Symantec Corporation (NASDAQ:SYMC)
Annual Stockholders Meeting
October 22, 2013 12:00 pm ET
Daniel Harris Schulman - Non-Executive Chairman, Member of Nominating & Governance Committee and Member of Compensation & Leadership Development Committee
Scott C. Taylor - Executive Vice President, General Counsel and Secretary
Stephen M. Bennett - Chief Executive Officer, President and Director
Good day, and welcome to the Symantec Annual Stockholders Meeting. Today's call is being recorded. At this time, I would like to turn the call over to Dan Schulman, Chairman of the Board of Directors of Symantec Corporation. Please go ahead, sir.
Daniel Harris Schulman
There we go. Perfect. I'm going to start again because we're being recorded here. Good morning, everyone. I'm Dan Schulman, Chairman of the Board of Directors of Symantec Corporation. On behalf of the board, our management team and the employees of Symantec, I'd like to welcome you to our 2013 Annual Meeting of Stockholders. Today's meeting is being recorded, and a replay will be available on the Investor Relations website.
Before proceeding with the business of the meeting, I'd like to first introduce our directors, our 2 nominees for directors and the executive officers here in the room. The other directors here with me today are Michael Brown, Frank Dangeard, Geri Laybourne, David Mahoney, Steve Miller, Paul Unruh and Steve Bennett, who is also our President and Chief Executive Officer. Our 2 board nominees with us today are Anita Sands and Suzanne Vautrinot. The other executives, senior executives from the company with us are: Scott Taylor, our Executive Vice President, General Counsel and Secretary; Helen Corcos, Vice President of Investor Relations; Andrew Del Matto, our Acting Chief Financial Officer, and [indiscernible]
Okay. Also with us this morning are Gabe de la Rosa and Jeffrey Ford of KPMG, our independent registered public accounting firm, and they will be available to answer questions later in the meeting. At this time, Scott Taylor, our Executive Vice President and General Counsel and Secretary, will conduct the formal portion of this meeting and record the minutes; and then Steve Bennett, our President and Chief Executive Officer, will present an overview of Symantec's corporate strategy, and then we will answer any of your questions. Thank you.
Scott C. Taylor
Thank you, Dan, and good morning, everybody. If there are any shareholders who have not registered your attendance at the meeting, please go to the registration desk located at the entrance of the room and register at this time.
Upon registration, you were provided with an agenda for the meeting and the rules of conduct for the meeting. The agenda and rules of conduct are also posted on the Investor Relations website at www.symantec.com/invest. In order to allow for an orderly meeting and commit sufficient time for any questions, we ask that you abide by these rules.
After the proposals are presented, you will be given an opportunity to ask questions regarding the proposal. There will also be a question and answer period for company-related questions after Mr. Bennett's presentation. If you would like to ask a question, please raise your hand, and a microphone will be passed to you. If you are attending the meeting remotely and would like to ask a question, please dial 1(866) 500-0030 or 1 (719) 325-3245, and please use reference number 8757897, which is also posted on the Investor Relations website.
Once you have been recognized, please identify yourself by name and state whether you are a stockholder or hold a proxy of the stockholder. Any such questions will be subject to the rules of conduct for the meeting. We have an affidavit from Broadridge certifying that the stockholders of record as of August 23, 2013, were mailed a notice of internet availability of proxy materials on or about September 3, 2013. The affidavit of mailing and notice will be filed with the minutes of the meeting.
Christopher Hummel from Broadridge has been appointed to serve as inspector of elections. He's coming back. [ph] Mr. Hummel, who's sitting in the back of the room, has taken the oath of office and is prepared to serve. Mr. Hummel has advised me that we have present, in person or by proxy, a sufficient number of shares to constitute a quorum. Accordingly, the meeting is duly constituted, and we may proceed with the business. It is 9:07 a.m. on October 22, and the polls are now open for voting. It will close at the conclusion of the formal portion of the meeting. Until the polls close, any stockholder may revoke or change his or her vote on any matter. However, once the polls are closed, no further ballots, proxies or votes or any revocations or changes will be accepted. [indiscernible] previously voted via the Internet, telephone or mail, you do not need to take any further action. If you didn't previously vote or wish to change your vote, please raise your hand, and we'll provide you with a ballot to vote here this morning. Would anyone like a ballot?
So once you voted, we'll collect the ballots and complete all of the matters on the agenda. Upon receipt of the ballots, the polls will officially close, and we will announce the preliminary results of voting at the end of the formal portion of the meeting.
