elements to third parties. When VSOE does not exist for undelivered items such as maintenance, then the entire arrangement fee is recognized ratably over the performance period. Changes to the elements in a software arrangement, the ability to identify VSOE for those elements, the fair value of the

respective elements, and changes to a product’s estimated life cycle could materially impact the amount of earned and unearned revenue.

      End-users may return our products, primarily within our Consumer Products and Enterprise Administration segments, through distributors and resellers or to us directly for a full refund within a reasonably short period from the date of purchase. Our estimated reserves for such end-user product returns, which are recorded as an offset to revenue, are based primarily on historical trends. We fully reserve for obsolete products in the distribution channels as an offset to revenue. If we made different estimates, material differences may result in the amount and timing of our net revenues for any period presented. More or less product may be returned than what was estimated and/or the amount of inventory in the channel could be different than what was estimated. These factors and unanticipated changes in the economic and industry environment could make our return estimates differ from actual results. For additional information see Schedule II on page 98.

      We estimate and record reserves as an offset to revenue for channel and end-user rebates, related primarily to products within our Consumer Products, Enterprise Security, and Enterprise Administration segments. Our estimated reserves for channel volume incentive rebates are based on distributors’ and resellers’ actual performance against the terms and conditions of volume incentive rebate programs, which are typically entered into quarterly. Our reserves for end-user rebates are estimated on the terms and conditions of the promotional programs, actual sales during the promotion, amount of actual redemptions received, historical redemption trends by product and by type of promotional program, and the value of the rebate. We also consider current market conditions and economic trends when estimating our reserves for rebates. If we made different estimates, material differences may result in the amount and timing of our net revenues for any period presented. For additional information see Schedule II on page 98.

      When we acquire businesses, we allocate the purchase price to tangible assets and liabilities acquired and identifiable intangible assets. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates are based on historical experience and information obtained from the management of the acquired companies. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. In addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates.

      At March 31, 2005, goodwill was $1.4 billion, acquired product rights were $128 million, and other identifiable intangible assets were $31 million. We assess the impairment of goodwill within our reporting units annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable. We assess the impairment of acquired product rights and other identifiable intangible assets whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. An impairment loss would be recognized when the sum of the future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. Such impairment loss would be measured as the difference between the carrying amount of the asset and its fair value. The estimate of cash flow is based upon, among other things, certain assumptions about expected future operating performance and an appropriate discount rate determined by our management. Our estimates of discounted cash flows may differ from actual cash flows due to, among other things, economic conditions, changes to the business model, or changes in operating performance. If we made different estimates, material differences may result in write-downs of net long-lived and intangible assets, which would be reflected by charges to our operating results for any period presented.

      We have estimated expenses for excess facilities related to consolidating, moving, and relocating various groups or sites as a result of restructuring activities and business acquisitions. In determining our estimates, we obtained information from third party leasing agents to calculate anticipated third party sublease income and the vacancy period prior to finding a sub-lessee. Market conditions will affect our ability to sublease facilities on terms consistent with our estimates. Our ability to sublease facilities on schedule or to negotiate lease terms resulting in higher or lower sublease income than estimated will affect our accrual for site closures. Differences between estimates of related broker commissions, tenant improvements, and related exit costs may increase or decrease our accrual upon final negotiation. If we made different estimates regarding these various components of our excess facilities costs, the amount recorded for any period presented could vary materially from those actually recorded.

      We make significant estimates to determine our current provision for income taxes, as well as deferred tax assets and liabilities and our income taxes payable. Our estimates relative to the current provision for income taxes take into account current tax laws, our interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. Changes in tax laws or our interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in our financial position and results of operations. We also assess the likelihood that our net deferred tax assets will be realized. Realization of our net deferred tax assets is dependent upon future United States taxable income and future taxable income in certain foreign jurisdictions, as well as our implementation of prudent and feasible tax planning strategies. Our estimates regarding future profitability may change due to future market conditions, changes in United States or international tax laws, and other factors. To the extent we believe it is more likely than not that some portion or all of our net deferred tax assets will not be realized, we establish a valuation allowance against the deferred tax assets. To the extent we establish a valuation allowance or change the allowance in a period, we reflect the change with a corresponding increase or decrease to our tax provision in our Consolidated Statements of Income.

      From time to time, we are involved in disputes that arise in the ordinary course of business, and we do not expect this trend to change in the future. We are currently involved in legal proceedings as discussed in Note 14 of the Notes to Consolidated Financial Statements.

      When the likelihood of the incurrence of costs related to our legal proceedings is probable and management has the ability to estimate such costs, we provide for estimates of external legal fees and any probable losses through charges to our Consolidated Statements of Income. These estimates have been based on our assessment of the facts and circumstances at each balance sheet date and are subject to change based upon new information and intervening events. Our accrual for legal contingencies as of March 31, 2005 represented insignificant amounts related to external legal fees and no amounts were accrued for probable losses as we believe that we have meritorious defenses to the claims against us, and we will defend ourselves vigorously. However, even if we are successful, estimated costs for external legal fees could be more than anticipated. If we are unsuccessful, we might be forced to pay significant damages and licensing fees for which we have not accrued any amounts for loss contingencies, or to modify our business practices. Any such results could materially harm our business and could result in a material adverse impact on our financial position, results of operations, or cash flows.

Results of Operations

Overview

      In fiscal 2005, we continued to pursue our goal of serving customer needs while reshaping the competitive landscape by offering new versions of integrated solutions. We believe that we continued to make progress

toward this goal as we introduced several new product offerings while posting substantial growth in revenue and earnings.

      We operate our business within five operating segments: Consumer Products, Enterprise Security, Enterprise Administration, Services, and Other.

      Within the Consumer Products segment, we continued to grow our base of individual users and accelerated our expansion into the small business market. Our Norton brand of consumer security products continued as a market leader in desktop protection. In addition, we released new versions of our award-winning consumer products, including Norton^tm Internet Security, Norton AntiVirus, Norton Personal Firewall, Norton AntiSpam^tm, and Norton SystemWorks. These new products provide protection from viruses, intrusion attempts, and piracy threats, and offer expanded protection from emerging threats.

      Within the Enterprise Security segment, we continued to enhance and expand our product portfolio in order to address the evolving threat environment with the release of new versions of our integrated solutions: Symantec Gateway Security, Symantec Enterprise Security Manager, and Symantec Incident Manager. In addition, we maintained our focus on enhanced manageability and more comprehensive intrusion protection.

      The Enterprise Administration segment continued to benefit from our new product introductions, including the ON iCommand^tm product family related to our business acquisition of ON Technology, and Symantec Client Migration and the LiveState^tm Recovery product family related to our business acquisition of PowerQuest, both of which were acquired in the second half of fiscal 2004. Sales of our pcAnywhere product continued to decline and we expect this trend to continue due to the extended functionality of Microsoft operating system products.

      On a worldwide basis, we closed bigger deals driven by the depth and breadth of our product and service offerings. Specifically, we generated 1,347 enterprise deals greater than $100,000 each, including 353 deals greater than $300,000 each, and 63 deals greater than $1 million each. Deals greater than $1 million increased 85% in fiscal 2005 as compared to fiscal 2004. In addition, 59% of the deals greater than $100,000 involved multiple Symantec enterprise products and services.

      Cashflows were strong in fiscal 2005 as we delivered over $1.2 billion in operating cash flow. We no longer carry any debt due to the conversion of our convertible subordinated notes during fiscal 2005 and we ended fiscal 2005 with $3.2 billion in cash, cash equivalents, and short-term investments.

      Net revenues during fiscal 2005 increased as compared to fiscal 2004 due primarily to increased sales of our consumer and enterprise security products. We believe that a significant portion of the growth in demand was attributable to the continued increase in vulnerabilities, Internet attacks, and malicious code activity coupled with a growing level of awareness of these threats around the world. This growth in demand may not continue and, if it does not, our revenue growth rate may not be sustainable.

      Net revenues during fiscal 2004 increased as compared to fiscal 2003 due primarily to increased sales of our consumer and enterprise security products, which can be attributed to the numerous security threat outbreaks that occurred during fiscal 2004, including the Beagle, Welchia, Blaster, Sobig, MyDoom, and Netsky viruses. Increased demand for our security protection solutions from large organizations as well as from small businesses and consumers also contributed to the growth.