Proposals and discussions. We have 6 proposals on the agenda today. The first proposal is to elect 10 directors to Symantec's Board of Director. The board's nominees for elections to the board of directors are: Steve Bennett, Michael Brown, Frank Dangeard, Geraldine Laybourne, David Mahoney, Robert Miller, Anita Sands, Daniel Schulman, Paul Unruh, and Suzanne Vautrinot. We did not receive any other nominations for directors.
The second proposal is to ratify the appointment of KPMG LLP to serve as Symantec's independent registered public accounting firm for the 2014 fiscal year. Third proposal is an advisory vote to approve executive compensation. Fourth proposal is to approve our 2013 Equity Incentive Plan. The fifth proposal is to approve an amendment to our 2008 Employee Stock Purchase Plan. This proposal is to approve an amendment to our 2008 Employee Stock Purchase Plans, increase the number of authorized shares, shares issuable thereunder. And finally, the sixth proposal is to approve our amended and restated Senior Executive Incentive Plan in accordance with section 162(m) of the Internal Revenue Code. If you have any questions regarding any of the proposals, please raise your hand. For those on the phone, operator, please provide instructions for posing a question.
Scott C. Taylor
While the operator is polling for questions on the phone, are there any questions in the room on the proposal? Operator, do you have any questions on the phone?
There are no questions at this time.
Scott C. Taylor
As a reminder, we will only address questions related to the proposals now. All other questions will be addressed during the Q&A portion of the meeting following Steve's discussion of the company's priorities. If we have no questions, we will move on to the voting. Stockholders who are voting in person should now mark their ballots on proposals 1 though 6 [indiscernible] the ballot.
Okay. It is now 9:11 a.m. on October 22, and the polls are closed. No additional ballots, proxies or votes, changes or revocations will be accepted. I will now ask Mr. Hummel to give his report on the preliminary voting results.
And just to clarify, as the inspector of elections, I have completed the preliminary tally of the votes. Based on the proxies and ballots received, the preliminary results of the voting are as follows:
Proposal 1. Each of the board's 10 nominees have been elected to the Board of Directors. Each nominee was elected by a majority of the votes cast.
Proposal 2, proposal to ratify the appointment of KPMG LLP to serve as Symantec's independent registered public accounting for the 2014 fiscal year has been approved by the affirmative vote by holders of at least the majority of the shares of the company's common stock, who attended the meeting either in person or by proxy.
Proposal 3. The advisory votes to approve the company's executive compensation has been approved by the affirmative vote by holders of at least a majority of the shares of the company's common stock, who attended the meeting either in person or by proxy.
Proposal 4. The proposal to approve the company's 2013 Equity Incentive Plan has been approved by the affirmative vote by holders of at least the majority of shares of the company's common stock, who attended the meeting either in person or by proxy.
Proposal 5. Proposal to approve an amendment to the company's 2008 employee stock purchase plan has been approved by the affirmative vote by holders of at least a majority of the shares of the company's common stock, who attended the meeting either in person or by proxy.
And, finally, Proposal 6, the proposal to improve the company's amended and restated Senior Executive Incentive Plan has been approved by the affirmative votes by holders of at least majority of the shares of the company's common stock, who attended the meeting either in person or by proxy.
Scott C. Taylor
Thank you, Chris. Final report by the inspector of elections will be filed with the minutes of this annual meeting of stockholders. In addition, we will report the final voting results on our Investor Relations website in the current report on Form 8-K within 4 business days of today. Now, I turn the floor to Mr. Schulman.
Daniel Harris Schulman
Thanks, Scott. This ends the formal portion of our meeting. There being no further business to come before the meeting, the meeting is adjourned. We will now proceed with an overview of Symantec's strategy presented by Steve Bennett, our President and Chief Executive Officer.
Stephen M. Bennett
Good morning, everybody. The world has never needed a stronger Symantec. Given we're not going to share any numbers today but we do -- let me remind everybody that we are going to release our earnings, our second quarter earnings tomorrow. As we think about the world and the way the world is going, I was at the Gartner conference recently, and they talked about the digital industrial revolution. And they talked about how today, we have 2.5 billion Internet-connected devices. And in the year 2020, we expect to have 30 billion Internet-connected devices, a 1200% increase. All of those Internet-connected devices are going to produce data and are going to be new control points that need to be secured in the Internet-of-everything world. Think about the challenges that are going to be required, make to protect information and secure information and data in this world that we're moving into at a rapidly accelerated fashion. That is why the world needs Symantec to make dramatic changes, to be a winner in this future situation.
Last year alone, targeted attacks were up 42%. Bad guys are getting more sophisticated, the environment is more challenging and the complexity is exploding. The consequences of an individual breach are more and more significant. 604,000 people had their lives impacted in a significant way on an average of each individual breach. And we just released the Norton consumer security report that said the economic impact of these bad guys' actions is $113 billion on an annual basis, up year-over-year. This is serious business on the scale of the world, and it's only going to get harder.
So a year ago when I was standing up in front of you, talked about the learning journey I was going on all around the world to talk to customers, employees, partners, industry investors, to learn about all the great things that Symantec has, all the assets we have and all the things we need to do to be a winner in this rapidly changing transforming environment, we announced the new strategy on January of this year that we feel very excited about. We are in the implementation mode on this new strategy, and we couldn't get there through an evolution. It is the company that need to go through a transformation to be a winner in this digital and industrial environment in the year 2020. And so we're taking on massive change to transform this company to make us a better performer for our employees, for our customers, for our partners and for our shareholders. Our fundamental premise of the company is building on our foundation of very strong point solutions.
Industry-leading point solutions and [indiscernible], for instance, of the Gartner Magic Quadrant. That is the foundational strength of our company, and it's a great foundation for me and the team to build on. But in traveling around the world, what I learned is that customers are dying for help, looking for help from suppliers or partners that can do the integration for them to solve their higher-order problem, and I've never seen, as I said in January, such a market with so many unmet or underserved customers needs in my 35 years in business, and they're getting bigger and they're getting harder, and the consequences of the industry not delivering are getting more significant.
So we can -- our first step in changing the world in a positive way is to integrate our offering to solve a higher-end customer problem as opposed to selling individual point solutions. For investors, this is important because it increases our served market. It'll, over time, improve our margins. And I think it will change the basis of competition from a point solution at a time to competing on the basis of bringing all our assets to bear to differentiate ourselves in the marketplace and not let our competitors dictate the basis of competition. So we're very excited and in January announced 10 new offerings, where we would do the integration so that our customers didn't have to. The feedback from our customers on this has been tremendous. And the feedback almost universally is if you can execute against what you're saying, I will buy it. But then we said, "But wait there's even more." Given the complexity of this industry and the challenges and the explosion of information and the sophistication of attackers, we can't -- no company, no matter what they say, can do this by themselves. The industry needs to build ecosystems where we integrate with what other people do to solve these customer problems, nobody can do it on their own. So the third element of our strategy, which is also to expand our served market and to solve even bigger customer problems by partnering with leading third parties to deliver an even bigger solution. I talked to a CIO of a major financial institution in New York about this concept, and he said it's refreshing to have somebody coming in here talking about solving my biggest problems as opposed to me -- selling me your products and services. We're quite excited about this vision for the future for our company, and it's a massive change from selling 150 individual point solutions one solution at a time.
This is probably too busy a picture, but I wanted to just build out the key thought and then build to the key thought. You see some of -- in the foundational elements, some of the examples of our leadership point solutions, NetBackup, DLP, where we have 5x the share of our largest competitor in a fast-growing business. We're the leader in Endpoint Protection and Storage Foundation. This is the foundation to build on. We announced things like our business continuity offering, our mobile workforce productivity, where we take, because mobile is such an important and high focus these days, we take and integrate mobile device management, app management, containerization into one solution, so our customers don't have to integrate 3 different point solutions. We make it easier for our customers to be more productive and more secure. This has been very well received. You can see some of the examples of other situations where we're integrating our technology.
Let me give you an example on this, Data Loss Prevention, which is one of our e-fast growth products. In the past, we sold it as a stand-alone product. What we will do over time is integrate Data Loss Prevention stocks, files or documents that you don't want to leave from leaving. You can't copy them. You can't forward them. You can't paste them. Well, that technology should be integrated into our secure email gateway. It should be on your iPad or on your mobile phone, so that you can control information from leaving, and that's a new way of thinking about leveraging all of our technology to bring real value to the customer. The key point on this for me is you go back to building on our point solutions to building these ecosystems. We need to partners with others because no company can do it on their own. We're going to deploy that effort in 3 different domains. One is information security. We call it unified security, where we integrate what we do with others to deliver security more as a service versus a bunch of point solutions today. The whole way the industry delivers security, in my view, is fundamentally broken and needs to be reimagined, and we want to be part of the crew that's leading that charge.