      From a regional standpoint, sales outside of the United States contributed strongly to revenue growth while sales in the United States also grew during these periods. Strength in major foreign currencies during fiscal 2005 and fiscal 2004 also positively impacted our international revenue growth.

      A significant portion of our deferred revenue balance of $971 million as of March 31, 2004 contributed to our total net revenues during fiscal 2005. Deferred revenue increased during fiscal 2005 as compared to fiscal 2004 due primarily to increased maintenance obligations.

      Our net income was $536 million, $371 million, and $248 million for fiscal 2005, 2004, and 2003, respectively, representing $0.74, $0.54, and $0.38 net income per diluted share, respectively. Our increased profitability is primarily the result of revenue growth offset in part by an increase in operating expenses largely

attributable to an increase in employee headcount and related compensation. Approximately 75% of our headcount increase was due to the growth of the company and approximately 25% was due to business acquisitions.

      During fiscal 2005, we acquired the following businesses:

      On January 28, 2005, we purchased technology patents from ReefEdge, Inc. for $800,000 in cash, which we recorded as acquired product rights.

      On December 16, 2004, we announced a definitive agreement with VERITAS Software Corporation, or VERITAS, a leading independent supplier of storage and infrastructure software products and services. Under this agreement, we would acquire all of the outstanding stock of VERITAS in exchange for 1.1242 shares of Symantec common stock for each outstanding share of VERITAS common stock. In addition, we would assume all outstanding VERITAS stock options with an exercise price less than or equal to $49.00 per share, as well as each outstanding option that was granted under certain specified VERITAS option plans, as adjusted in accordance with the exchange ratio. All other outstanding VERITAS stock options would be cancelled. The estimated purchase price is $13 billion, which includes the estimated fair value of Symantec common stock to be issued and VERITAS options to be assumed, as well as estimated direct transaction costs. We derived this estimate using an average market price per share of Symantec common stock of $25.87, which was based on an average of the closing prices for a range of trading days (December 14, 2004 through December 20, 2004, inclusive) around the announcement date (December 16, 2004) of the proposed transaction. The final purchase price would be determined based upon the number of VERITAS shares and options outstanding at the closing date. Completion of the transaction is subject to customary closing conditions that include, among others, receipt of required approvals from Symantec and VERITAS stockholders. Under terms specified in the merger agreement, Symantec or VERITAS may terminate the agreement and as a result either Symantec or VERITAS may be required to pay a $440 million termination fee to the other party in certain circumstances. While we currently anticipate that we will be in a position to complete the merger on or prior to June 30, 2005, we believe that there may be administrative benefits to completing the merger at the beginning of our second quarter of fiscal 2006. Symantec and VERITAS have therefore discussed the possibility of closing the merger during the first week of that fiscal quarter. Unless otherwise indicated, the discussions in this document relate to Symantec as a stand-alone entity and do not reflect the impact of the pending business combination transaction with VERITAS.

      Information about the various factors that management deems important in contributing to our operating results for fiscal year 2005, 2004, and 2003 is provided in the discussion below.

Total Net Revenues

      Net revenues increased during fiscal 2005 as compared to fiscal 2004 due primarily to increases of $443 million and $191 million in sales of our consumer and enterprise security products, respectively. The increased sales of these products were due primarily to continuing growth in demand for our consumer security protection products and our enterprise virus protection solutions. We believe that a significant portion of the growth in demand was attributable to the continued increase in vulnerabilities, Internet attacks, and malicious code activity coupled with a growing level of awareness of these threats around the world. This growth in demand may not continue and, if it does not, our revenue growth rate may not be sustainable.

      Net revenues increased during fiscal 2004 as compared to fiscal 2003 due primarily to increases of $302 million and $143 million in sales of our consumer and enterprise security products, respectively. The increased sales of these products were due primarily to continuing growth in demand for our consumer security protection products and our enterprise virus protection solutions. We believe that a significant portion of the growth in demand during fiscal 2004 was attributable to the numerous security threat outbreaks that occurred during the year.

      Our Consumer Products segment focuses on delivering our Internet security and problem-solving products to individual users, home offices, and small businesses. We believe that a significant portion of the increase in revenues from our Consumer Products segment in fiscal 2005, as compared to fiscal 2004, was attributable to the continued increase in vulnerabilities, Internet attacks, and malicious code activity coupled with a growing level of awareness of these threats around the world, and this growth may not be sustainable. Specifically, the increase in our Consumer Products revenue during fiscal 2005 was due primarily to an increase of $231 million in sales of our Norton Internet Security products, a comprehensive security solution, and an increase of $185 million in sales of our Norton AntiVirus products. Sales through our electronic distribution channel (which includes sales of our Norton Internet Security products and our Norton AntiVirus products), including original equipment manufacturer, or OEM, subscription renewals, grew by $297 million in fiscal 2005 as compared to fiscal 2004.

      We believe that a significant portion of the increase in revenues from our Consumer Products segment in fiscal 2004, as compared to fiscal 2003, was attributable to the numerous security threat outbreaks that occurred in August 2003 and February 2004. Specifically, the increase in revenue from our Consumer Products segment during fiscal 2004 as compared to fiscal 2003 was due primarily to increases of $188 million and $129 million in sales of our Norton AntiVirus and Norton Internet Security products, respectively. We experienced growth in our electronic distribution channel, including OEM subscription renewals, where sales grew by $223 million in fiscal 2004 as compared to fiscal 2003. These increases were offset slightly by a decrease in sales of our other consumer products.

      Our Enterprise Security segment provides security solutions for all tiers of a network: at the server tier behind the gateway and at the client tier, including desktop personal computers, or PCs, laptops, and handhelds. Revenue from our Enterprise Security segment increased during fiscal 2005 as compared to fiscal 2004 due primarily to an increase of $148 million in sales of our antivirus products. In addition, revenue increased due to sales of antispam products formerly associated with Brightmail, which we acquired in June 2004.

      Similarly, revenue from our Enterprise Security segment increased during fiscal 2004 as compared to fiscal 2003 due primarily to a $131 million increase in sales of our antivirus products. This increase was attributable to the numerous security threat outbreaks that occurred in August 2003 and February 2004.

      Our Enterprise Administration segment offers open and modular products and services that enable companies to effectively and efficiently manage their IT infrastructures. Revenue from our Enterprise Administration segment increased during fiscal 2005 as compared to fiscal 2004 due primarily to sales of products formerly associated with PowerQuest of $64 million and ON Technology of $29 million, which were acquired in the second half of fiscal 2004. These increases were partially offset by a continued decline in sales of our pcAnywhere product. We expect sales of our pcAnywhere product to continue to decline in the future.

      Revenue from our Enterprise Administration segment increased during fiscal 2004 as compared to fiscal 2003 due primarily to sales of PowerQuest products of $18 million and sales of ON Technology products of $6 million, after the respective dates of acquisition. These increases were partially offset by a decrease in sales of our pcAnywhere product of $19 million.

      Our Services segment provides information security solutions that incorporate advanced technology, security best practices and expertise, and global resources to help enable e-business success. The increase in revenue from our Services segment during fiscal 2005 as compared to fiscal 2004 was due primarily to an increase of $11 million in sales of our consulting services. In addition, revenue from our Services segment

increased due to the @stake, Inc. and LIRIC Associates acquisitions. We expect our Services revenue will continue to increase in the future.

      The increase in revenue from our Services segment during fiscal 2004 as compared to fiscal 2003 was due primarily to an increase of $14 million in sales of our managed security services.

      Our Other segment is comprised of sunset products and products nearing the end of their life cycle. Revenues from the Other segment during fiscal 2005, 2004 and 2003 were insignificant.

      The increase in net revenues in international regions in fiscal 2005 was due to increased sales of our Norton Internet Security and Norton AntiVirus products in our Consumer Products segment and our antivirus products in our Enterprise Security segment in those regions. We believe this increase in sales is attributable to increased customer awareness related to security threats. In addition, strength in major foreign currencies positively impacted our international revenue growth during fiscal 2005 by $74 million, as compared to fiscal 2004. The strength in foreign currencies is due primarily to the strength of the Euro. We are unable to predict the extent to which revenues in future periods will be impacted by changes in foreign currency rates. If international sales become a greater proportion of our total sales in the future, changes in foreign exchange rates may have a potentially greater impact on our revenues and operating results.