Another ecosystem we need to build is what we're calling the information fabric. Turns out that the industry today manages information on an application- or server-specific basis. When we think about all of our leading point solutions that collect data, we back up about half the world's information with our NetBackup and Backup Executive products, and it sits in there. We have the leading eDiscovery product, that sits there. We have electronic vaults, EV, that sits there. What our customers are saying is we want to get a holistic picture of all of the information in our environment, so that we can better secure it, we can comply, apply policy compliance to all the information, so that we can better manage, so that we don't have to store it in 15 different storage because it's in all these different applications. So as we talked about this concept, almost all the large customers we talked to says we want to be lighthouse customers and help you with the development of this offering because we're so excited about what you're doing to solve this problem in a different and new way.
Now there's another case where we have to combine what we do to this other data, metadata that companies have that need to be integrated into this information tablet. These are 3- to 5-year journeys that we will start launching new offerings about in the third quarter against. So we have a vision, we're forming partnerships, and we're working hard on executing against the product roadmaps to make these visions a reality. Both of those we have dedicated teams right now working on building and working hard to solve the important customer problems.
The third area is actually more of a concept. We don't have a dedicated team thinking about it, but we're actually going to talk about it at our board meeting today, some of the things we're doing. Here's a simple concept. If you look forward into the Internet of everything 20 billion, 30 billion devices, 30 billion Internet-connected devices, we have great assets to contribute to identity in the future, which is the third ecosystem. You're going to have to certify those devices, and we have the largest certification business in the world in VeriSign that was acquired a few years ago. This is a big opportunity for us.
In addition to certifying devices, we have to authenticate people. And we have to authenticate people in a multi-faster way without passwords. Passwords are not secure, and they're a pain in the butt for people. If everybody's got their multipage passwords and changing them, and it's like my life would be over if somehow I lost my 4-page list of all my passwords. And I guess most of you are in the same boat as me. And it's hard enough just to remember, and they're not secure. So we believe we have assets to combine with other folks. No one can do this on their own to reach out and form partnerships to change the way identity is managed for devices and for individuals in the future to produce a more secured world for people, for companies and for government. And we're really excited about this opportunity, and that's why we're transforming Symantec.
So to convert from that vision to make it a reality we're focused really on 3 priorities. Number one, building these offerings, these products and services, against these visions to deliver real value for our customers and to solve their most important problem. Second, realigning our go-to-market to be right for these, aligned with these new services and the capabilities we're going to require from our channel partners to deliver this value to the marketplace. And third, a concept that we're calling work smart, which is really about improving our execution, speed, quality and efficiency and being easier to do business with.
I could give you a lot of examples of this, but we are not easy enough to do business with. And we have huge hidden factories because we've been running a decentralized fragmented way that got in the way of us consistently executing quickly, effectively, with high quality cost efficiently. And we've got a big opportunity over the next few years to continue to work to streamline, simplify our company, be easier to do business with that we're quite exciting about.
Just a couple of the accomplishments so far from the January announcement. Number one, we took all of our 150-or-so point solutions and we treated them more like a portfolio. And we said, which are the ones we really want to invest in because of the market opportunity, and what are the ones that we need to move resources away to support faster growth in solving customers' future problems versus the past problems? In the past, we test everybody -- every 152 to be the best they could be on their individual basis. We needed to make a big change to manage it as a portfolio, invest where we want to grow and the biggest opportunities and fund other new higher impact customer thing. Second, we announced these 10 new offerings in January that we're very excited about to solve the higher-order customer problem.
And third, we're going to again talk about this one at the board meeting later today. We are working hard, started these discussions, I started them a year ago with key industry players to talk about what we could do to integrate what we do with what they do, to deliver value to customers they'd be willing to pay us for. And we have some announcements coming soon on this path to build ecosystems in these 3 areas we talked about: information fabric, unified security and, ultimately, identity.
And the go-to-market is probably where we've made the most significant changes, many of which occurred in the quarter we just completed. So the first thing we did -- and we were not a leader in this, we were more of a laggard.
On the product side, I believe we're prowling new ground in innovating new solutions that will be industry leading. On this, we're actually following our competitors. We split our sales force into a renewals and a new license organization similar to basically every large software company in the industry.