      The increase in net revenues in international regions in fiscal 2004 was due primarily to increased sales of our Norton Internet Security and Norton AntiVirus products in our Consumer Products segment and our

antivirus products in our Enterprise Security segment in those regions. In addition, strength in major foreign currencies positively impacted our international revenue growth during fiscal 2004 by $128 million, as compared to fiscal 2003. The strength in foreign currencies was due primarily to the strength of the Euro.

Gross Profit

      Gross profit represents net revenues less cost of revenues. Cost of revenues consists primarily of payments to OEMs under revenue-sharing arrangements, costs for producing manuals and CDs, fee-based technical support costs, costs of services, royalties paid to third parties under technology licensing agreements, packaging costs, manufacturing expenses, and amortization of acquired product rights.

      Gross margin remained flat at approximately 82% during fiscal years 2005, 2004, and 2003. We anticipate that our net revenues from our Services segment may grow and comprise a higher percentage of our total net revenues, which would have a negative impact on our gross margin, as our services typically have higher cost of revenues than our software products.

      Acquired product rights are comprised of developed technologies, patents, and revenue-related order backlog and contracts from acquired companies.

      During fiscal 2005, we recorded $59 million in acquired product rights as follows (in thousands):

      During fiscal 2004, we recorded $90 million in acquired product rights as follows (in thousands):

      During fiscal 2005, 2004, and 2003 amortization of acquired product rights was as follows:

      Amortization of acquired product rights is included in Cost of revenues in the Consolidated Statements of Income. The increased amortization during fiscal 2005, as compared to fiscal 2004, is primarily associated with the Brightmail acquisition in June 2004 and the PowerQuest acquisition in December 2003. This increase was partially offset by certain acquired product rights becoming fully amortized during fiscal 2005. The increased amortization during fiscal 2004, as compared to fiscal 2003, is primarily associated with the purchase of a security technology patent as part of a settlement in Hilgraeve, Inc. v. Symantec Corporation in August 2003 and Roxio, Inc.’s GoBack computer recovery system in April 2003. For further discussion of acquired product rights and related amortization, see Notes 3 and 4 of the Notes to Consolidated Financial Statements.

Operating Expenses

      The increase in sales and marketing expenses in fiscal 2005, as compared to fiscal 2004, was due primarily to an increase in employee headcount resulting in an additional $118 million of employee compensation cost. In addition, we spent $44 million more on advertising and promotion activities during fiscal 2005 as compared to the prior fiscal year.

      The increase in sales and marketing expenses in fiscal 2004, as compared to fiscal 2003, was due primarily to an increase in employee headcount resulting in an additional $77 million of employee compensation cost. In addition, we spent $20 million more on advertising and promotion activities during fiscal 2004, as compared to the prior fiscal year. The remaining increase was related to increased variable sales and marketing expenses associated with increased sales.

      The increase in research and development expenses in fiscal 2005, as compared to fiscal 2004, resulted primarily from a $34 million increase in employee compensation due to increased headcount. In addition, research and development expenses increased by $26 million due to additional overhead costs resulting from greater infrastructure needed to support overall company growth. The remaining increase was primarily related

to increased variable research and development costs due to growth of the company, including new product offerings from business acquisitions.

      The increase in research and development expenses in fiscal 2004, as compared to fiscal 2003, resulted primarily from a $26 million increase in employee compensation due to increased headcount. In addition, research and development expenses increased by $14 million due to additional overhead costs resulting from greater infrastructure needed to support overall company growth. The remaining increase was related to increased variable research and development costs due to growth of the company, including new product offerings from business acquisitions.

      The increases in general and administrative expenses in fiscal 2005, as compared to fiscal 2004, resulted primarily from an increase in employee compensation due to increased headcount. The increased headcount and related compensation was the direct result of the growth of the company, including business acquisitions completed in the second half of fiscal 2004 and the first quarter of fiscal 2005.

      The increase in general and administrative expenses in fiscal 2004, as compared to fiscal 2003, was due primarily to an increase of $14 million in additional compensation cost resulting from increased headcount. The increase was also attributable to additional overhead costs resulting from a greater infrastructure needed to support overall company growth.

      The increase in amortization of other intangibles from acquisitions in fiscal 2005, as compared to fiscal 2004, was primarily associated with the Brightmail acquisition in June 2004, the ON Technology acquisition in February 2004, the PowerQuest acquisition in December 2003, and the @stake, Inc. acquisition in October 2004. The increase in amortization of other intangibles from acquisitions in fiscal 2004, as compared to fiscal 2003, was primarily associated with the ON Technology acquisition in February 2004, the PowerQuest acquisition in December 2003, and the Nexland acquisition in July 2003. This increase was partially offset by certain other intangibles becoming fully amortized during fiscal 2004. For further discussion of other intangibles from acquisitions and related amortization, see Notes 3 and 4 of the Notes to Consolidated Financial Statements.

      In connection with the acquisition of Brightmail in June 2004, we assumed unvested Brightmail stock options in exchange for unvested options to purchase Symantec common stock. The intrinsic value of the assumed unvested stock options was $21 million and represented deferred stock-based compensation. During the September 2004 quarter, we reduced deferred stock-based compensation by $1 million as a result of the cancellation of a portion of those options upon employee terminations. We recorded amortization of deferred stock-based compensation related to the assumed Brightmail stock options of $3 million during fiscal 2005. We anticipate that amortization of deferred stock-based compensation related to the assumed Brightmail options will be approximately $8 million in fiscal 2006.

      On October 20, 2004, we issued 200,000 restricted shares of common stock to our current Senior Vice President of Finance and Chief Financial Officer, at a purchase price of $1,000 (representing the aggregate par value at the time of issuance), vesting 50% at each anniversary date. The market value of the common stock on the date of grant, less the purchase price, was $6 million and was recorded in Deferred stock-based compensation within Stockholders’ Equity in the Consolidated Balance Sheets during fiscal 2005. The deferred stock-based compensation is being amortized over the two-year service period beginning in October 2004. We recorded amortization of deferred stock-based compensation related to the restricted shares of $1 million during fiscal 2005.

      The in-process technology acquired in the Brightmail acquisition consisted primarily of research and development related to its next generation Brightmail AntiSpam product, which protects the email networks of businesses, government agencies, and service providers, blocking spam while assuring that legitimate mail is reliably delivered.

      The in-process technology acquired in the ON Technology acquisition consisted primarily of research and development related to its next generation CCM/iCommand and iPatch^tm products, which enable organizations and service providers to manage the full lifecycle of their computing systems over corporate networks. We are using this technology in order to construct a common platform for our Enterprise Administration segment products.

      The in-process technology acquired in the PowerQuest acquisition consisted primarily of research and development related to its Virtual Volume Imaging technology, which provides the capability to recover from server or desktop failures and minimize system downtime. We are integrating this technology into our Enterprise Administration segment product offerings.

      The in-process technology acquired in the Nexland acquisition consisted primarily of research and development related to a next generation firewall product. We integrated this technology into our firewall and appliance series of products within our Enterprise Security segment.

      The in-process technology acquired in the Riptech acquisition consisted primarily of research and development related to the fourth generation of its Caltarian^tm technology, which provides real-time information protection through around-the-clock monitoring, analysis and response. We integrated this technology into our managed security services within our Services segment.

      The in-process technology acquired in the Recourse acquisition consisted primarily of research and development related to new versions of ManHunt^tm, a network intrusion detection system. We integrated this technology into our intrusion detection products within our Enterprise Security segment.

      The in-process technology acquired in the SecurityFocus acquisition consisted primarily of research and development related to new versions of DeepSight Threat Management System and DeepSight Analyzer products, which are threat management systems that provide early warnings of attack, as well as countermeasures to defend against these attacks. We integrated this technology into our vulnerability management products within our Enterprise Security segment.

      The efforts required to develop the acquired in-process technology principally relate to the completion of all planning, design, development, and test activities that are necessary to establish that the product or service can be produced to meet its design specifications including features, functions, and performance.

      We determined the fair value of the acquired in-process technology by estimating the projected cash flows related to these projects and future revenues to be earned upon commercialization of the products. We discounted the resulting cash flows back to their net present values. We based the net cash flows from such projects on our analysis of the respective markets and estimates of revenues and operating profits related to these projects.

      During fiscal 2005, we recorded $3 million of restructuring charges, of which $2 million was for costs of severance, related benefits, and outplacement services related to the termination of 51 employees located in the United States and Europe due to the consolidation and relocation of engineering and development functions. In addition we recorded an increase to the accrual of $1 million relating to the fiscal 2002

restructuring plan due to the termination of a sublease agreement for facilities in Eugene, Oregon. As of March 31, 2005, substantially all of the costs were paid.

      During fiscal 2004, we recorded $1 million of restructuring charges for costs of severance, related benefits, and outplacement services for a member of our senior management team, as well as an increase to the accrual for excess facilities in Eugene, Oregon in connection with our fiscal 2002 restructuring plan. As of March 31, 2005, substantially all of the costs were paid.

      During fiscal 2003, we recorded $11 million of restructuring charges, including costs of severance, related benefits, and outplacement services of $8 million and costs associated with the consolidation of certain facilities in the United States and Europe of $3 million. The costs resulted from relocating certain development, sales, and finance activities, realigning certain worldwide marketing efforts, and outsourcing our North American and European consumer support functions. As a result, we terminated 424 employees. As of March 31, 2005, substantially all of the costs were paid.

      In connection with our proposed merger with VERITAS, we may incur substantial restructuring costs in future periods. We may ultimately record liabilities for severance or relocation costs related to VERITAS employees, costs of vacating some facilities (leased or owned) of VERITAS, or other costs associated with exiting activities of VERITAS. Any such liabilities would be recorded as an adjustment to the purchase price and an increase in goodwill. In addition, we may incur significant restructuring charges upon completion of the merger or in subsequent quarters for severance or relocation costs related to Symantec employees, costs of vacating some facilities (leased or owned) of Symantec, and other costs associated with exiting activities of Symantec. Any such restructuring charges would be recorded as an expense in the Consolidated Statements of Income in the period in which they were incurred.

      On December 16, 2004, we announced a definitive agreement with VERITAS under which we would acquire all the outstanding stock of VERITAS. In connection with this pending acquisition, we have recorded integration planning costs of $3.5 million in fiscal 2005.

      On May 12, 2005, we resolved the Altiris patent litigation matters with a cross-licensing agreement that resolves all legal claims between the companies. As part of a settlement, we paid Altiris $10 million for use of the disputed technology. This transaction will be recorded in the June 2005 quarter.

      On March 31, 2005, we entered into a patent license agreement with Tumbleweed Communications Corporation. The total cost of the patent license agreement was $1 million, which was paid in cash in March 2005. Under the transaction, we recorded $375,000 of patent settlement costs in the March 2005 quarter that was related to benefits received by us in and prior to the March 2005 quarter. The remaining amount was recorded as an asset and is being amortized to Cost of revenues in the Consolidated Statements of Income over the remaining life of the patent, which expires in March 2010.

      On August 6, 2003, we purchased a security technology patent as part of a settlement in Hilgraeve, Inc. v. Symantec Corporation. As part of the settlement, we also received licenses to the remaining patents in Hilgraeve’s portfolio. The total cost of purchasing the patent and licensing additional patents was $63 million, which was paid in cash in August 2003. Under the transaction, we recorded $14 million of patent settlement costs in the June 2003 quarter that was related to benefits received by us in and prior to the June 2003 quarter. The remaining $49 million was recorded as acquired product rights and is being amortized to Cost of revenues in the Consolidated Statements of Income over the remaining life of the primary patent, which expires in June 2011.

Operating Income

      Operating income increased during fiscal 2005, as compared to fiscal 2004, due primarily to increased revenue growth of 38% during fiscal 2005, partially offset by increased operating expenses as discussed above. Operating income increased during fiscal 2004, as compared to fiscal 2003, due primarily to increased revenue growth of 33% during fiscal 2004, partially offset by increased operating expenses as discussed above.

Non-operating Income and Expense

      The increase in interest and other income, net in fiscal 2005 as compared to fiscal 2004, was due to a higher average investment balance and higher average interest rates. The increase in interest and other income, net in fiscal 2004 as compared to fiscal 2003, was due to a higher average investment balance, partially offset by lower average interest rates.

      Interest expense during fiscal 2005, 2004, and 2003 was primarily related to the issuance of our $600 million 3% convertible subordinated notes in October 2001. In November 2004, substantially all of the outstanding convertible subordinated notes were converted into 70.3 million shares of our common stock and the remainder was redeemed for cash. We will not incur further interest expense with respect to these notes.

      Income, net of expense, from sale of technologies and product lines during fiscal 2004 and 2003 primarily related to royalty payments received in connection with the licensing of substantially all of the ACT! product line technology. In December 2003, Interact purchased this technology from us.

Provision for Income Taxes

      Our effective tax rate on income before taxes was approximately 38%, 32%, and 32% during fiscal 2005, 2004, and 2003 respectively. The higher effective tax rate in fiscal 2005 reflects the additional tax expense attributable to the $500 million of foreign earnings that we repatriated under the American Jobs Creation Act.

American Jobs Creation Act of 2004-Repatriation of Foreign Earnings

      On October 22, 2004, the American Jobs Creation Act of 2004, or the Jobs Act, was signed into law. Under the Jobs Act, we may elect an 85% dividends-received deduction for repatriating eligible dividends from our foreign subsidiaries in either the year ended March 31, 2005 or 2006. Certain criteria must be met to qualify for the deduction, including the establishment of a domestic reinvestment plan by our Chief Executive Officer, and the approval of the plan by our Board of Directors, whereby the repatriated earnings must be reinvested in the United States. The maximum amount of our foreign earnings that qualify for the deduction is $500 million.

      During the March 2005 quarter, we repatriated $500 million from certain of our foreign subsidiaries under the Jobs Act provisions. We recorded a tax charge for this repatriation of approximately $54 million in accordance with tax laws existing at the time.

      The $500 million repatriation under the Jobs Act was deemed to be distributed entirely from foreign earnings that had been previously treated as indefinitely reinvested. However, this distribution from previously indefinitely reinvested earnings does not change our position going forward that future earnings of certain of our foreign subsidiaries will be indefinitely reinvested.

      In May 2005, clarifying language was issued by the U.S. Department of the Treasury and the Internal Revenue Service with respect to the treatment of foreign taxes paid on the earnings repatriated under the Jobs Act. As a result of this clarifying language, we will reduce the $54 million tax expense attributable to the $500 million repatriation by approximately $20 million, to $34 million. This reduction in tax expense will be recorded in our first quarter of fiscal 2006.

Liquidity and Capital Resources

      Our principal source of liquidity as of March 31, 2005 is our existing cash, cash equivalents, and short-term investments of $3.2 billion, as well as cash that we generate over time from our operations. We believe that our cash balances and the cash flows generated by operations will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

      Net cash provided by operating activities during fiscal 2005 resulted largely from net income of $536 million, plus non-cash depreciation and amortization charges of $132 million, the income tax benefit from employee stock plans of $109 million, and deferred income taxes of $61 million. In addition, our deferred revenue increased by $319 million and income taxes payable increased by $56 million. We expect operating cash flow to continue to be positive in the future.

      Net cash provided by operating activities during fiscal 2004 resulted largely from net income of $371 million, plus non-cash depreciation and amortization charges of $117 million and the income tax benefit from employee stock plans of $67 million. Deferred revenue increased by $345 million, partially offset by an increase in accounts receivable of $83 million. In addition, income taxes payable increased by $54 million.

      Net cash provided by operating activities during fiscal 2003 resulted largely from net income of $248 million, plus non-cash depreciation and amortization charges of $103 million and the income tax benefit from employee stock plans of $40 million. Deferred revenue increased by $223 million, partially offset by an increase in accounts receivable of $48 million.