Second, we built this new centrally managed renewals team. In the past, we were actually high cost and low quality. Our performance on renewals was below norms, and we were doing it with a very high cost business model, paying our sales force in the field commissions and distracting them from getting new license sales.
We also made a change where we changed all of our sales people from being a generalist that sold all 150 of these products into information security or Information Management specialist, a big change, a big transition, but again something, we're very convinced in the long term will be the right thing. We're expanding and enhancing our e-business platform. We had narrow scope and capability in the past, and we've hired somebody, Matt Lynch from Amazon, who's building out our e-business capability, so we will be more Amazon-like, and we think that's another big-growth opportunity for us as a company to better meet our customer needs and drive best to revenue growth.
And finally, we've completely redesigned our channel strategy and our channel program, so that we reward the channel for the value they create, and we're much more selected on how we go to market with our channel partners and build deeper, more win-win relationships. [indiscernible], one of our e-channels partners, is here with us today. Welcome. Glad to see you.
And on the work smart, in simple terms, this is an all-encompassing process. We basically started engaging our front-line employees that do the work every day because those closest to the work, know best how to do it. And it's a big mindset shift but it's something that I've had some experience with, with the Toyota production system and other methodologies to really engaging your workforce to produce better accounts. We've added people with process management capability and expertise, many of which were on the team at Intuit when I was there and came because they wanted to help us transform Symantec. We've actually named process owners for big cross-functional processes like order to cash that we really never had end-to-end ownership with to drive ownership and accountability, and we're starting to see the benefit of that.
And finally, we have a lot of work to do to upgrade our IT quality, to align our quality, our IT infrastructure to these new, simplified processes. And we're so fortunate to have Stephen Gillett, having joined us as COO, who was, in previous life, the CIO of the year at Starbucks. And so another very talented executive that joined 9 months ago who's in the back row here. Wave your hand there. And so we're so glad he's here to help us make this happen.
So let me just close by saying we have in a neighborhood of 20,000 employees at Symantec that wake up every day focused on making the world a safer place by protecting and managing information so people, businesses and countries can live their lives [indiscernible] achieving their goal. Thanks for all of your support, and we're excited about the future. Hopefully, you've a sense of where we're trying to go with the company. And I feel great that we're making progress every day, but this is a marathon, not a sprint, and it's a big transformation we're going through. We love the progress we've made in less than a year. We love the future, and we're excited about bringing us all to reality for our employees, our customers, our partners and our shareholders.
With that, let me open it up to anybody in the audience for any questions. We should ask the operator if she wants to poll for questions. Okay. Operator, could you do that?
Stephen M. Bennett
While we're waiting for that, we have a question in the audience.
I have couple of questions. The first one is regarding the Norton product. I use the Norton 360. It's really excellent, and I like the way it's improved over the years. But what I see is a continuing number of actually increasing free -- or premium model security products continuing. And I was wondering how do you defend against that, and especially because consumer reports have rated [indiscernible] very highly.
Stephen M. Bennett
We won the battle to protect your Windows desktop PC. We won. What we have to do now is reinvent the business to solve the new customer, the new consumer problem, the new small business problems in the future. Now, we're still in the process of reimagining those, and we haven't announced anything. But to me, it ties to this idea of identity. It's about protecting people and their information in a device-independent world, and that's what we're thinking about. Whether you're in your home, in your car, it's about protecting you and your data as opposed to protecting your Windows desktop PC. So that's the vision we have as we move forward. This is a concept at this point. The good news is Norton is a very important business, and we can do a bunch of things to improve our execution in that business. But to be successful long-term and beat off the people you're talking about and win in the market, we have to solve a new problem like mobility in protecting people and their data. So that's what our focus is now. The good news is, the Norton business you still have to protect your PC. So the business isn't going to go away, but it's not a growth business in terms of new PCs. You've all seen the data. But you still have to protect it, so the business doesn't go away. But for us to grow, we've got to solve a new problem, and that's what we focus on.
Logistical question. Today is the day before your next earnings release. Why not have the meeting the day after, so we can have the most up-to-date information?
Stephen M. Bennett
Well, we want you to come and visit us twice. I mean we want you to come today and we want you to call in and talk to us tomorrow. That's a good input. Scott, let's take that as a -- because it is a little bit -- feels odd to me, too. So thank you for that perspective. Operator, anybody on the phone?
There are no questions at this time.
Stephen M. Bennett
Anybody else? All right. Everybody, thank you very much.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!