      Net cash used in investing activities during fiscal 2005 was primarily the result of payments for business acquisitions of $424 million and net purchases of short-term investments of $143 million.

      Net cash used in investing activities during fiscal 2004 was primarily the result of net purchases of short-term investments of $332 million, payments for business acquisitions of $287 million, and capital expenditures of $111 million.

      Net cash used in investing activities during fiscal 2003 was primarily the result of payments for business acquisitions of $376 million and net purchases of short-term investments of $323 million.

      We expect to continue our investing activities, including investments in short-term instruments. Furthermore, cash reserves may be used for strategic acquisitions of software companies or technologies that are complementary to our business.

      During fiscal 2005, we repurchased 7.8 million shares under our stock repurchase authorization approved by our Board of Directors, at prices ranging from $21.05 to $30.77 per share, for an aggregate amount of $192 million. In addition, during fiscal 2005, we received $160 million from the sale of our common stock through employee benefit plans.

      During fiscal 2004, we received $189 million from the sale of our common stock through employee benefit plans. In addition, we repurchased 3.0 million shares under our stock repurchase authorization approved by our Board of Directors, at prices ranging from $19.52 to $20.82 per share, for an aggregate amount of $60 million.

      During fiscal 2003, we received $138 million from the sale of our common stock through employee benefit plans. In addition, we repurchased 8.8 million shares at prices ranging from $6.99 to $7.49 per share, for an aggregate amount of $64 million.

      On January 16, 2001, our Board of Directors replaced an earlier stock repurchase authorization with a new authorization to repurchase up to $700 million of Symantec common stock, not to exceed 60.0 million shares, with no expiration date. On January 20, 2004, our Board of Directors increased the dollar amount of our stock repurchase authorization from $700 million to $940 million, without any specific limit on the number of shares to be repurchased. On October 19, 2004, our Board of Directors increased the dollar amount of our stock repurchase authorization by $300 million, without any specific limit on the number of shares to be repurchased. In connection with the stock repurchase authorizations, we have a repurchase plan under Rule 10b5-1 to facilitate stock repurchases up to $60 million per quarter. Pending the completion of the proposed merger with VERITAS, we will be subject to a regulatory limitation that limits the level of quarterly repurchases allowed.

      On March 28, 2005, the Board of Directors increased the dollar amount of authorized stock repurchases by $3 billion effective upon completion of the VERITAS merger, without any specific limit on the number of shares to be repurchased. We expect to repurchase shares pursuant to this authorization for cash as business conditions warrant between the date of the completion of the merger and March 31, 2006. Excluding the post-merger authorization, as of March 31, 2005, $475 million remained authorized by our Board of Directors.

Contractual Obligations

      The contractual obligations presented in the table below represent our estimates of future payments under fixed contractual obligations and commitments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our information within the context of our consolidated financial position, results of operations, and cash flows. The following table summarizes our fixed contractual obligations and commitments as of March 31, 2005:

      On December 16, 2004, we announced a definitive agreement with VERITAS under which we would acquire all of the outstanding stock of VERITAS in exchange for 1.1242 shares of Symantec common stock for each outstanding share of VERITAS common stock. The transaction is subject to customary closing conditions. Under certain terms specified in the merger agreement, Symantec or VERITAS may terminate the agreement and as a result either Symantec or VERITAS may be required to pay a $440 million termination fee to the other party in certain circumstances.

      During the March 2005 quarter, we entered into a development agreement in the amount of $22 million in connection with the refurbishment of a building in Dublin, Ireland. Payment of this amount is contingent upon the achievement of certain agreed-upon milestones. As none of these milestones have been reached as of March 31, 2005, there is no accrual relative to the $22 million commitment included in our liabilities on our Consolidated Balance Sheet as of March 31, 2005.

      We have certain royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally based on a dollar amount per unit shipped or a percentage of underlying revenue and has not been included in the table above. Certain royalty commitments have minimum commitment obligations; however, as of March 31, 2005 all such obligations are immaterial.

      As permitted under Delaware law, we have agreements whereby we 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 indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is not limited; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion or all of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.

Newly Adopted And Recently Issued Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 123R, Share-Based Payment, which requires companies to measure and recognize compensation expense for all stock-based payments at fair value. SFAS No. 123R is effective for annual periods beginning after June 15, 2005 and, thus, will be effective for us beginning with the first quarter of fiscal 2007. We are currently evaluating the impact of SFAS No. 123R on our financial position and results of operations. See Stock-Based Compensation in Summary of Significant Accounting Policies for information related to the pro forma effects on our reported net income and net income per share when applying the fair value recognition provisions of the previous SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

      In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets — An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions. SFAS No. 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153 did not have a material impact on our consolidated financial position, results of operations, or cash flows.

      In October 2004, the FASB issued Emerging Issues Task Force Issue No., or EITF, 04-1, Accounting for Preexisting Relationships between the Parties to a Business Combination, which provides new guidance for the accounting for preexisting relationships between the parties to a business combination. Additionally, EITF 04-1 includes additional disclosure requirements for business combinations between parties with a preexisting relationship. EITF 04-1 is effective for fiscal periods beginning after October 13, 2004. The adoption of EITF 04-1 did not have a material impact on our consolidated financial position, results of operations, or cash flows.

      In June 2004, the FASB issued EITF 02-14, Whether an Investor Should Apply the Equity Method of Accounting to Investments Other Than Common Stock. EITF 02-14 addresses whether the equity method of accounting applies when an investor does not have an investment in voting common stock of an investee but exercises significant influence through other means. EITF 02-14 states that an investor should only apply the equity method of accounting when it has investments in either common stock or in-substance common stock of a corporation, provided that the investor has the ability to exercise significant influence over the operating and financial policies of the investee. The accounting provisions of EITF 02-14 are effective for reporting periods beginning after September 15, 2004. The adoption of EITF 02-14 did not have a material impact on our consolidated financial position, results of operations, or cash flows.

      In March 2004, the FASB issued EITF 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which provides new guidance for assessing impairment losses on investments. Additionally, EITF 03-1 includes new disclosure requirements for investments that are deemed to be temporarily impaired. In September 2004, the FASB delayed the accounting provisions of EITF 03-1; however, the disclosure requirements remain effective for annual periods ending after June 15, 2004. The adoption of the disclosure provisions of EITF 03-1 did not have a material impact on our consolidated financial statements. We do not expect the accounting provisions of EITF 03-1 to have a material impact on our consolidated financial position, results of operations, or cash flows.

Business Risk Factors

      The following risk factors present certain risks relative to Symantec without giving effect to the proposed merger with VERITAS. We have provided in the joint proxy statement/prospectus that was first mailed to our stockholders on May 23, 2005, under the caption “Risk Factors — Risks Related to Symantec After the Merger,” risks that we believe may apply to Symantec and VERITAS operating as a combined company if the merger is completed. The joint proxy statement/prospectus is included in our Registration Statement on Form S-4 which is on file with the Securities and Exchange Commission.

      There are numerous risks associated with our recent entry into an agreement to merge with VERITAS. On December 16, 2004 we announced that we had entered into an agreement to merge with VERITAS in a transaction where VERITAS would become our wholly-owned subsidiary and the outstanding shares of VERITAS common stock would convert into the right to receive shares of our common stock representing approximately 40% of our outstanding shares following the merger. There are numerous risks associated with our having entered into this agreement, including the following:

      We cannot assure you that all conditions to the merger will be completed and the merger consummated.  The merger is subject to the satisfaction of closing conditions, including the approval of our and VERITAS’ stockholders, and we cannot assure you that the merger will be completed. In the event the merger is not completed, we may be subject to many risks, including the costs related to the proposed merger, such as legal, accounting, and advisory fees, which must be paid even if the merger is not completed, or the payment of a large termination fee to VERITAS under specified circumstances. If the merger is not completed, the market price of our common stock could decline.

      Completion of the merger may result in dilution of net income per share.  The completion of the merger may not result in improved net income per share of Symantec or in a financial condition superior to that which we would have achieved on a stand-alone basis. The merger could fail to produce the benefits that we anticipate, or could have other adverse effects that we currently do not foresee. In addition, some of the assumptions that we have relied upon, such as the achievement of operating synergies, may not be realized. In this event, the merger could result in a reduction of our net income per share as compared to the net income per share that we would have achieved if the merger had not occurred.

      If we and VERITAS fail to successfully integrate our operations, the combined company may not realize the potential benefits of the merger.  If the merger is completed, the integration of Symantec and VERITAS will be a time consuming and expensive process and may disrupt our operations if it is not completed in a timely and efficient manner. If this integration effort is not successful, our results of operations could be harmed, employee morale could decline, key employees could leave, and customers could cancel existing orders or choose not to place new ones. In addition, we may not achieve anticipated synergies or other benefits of the merger. Following the merger, Symantec and VERITAS must operate as a combined organization utilizing common information and communication systems, operating procedures, financial controls, and human resources practices. We may encounter the following difficulties, costs, and delays involved in integrating these operations:

      If the combined company’s operations after the merger do not meet the expectations of existing customers of Symantec or VERITAS, then these customers may cease doing business with the combined company altogether, which would harm our results of operations and financial condition.

      Costs associated with the merger are difficult to estimate, may be higher than expected, and may harm the financial results of the combined company.  We have incurred substantial direct transaction costs associated with the merger and additional costs associated with consolidation and integration of operations and we expect to continue to incur substantial costs for these purposes. If the total costs of the merger exceed estimates or the benefits of the merger do not exceed the total costs of the merger, our financial results could be adversely affected.

      Fluctuations in our quarterly financial results have affected the price of our common stock in the past and could affect our stock price in the future. Our quarterly financial results have fluctuated in the past and are likely to vary significantly in the future. If our quarterly financial results or our predictions of future financial results fail to meet the expectations of securities analysts and investors, our stock price could be negatively affected. Any volatility in our quarterly financial results may make it more difficult for us to raise capital in the future or pursue acquisitions that involve issuances of our stock or securities convertible into, or exercisable for, our stock. You should not rely on the results of prior periods as predictors of our future performance.

      Factors associated with the conduct of our business may cause fluctuations in our quarterly financial results. A number of factors associated with the operation of our business may cause our quarterly financial results to fluctuate, including our ability to:

      Quarterly changes in our financial results could cause the trading price of our common stock to fluctuate significantly.

      Factors associated with our industry and the markets for our products may cause fluctuations in our quarterly financial results. A number of factors associated with our industry and the markets for our products, many of which are outside our control, may cause our quarterly financial results to fluctuate, including:

      Any of the foregoing factors could cause the trading price of our common stock to fluctuate significantly.

      The timing of orders by customers and channel partners may cause fluctuations in our quarterly financial results. The timing and amount of orders by customers and channel partners and seasonality in the buying patterns of customers may cause our quarterly results to fluctuate. The risk of quarterly fluctuations is increased by the fact that a significant portion of our quarterly net revenues has historically been generated during the last month of each fiscal quarter. Most resellers have tended to make a majority of their purchases at the end of a fiscal quarter. In addition, many enterprise customers negotiate site licenses near the end of each quarter. Due to the unpredictability of these end-of-period buying patterns, forecasts may not be achieved, either because expected sales do not occur or because they occur at lower prices or on terms that are

less favorable to us. If we do not achieve our forecasted results for a particular quarterly period, our stock price could decline significantly.

      Accounting charges may cause fluctuations in our quarterly financial results. Our financial results have been in the past, and may continue to be in the future, materially affected by non-cash and other accounting charges, including:

      Our proposed merger with VERITAS would result in increases in the foregoing types of charges. In particular, we expect to record approximately $3 billion of intangible assets, including acquired product rights, in connection with the merger on which we will be required to record future amortization charges. We also expect to record stock compensation expense related to the stock options to purchase VERITAS common stock assumed by us. The foregoing types of accounting charges may also be incurred in connection with other business acquisitions. The price of our common stock could decline to the extent that our financial results are materially affected by the foregoing accounting charges.

      Our markets are competitive and our financial results and financial condition could be adversely affected if we are unable to anticipate or react to this competition. Our markets are competitive. If we are unable to anticipate or react to competition or if existing or new competitors gain market share, our sales may decline or be impaired and we may experience a decline in the prices we can charge for our products, which could adversely affect our operating results. Our competitive position depends on several factors, including:

      Our competitors include or may include the following:

      Microsoft has added security and remote access features to new versions of its operating system products. In addition, Microsoft has recently announced the acquisition of companies that offer security products that compete more directly with our security products. Microsoft’s recent acquisitions include a provider of server-based antivirus, antispam, and content filtering products, and a provider of antispyware and other Internet security products. In addition, Microsoft has recently announced and has launched the internal testing of an online suite that includes automated protection, maintenance, and performance tuning. This consumer subscription service, Windows OneCare, is expected to be a fee-based service available to the general public by the end of calendar 2005. Microsoft has also recently introduced a free antispyware product for the consumer market. In the future, Microsoft may offer additional security features or products that compete with our security products.

      Many of our strategic partners offer software products, and customers may prefer to purchase software and hardware that is produced by the same vendor. In addition, these vendors may choose not to offer our products to their customers or to limit our access to their hardware platforms. Similarly, some software vendors may choose to bundle their software with their own or other vendors’ software or may limit our access to standard product interfaces and inhibit our ability to develop products for their platform.

      Several of our current and potential competitors have greater financial, technical, sales, marketing, and other resources than we do and consequently may have an ability to influence customers to purchase their products instead of ours. Our future and existing competitors could introduce products with superior features, scalability, and functionality at lower prices than our products, and could also bundle existing or new products with other more established products in order to compete with us. Our competitors could also gain market share by acquiring or forming strategic alliances with our other competitors and ISPs such as AOL and Comcast. In addition, because new distribution methods offered by the Internet and electronic commerce have removed many of the barriers to entry historically faced by start-up companies in the software industry, we may face additional sources of competition in the future. If we do not adapt our business in the face of this competition, our business and operating results may be harmed.

      Because we derive a majority of our license revenues from sales of a few product lines, any decline in demand for these products could severely harm our ability to generate revenues. We derive a majority of our revenues from a limited number of software products, including our antivirus and Internet security products. In addition, our software products are concentrated within the markets for data security. Net revenues from sale of our antivirus products within our Consumer Products and Enterprise Security segments represented 51%, 55%, and 51% of our total net revenues for fiscal 2005, 2004, and 2003, respectively. Net revenues from sales of our Norton Internet Security product within our Consumer Products segment represented 18%, 12%, and 7% of our total net revenues during fiscal 2005, 2004, and 2003, respectively. As a result, we are particularly vulnerable to fluctuations in demand for these products, whether as a result of competition, product obsolescence, technological change, budget constraints of our potential customers, or other factors. If our revenues derived from these software products were to decline significantly, our business and operating results would be adversely affected.

      There is uncertainty as to whether or not we will be able to sustain the growth rates in sales of our products, particularly our consumer security products. Over the last several quarters, we have experienced a higher than expected rate of growth in sales of our consumer security protection products, and we expect that we will not be able to sustain this high growth rate on a consistent basis. We believe that consumer security protection sales have been spurred by a number of factors, including increased broadband usage and increased awareness of security threats to consumer systems, including several well publicized viruses. The impact of these factors may diminish over time with greater market penetration, and it is possible that our growth rates in sales of consumer security protection products may decline.

      If we are unable to develop new and enhanced products that achieve widespread market acceptance, we may be unable to recover product development costs, and our earnings and revenues may decline. Our future success depends on our ability to address the rapidly changing needs of our customers by developing and introducing new products, product upgrades, and services on a timely basis. We have incurred, and we will need to continue to incur, significant research and development expenditures in future periods as we strive to remain competitive. New product development and introduction involve a significant commitment of time and resources and are subject to a number of risks and challenges, including:

      If we are not successful in managing these risks and challenges, or if our new product introductions are not technologically competitive or do not achieve market acceptance, we will have expended substantial resources and capital without realizing sufficient revenues in return, and our business and operating results could be adversely affected.

      We have grown, and may continue to grow, through acquisitions that give rise to risks and challenges that could adversely affect our future financial results. We have in the past acquired, and we expect in the future to acquire, other businesses, business units, and technologies. Acquisitions involve a number of special risks and challenges, including:

      Integrating acquired businesses has been and will continue to be a complex, time consuming, and expensive process. To integrate acquired businesses, we must implement our technology systems in the acquired operations and integrate and manage the personnel of the acquired operations. Our success in completing the integration of acquired businesses may impact the market acceptance of such acquisitions, and our willingness to acquire additional businesses in the future. Other challenges of integration include our ability to incorporate acquired products and business technology into our existing product lines, including consolidating technology with duplicative functionality or designed on a different technological architecture, and our ability to sell the acquired products through our existing or acquired sales channels. We also must effectively integrate the different cultures of acquired business organizations into our own in a way that aligns common interests. Further, the difficulties of integrating acquired businesses could disrupt our ongoing business, distract our management focus from other opportunities and challenges, and increase our expenses and working capital requirements.

      Any of the foregoing and other factors could harm our ability to achieve anticipated levels of profitability from acquired businesses or to realize other anticipated benefits of acquisitions. We may face difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions. Mergers and acquisitions of high technology companies are inherently risky, and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition.

      We have authorized the use of a substantial amount of our cash for the repurchase of our shares, and this use of funds may limit our ability to complete other transactions or to pursue other business initiatives. In March 2005, our board of directors approved the expansion of our previously authorized share repurchase program by authorizing an additional $3 billion of cash to be used for this purpose following completion of our merger with VERITAS. With this increase, we have approximately $3.5 billion of funding authorized for the repurchase of shares under this program. We expect to repurchase shares for cash as business conditions warrant between the date of the completion of the merger and the end of our fiscal year 2006, which ends on March 31, 2006. The full implementation of this repurchase program will use a significant portion of our cash reserves. This use of cash could limit our future flexibility to complete acquisitions of businesses or technology or other transactions or make investments in research and development, new employee hiring, or other aspects of our operations that might be in our best interests, or could require that we borrow money or issue additional equity securities for such purposes. Any incurrence of debt may not be on terms favorable to us and could result in our being subject to covenants or other contractual restrictions that limit our ability to take advantage of other opportunities that may arise. Any such incurrence of debt would likely increase our interest expense, and any issuance of additional equity securities would dilute the stock ownership of existing stockholders. We have in the past repurchased shares under our repurchase program at prices that are higher than the current trading prices of our common stock, and the prices at which we repurchase shares under the expanded repurchase program may exceed the prices at which our shares trade following such repurchases.

      Our international operations involve special 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 operations. We plan to expand our international operations, but such expansion is contingent upon the financial performance of our existing international operations as well as our identification of growth opportunities. Our international operations are subject to risks in addition to those faced by our domestic operations, including:

      A significant portion of our transactions outside of the U.S. are denominated in foreign currencies. Accordingly, our future operating results will continue to be subject to fluctuations in foreign currency rates. Although we hedge against our foreign currency exposure, hedging foreign currency transaction exposures is complex and subject to uncertainty. We may be negatively affected by fluctuations in foreign currency rates in the future, especially if international sales continue to grow as a percentage of our total sales.

      We receive significant tax benefits from sales to our non-U.S. customers. These benefits are contingent upon existing tax regulations in both the U.S. and in the countries in which our international operations are located. Future changes in domestic or international tax regulations could adversely affect our ability to continue to realize these tax benefits.

      If we lose key personnel or fail to integrate replacement personnel successfully, our ability to manage our business could be impaired. Our future success depends upon the continued service of our key management, technical, sales, and other critical personnel. Our officers and other key personnel are employees-at-will, and we cannot assure you that we will be able to retain them. Key personnel have left our company in the past and there likely will be additional departures of key personnel from time to time in the future. 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, and the results of our operations. In addition, the integration of replacement personnel could be time consuming, may cause additional disruptions to our operations, and may be unsuccessful.

      If we are unable to attract and retain qualified employees and manage our employee base effectively, we may be unable to develop new and enhanced products, effectively manage or expand our business, or increase our revenues. Our future success depends upon our ability to recruit and retain highly skilled management, sales, marketing, financial, and technical personnel. However, competition for people with the specific skills that we require is significant. In order to attract and retain personnel in a competitive marketplace, we believe that we must provide a competitive compensation package, including cash and equity-based compensation. The volatility in our stock price may from time to time adversely affect our ability to retain or attract employees. In addition, we may be unable to obtain required stockholder approvals of future increases in the number of shares available for issuance under our equity compensation plans and recent changes in accounting rules will require us to treat the issuance of employee stock options and other forms of equity-based compensation as compensation expense, beginning in the first quarter of fiscal 2007. As a result, we may decide to issue fewer stock options 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.

      If we fail to manage our distribution channels effectively, or if our partners choose not to market and sell our products to their customers, our operating results could be adversely affected. We sell our consumer products to individuals and small offices/home offices around the world through a multi-tiered distribution network. Our products are available to customers through indirect channels that include distributors, retailers, direct marketers, Internet-based resellers, educational institutions, and ISPs, as well as through OEMs. We separately sell annual content update subscriptions directly to end users primarily via the Internet. We also sell some of our products and product upgrades through direct mail/email and over the Internet, in conjunction with channel partners.

      Indirect Sales Channels.  A significant portion of our revenues are derived from sales through indirect channels, including distributors that sell our products to end-users and other resellers. This channel involves a number of special risks, including:

      OEM Sales Channels.  A significant portion of our revenues are 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:

      If we fail to manage our distribution channels successfully, our distribution 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 distribution partners have experienced financial difficulties in the past, and if our partners suffer financial difficulties in the future, we may have reduced sales or increased bad debt expense, which would adversely affect our operating results. In addition, reliance on multiple channels subjects us to events that cause unpredictability in demand. This increases the risk that we may not plan effectively for the future, which could result in adverse operating results in future periods.

      Increased reliance on sales of enterprise licenses may result in greater fluctuations in, or otherwise adversely affect, our financial results. Sales of enterprise licenses through our Enterprise Security segment represent a major portion of our business. Enterprise licensing arrangements involve a longer sales cycle than sales through other distribution channels, require greater investment of resources in establishing the enterprise relationship, may involve greater pricing pressure, and sometimes result in lower operating margins. The timing of the execution of volume licenses, or their non-renewal by large customers, could cause our results of operations to vary significantly from quarter to quarter and could have a material adverse impact on our results of operations. In addition, longer license periods impede our ability to increase prices due to increased costs and may adversely impact our operating margins.

      A significant portion of our revenues is derived from sales by our direct sales force to enterprise customers. There is a substantial amount of training required for sales representatives to become productive and that training must be updated to cover new and revised products. If we are unable to maintain an adequate direct sales force, it could have a material adverse impact on our sales and results of operations.

      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, we have received claims that we have

infringed the intellectual property rights of others. As the number of products in the software industry increases and the functionality of these products further overlap, we believe that we may become increasingly subject to infringement claims, including patent, copyright, and trademark infringement claims. We have received several trademark claims in the past and may receive more claims in the future from third parties who may also be using our name or another name that may be similar to one of our trademarks or service marks. We have also received patent infringement claims in the past and may receive more claims in the future based on allegations that our products infringe upon patents held by third parties. In addition, former employers of our former, current, or future employees may assert claims that such employees have improperly disclosed to us the confidential or proprietary information of these former employers. Any such claim, with or without merit, could:

      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. Also, these third parties may from time to time receive claims that they have infringed the intellectual property rights of others, including patent and copyright infringement claims, which may affect our ability to continue licensing their software. Our inability to use any of this third party software could result in shipment delays or other disruptions in our business, which could materially and adversely affect our operating results.

      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. Our software and underlying technology are proprietary. We seek to protect our proprietary rights through a combination of confidentiality agreements and procedures and copyright, patent, trademark, and trade secret laws. However, all of these measures afford only limited protection and may be challenged, invalidated, or circumvented by third parties. Third parties may copy aspects of our products or otherwise obtain and use our proprietary information without authorization. Third parties may also develop similar or superior technology independently, including 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 United States, and we may be subject to unauthorized use of our products in those countries. Any legal action that we may bring to protect proprietary information could be expensive and may distract management from day-to-day operations. Unauthorized copying or use of our products or proprietary information could result in reduced sales of our products.

      Although we are unable to quantify the extent of piracy of our software products, software piracy may depress our net revenues. While this would adversely affect revenues domestically, lost revenues are believed to be even more significant outside of the United States, particularly in countries where laws are less protective of intellectual property rights. We engage in efforts to educate consumers on the benefits of licensing genuine products and to educate lawmakers on the advantages of a business climate where intellectual property rights are protected, and we cooperate with the Business Software Alliance and the Software & Information Industry Association in their efforts to combat piracy. However, these efforts may not affect the piracy of our products.

      Our products are complex and operate in a wide variety of computer configurations, which could result in errors or product failures. Because we offer very complex products, undetected errors, failures, or bugs may occur, especially when the products are first introduced or when new versions are released. Our products often are installed and used in large-scale computing environments with different operating systems, system management software, and equipment and networking configurations, which may cause errors or failures in

our products or may expose undetected errors, failures, or bugs in our products. Our customers’ computer environments are often characterized by a wide variety of standard and non-standard configurations that make pre-release testing for programming or compatibility errors very difficult and time-consuming. In addition, despite testing by us and by others, errors, failures, or bugs may not be found in new products or releases until after commencement of commercial shipments. In the past, we have discovered software errors, failures, and bugs in certain of our product offerings after their introduction and have experienced delayed or lost revenues during the period required to correct these errors.

      Errors, failures, or bugs in products released by us could result in negative publicity, product returns, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers or others. Many of our end-user customers use our products in applications that are critical to their businesses and may have a greater sensitivity to defects in our products than to defects in other less critical software products. In addition, if an actual or perceived breach of information integrity 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 products could be harmed. Alleviating any of these problems could require significant expenditures of our capital and resources and could cause interruptions, delays, or cessation of our product licensing, which could cause us to lose existing or potential customers and would adversely affect our operating results.

      Most of our license agreements with customers contain provisions designed to limit our exposure to potential product liability claims. It is possible, however, that a court could rule that these provisions are unenforceable. If a customer is successful in proving its damages and a court does not enforce our protective provisions, it could prove expensive and time-consuming to defend against these claims, and we could be liable for the damages suffered by our customers and other related expenses, which could adversely affect our operating results.

      Increased customer demands on our technical support services may adversely affect our financial results. We offer technical support services with many of our products. We may be unable to respond quickly enough to short-term increases in customer demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by competitors or successfully integrate support for our customers. Further customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results.

      We have outsourced a substantial portion of our worldwide consumer support functions. As such, we are highly dependent on the on-going business success of the companies with whom we have contracted to provide these services. If these companies experience financial difficulties, do not maintain sufficiently skilled workers and resources to satisfy our contracts or otherwise fail to perform at a sufficient level under these contracts, the level of support services to our customers may be significantly disrupted, which could materially harm our relationships with these customers.

      Our inability to timely distribute our products and services over the Internet, including security patches and content updates, could adversely affect our business. Our ability to maintain and increase the speed with which we provide services to customers and to increase the scope of these services is limited by and dependent upon the speed and reliability of the Internet. We are increasingly reliant on the Internet as a means to distribute our security patches and content updates to our customers. Accordingly, if we, or our customers, are unable to utilize the Internet due to a failure of technology or infrastructure, terrorist activity, or other reasons, our ability to provide services may suffer, which could lead to a decrease in revenues.

      Our software products and Web site may be subject to intentional disruption, which could adversely impact our reputation and future sales. Although we believe we have sufficient controls in place to prevent intentional disruptions, we expect to be an ongoing target of attacks specifically designed to impede the performance of our products. Similarly, experienced computer programmers may attempt to penetrate our network security or the security of our Web site and misappropriate proprietary information or cause interruptions of our services. Because the techniques used by such computer programmers to access or sabotage networks change frequently and may not be recognized until launched against a target, we may be

unable to anticipate these techniques. Our activities could be adversely affected, and our reputation and future sales harmed, if these intentionally disruptive efforts are successful.

      Our stock price may be volatile in the future, and you could lose the value of your investment. The market price of our common stock has experienced significant fluctuations in the past and may continue to fluctuate in the future, and as a result you could lose the value of your investment. The market price of our common stock may be affected by a number of factors, including:

      The stock market in general, and the market prices of stocks of technology companies in particular, have experienced extreme price volatility, which has adversely affected and may continue to adversely affect the market price of our common stock for reasons unrelated to our business or operating results.

      Factors outside of our control may adversely affect our operations and operating results. Our operations and operating results may be adversely affected by many different factors which are outside of our control, including:

      Any of these factors could result in a loss of revenues and/or higher expenses, which could adversely affect our financial results.

      If the carrying value of our long-lived assets is not recoverable, an impairment loss must be recognized which would adversely affect our financial results. We will evaluate our long-lived assets, including property and equipment, goodwill, acquired product rights, and other intangible assets, whenever events or circumstances occur which indicate that these assets might be impaired. For example, we estimate that we will record approximately $9 billion of goodwill as a result of our merger with VERITAS and may record additional

goodwill in connection with future acquisitions. Goodwill is evaluated annually for impairment in the fourth quarter of each fiscal year, regardless of events and circumstances. We will continue to evaluate the recoverability of the carrying amount of our long-lived assets, and we may incur substantial impairment charges, which could adversely affect our financial results.

      Our effective tax rate may increase or fluctuate, which could increase our income tax expense and reduce our net income. Our effective tax rate could be adversely affected by several factors, many of which are outside of our control, including:

      We are exposed to market risk related to fluctuations in market prices, interest rates, and foreign currency exchange rates. We use certain derivative financial instruments to manage these risks. All financial instruments used are in accordance with our global investment policy and global foreign exchange policy. We do not use derivative financial instruments for trading purposes.

      We also hold equity interests in several privately-held companies. These investments were recorded at cost, and are classified as other long-term assets on the Consolidated Balance Sheets. These investments are inherently risky and we could lose our entire investment in these companies. As of March 31, 2005, these investments had an aggregate carrying value of $11 million.

Interest Rate Sensitivity

      We consider investments in highly liquid instruments purchased with an original maturity of 90 days or less to be cash equivalents. All of our cash equivalents and short-term investments are classified as available-for-sale securities as of the balance sheet dates. Our available-for-sale securities are reported at fair market value and any unrealized gains and losses are included as a component in Stockholders’ Equity in Accumulated other comprehensive income on our Consolidated Balance Sheets. Our cash equivalents and short-term investments consist primarily of corporate securities, taxable auction rate securities, U.S. government and government-sponsored securities, and money market funds. The following table presents the fair value and hypothetical changes in fair market values of our significant financial instruments held as of March 31, 2005 that are sensitive to changes in interest rates (in millions):

      The modeling technique used above measures the change in fair market value arising from selected potential changes in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of minus 75 basis points, minus 25 basis points, plus 50 basis points, plus 100 basis points, and plus 150 basis points, which are representative of potential movements in the United States Federal Funds Rate and the Euro Area ECB Rate.

Exchange Rate Sensitivity

      We conduct business in 31 international currencies through our worldwide operations. We believe that the use of foreign exchange forward contracts should reduce the risks that arise from conducting business in international markets.

      We hedge risks associated with certain foreign currency cash, investments, receivables, and payables in order to minimize the impact of changes in foreign currency fluctuations on these assets and liabilities denominated in foreign currencies. Foreign exchange forward contracts as of March 31, 2005 were as follows (in millions):

      We believe that these foreign exchange forward contracts do not subject us to undue risk from the movement of foreign exchange rates because gains and losses on these contracts are offset by losses and gains on the underlying assets and liabilities. All contracts have a maturity of no more than 35 days. Gains and losses are accounted for as Interest and other income, net each period. We regularly review our hedging program and may make changes as a result of this review.

Annual Financial Statements

      See Part IV, Item 15 of this Annual Report on Form 10-K.

Selected Quarterly Data

      We have a 52/53-week fiscal accounting year. Accordingly, we have presented quarterly fiscal periods, comprised of 13/14 weeks, as follows: