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Symantec (NASDAQ:SYMC)

Q1 2013 Earnings Call

July 25, 2012 8:00 am ET

Executives

Helyn Corcos - Vice President of Investors Relations

Stephen M. Bennett - Chairman and Member of Compensation Committee

James A. Beer - Chief Financial Officer and Executive Vice President

Enrique T. Salem - Chief Executive Officer, President and Director

Analysts

Brad A. Zelnick - Macquarie Research

John S. DiFucci - JP Morgan Chase & Co, Research Division

Walter H. Pritchard - Citigroup Inc, Research Division

Adam H. Holt - Morgan Stanley, Research Division

Philip Winslow - Crédit Suisse AG, Research Division

Raimo Lenschow - Barclays Capital, Research Division

Aaron Schwartz - Jefferies & Company, Inc., Research Division

Robert P. Breza - RBC Capital Markets, LLC, Research Division

Michael Turits - Raymond James & Associates, Inc., Research Division

Gregg Moskowitz - Cowen and Company, LLC, Research Division

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Edward Maguire - Credit Agricole Securities (NYSE:USA) Inc., Research Division

Daniel T. Cummins - ThinkEquity LLC, Research Division

Operator

Good day, and welcome to Symantec's First Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Helyn Corcos, Vice President of Investor Relations. Please go ahead, ma'am.

Helyn Corcos

Thank you. Good morning, and thank you for joining our call to discuss our first quarter results for fiscal 2013. With me today are Steve Bennett, Symantec's newly appointed Chairman, President and CEO; and James Beer, Symantec's Executive Vice President and CFO. In a moment, I will turn the call over to Steve. He will make a few opening remarks, then James will provide quarterly highlights and review our financial results as well as guidance assumptions as outlined in the press release. This will be followed by a question-and-answer session.

Today's call is being recorded and will be available for replay on Symantec's Investor Relations website. A copy of today's press release and supplemental financial information are posted on our website. And a copy of today's prepared remarks will be available shortly after the call is completed.

Before we begin, I'd like to remind you that we provide year-over-year constant currency growth rates in our prepared remarks unless otherwise stated. Earnings-per-share growth rates are provided on an as-reported basis only. We use our foreign currency rules of thumb in our guidance section for all constant currency year-over-year growth rates. For the June 2012 quarter, the actual weighted average exchange rate was $1.28 per euro and the end-of-period rate was $1.27 per euro, compared to the guided rate of $1.32. For the June '11 quarter, the actual weighted average was $1.44 per euro, and the end-of-period rate was $1.45.

We've included a summary of the year-over-year constant currency and actual growth rates in our press release tables and in our supplemental information, which are available on the website. Some of the information discussed on this call, including our projections regarding revenue, operating results, deferred revenue, amortization of acquisition-related intangibles and stock-based compensation for the coming quarter, contain forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statement. Additional information concerning these risks and uncertainties can be found in the company's most recent periodic reports filed with the U.S. Securities and Exchange Commission. Symantec assumes no obligation to update any forward-looking statements.

In addition to reporting financial results in accordance with Generally Accepted Accounting Principles or GAAP, Symantec reports non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in the press release and on our website.

And now, I would like to introduce our CEO, Mr. Steve Bennett.

Stephen M. Bennett

Thanks, Helyn, and good morning, everyone. Thanks, really, for joining us at this rescheduled time. We apologize for the last-minute change, but because of the announcement, we felt it was the right thing to do to make this change on short notice. So I'm really glad to be here on our earnings call and my first day on my new job.

The decision to replace Enrique was a tough one. It was not based on any particular event or issue but one that the board made after reflection on the ongoing company performance. While progress has been made over the last 3 years in many areas, it was the board's decision that making a change now was in the best interest of all of our stakeholders. Enrique has been a significant contributor during his 19 years at Symantec. Throughout his time, and especially during his last 3 years as CEO, Enrique showed an incredible dedication to customers and strong enthusiasm to pursue new emerging opportunities. I want to recognize and thank him for his considerable commitment and wish him the best in the future.

My perspective is while the company has very strong assets, we are underperforming against the opportunities. And I'm very excited about working with our leaders to speed up the pace at which we create value for all of our stakeholders. My first order of business will be to speak with our customers, partners and shareholders, and over the next 90 to 120 days I'm going on a tour to listen, learn and work with the leadership team to figure out the right strategy to leverage all of Symantec resources to accelerate our rate of value creation. Once this tour is completed, I'll share our go-forward strategy to win in the marketplace and how we're going to drive accelerated revenue and profit growth. This is a process I've used before many times in the past. It's been successful, and I look forward to applying this similar playbook at Symantec.

With that, I'll turn the call over to James to review the quarterly highlights and financial details.

James A. Beer

Thank you, Steve, and good morning. Let me start by welcoming you, Steve, to the management team, and I look forward to working closely with you to drive value creation at Symantec. Now, let me start with some highlights from the quarter. Our consumer results were driven by ongoing cross-selling and up-selling. The consumer security products continue to demonstrate best-in-class quality, winning over 250 awards in the past 2 years. Though early in their product life cycle, our newest premium suites, Norton One and Norton 360 Everywhere, have received very positive feedback, with Norton One earning the Editor's Choice Award from PC Magazine. We also refreshed and extended our portfolio to target the growing number of Mac users.

Norton Online Backup and NortonLive solutions maintained their strong performance and continued to be meaningful contributors to the growth of our business. Our Norton Mobile Security solution maintained its leadership position in the mobile security market as we surpassed Lookout as the top-grossing security app in the Google Play marketplace. While still a nascent market, our products continue to receive top reviews, with Norton Mobile Security earning 4.4 stars in Google Play. We also signed new Norton Mobile Security partnerships with several leading wireless retailers and carriers in all 3 regions.

On the enterprise side, our backup, archiving and eDiscovery solutions continue to drive momentum. Our enterprise backup business continues to be driven by customers' desire to minimize complexity and backup challenges without complicating recovery. With 3 Best of VMworld awards, Symantec is the industry leader in VMware and Hyper-V backup. Only Symantec offers a single product capable of providing true individual file recovery, deduplication and policy management across the VMware, Hyper-V and traditional physical servers.

Let me spend a moment on an area where we didn't execute to our high standards on a new product launch. While we delivered a much improved user interface For Backup Exec, we excluded specific functionality that customers still required. As such, we have now reinstated this functionality to further simplify the backup process. We expect it will take 2 to 3 quarters to get Backup Exec back on track.

Our backup appliance business is gaining significant traction and has been well received by customers and the industry alike. Our 5220 appliance won the Backup and Recovery Award at Microsoft's Best of TechEd 2012 event. In the June quarter, we delivered our first appliance for the midmarket, and we continued to grow our Appliance business by expanding our portfolio into additional geographies.

The quality of our endpoint protection product, SEP 12, continues to garner industry acclaim. Third-party research has confirmed that SEP 12 uses less computing power to provide greater protection than competitive offerings. In addition, at the Gartner Security & Risk Management Summit, the quality of SEP was identified as a primary threat to our competitors.

Trust Services, our SSL certificate business, had another strong quarter. We continue to differentiate our premium and value SSL brands, driving growth in both market segments. We've also simplified and streamlined our online enrollment process, which will be rolled out to other geographies throughout the year.

Our Data Loss Prevention solutions saw strong growth across all of our geographies, including an increased appetite for DLP in Europe. We are winning competitive bids by demonstrating our market-leading capability to protect sensitive information from the desktop to the server. We rolled out DLP for tablets in fiscal 2012 to accommodate the breadth of devices in use and plan to extend support to the iPhone later this year.

eDiscovery and cloud-based archiving exceeded our expectations this quarter, as we leveraged the scope and scale of the Symantec sales force. Both products were named leaders in their respective Gartner Magic Quadrants as customers reported that our solutions were easy to buy, implement and use.

User authentication continued its strong growth in the first quarter. We continue to gain market share as customers choose our Software-as-a-Service-based authentication solution for its ease of use and best-in-class security. As governments and businesses deliver more online services requiring security, we expect to see continued growth for these services.

Leveraging our user authentication technology, our security for the cloud solution, O3, signed its first large enterprise customer and continues to garner significant attention. Enterprises are rapidly shifting their software needs to the cloud, and the security and visibility O3 offers addresses a critical customer need.

We made significant progress towards developing the first complete enterprise mobility solution, including device and application management, data protection and full compliance capabilities. While we work towards integrating these best-of-breed capabilities, we continue to receive positive feedback from customers.

Moving now to the financial details. We posted better-than-expected first quarter results to each of our key financial metrics for which we guide: revenue, deferred revenue and EPS.

GAAP revenue totaled $1.67 billion, an increase of 4% versus the June 2011 period. Our Clearwell and LiveOffice acquisitions together accounted for $24 million of total revenue. Our organic constant currency revenue growth rate for the June quarter was 1% year-over-year. Despite the U.S. dollar strengthening by approximately 11% against the euro year-over-year, our results were better than expected. Total foreign currency movements negatively impacted revenue growth by 3 percentage points, driving a reported revenue growth rate of 1%.

Our subscription business continues to grow. In constant currency, our license revenue declined 6%, while content and maintenance revenue grew 2%. Subscription revenue, which includes our consumer, authentication, MSS and Software-as-a-Service offerings, grew 10% and accounted for 44% of total revenue compared to 42% of revenue in the year-ago period. Enterprise subscriptions, which exclude our consumer offerings, grew 24% and accounted for 14% of total revenue as compared to 12% of revenue in the year-ago period.

The Consumer business generated revenue of $521 million, up 2% year-over-year, driven by upselling customers to our premium suites and growing our emerging businesses, such as Online Backup, NortonLive Services and our mobile applications.

The Storage and Server Management segment generated revenue of $584 million, an increase of 1% as compared to the June 2011 quarter, driven by continued growth in our backup and archiving business. Revenue from the Information Management business, which includes our backup archiving and eDiscovery offerings, increased 6% year-over-year, driven by our appliances, cloud-based archiving and eDiscovery solutions. Revenue from the storage and availability management business declined 8% year-over-year. This business continues to be highly profitable and generates strong cash flow for the company.

The Security and Compliance segment generated revenue of $501 million, up 10% year-over-year, as our endpoint protection business continues to gain market share with enterprise customers. Our authentication services and data loss prevention solutions continued to post double-digit growth.

This is the first quarter of year-over-year growth for our Services business since we transitioned our consulting services to specialized partners. Our Services business generated revenue of $62 million, up 1% year-over-year.

Turning now to total company margins. Consistent with the growth we are experiencing in our subscription and appliance businesses, non-GAAP gross margin declined 140 basis points to 84.3%, as higher costs are associated with these businesses, a trend we expect to continue going forward. Non-GAAP operating margin was 26.1%, down 60 basis points compared to the June 2011 quarter. Operating margins were better than we expected in the June quarter due to lower-than-expected OEM fees which accounted for approximately $0.01 of benefit to EPS. In addition, ongoing cost controls decreased expenses as we continued to tightly manage our expense structure.

Improved operating leverage from better-than-expected revenue positively impacted EPS by approximately $0.02. Net income of $309 million resulted in fully diluted non-GAAP earnings per share of $0.43. Continued growth in subscriptions and maintenance contributed to deferred revenue growth of 5% year-over-year to total $3.75 billion.

We exited the June quarter with $4.1 billion in cash, cash equivalents and short-term investments, which was an increase of 79% year-over-year, driven primarily by the proceeds we received from our $1 billion senior note offering on June 14 and the sale of our 49% stake in the Huawei-Symantec joint venture. As we exited the June quarter, approximately 47% of our cash balance resided in the U.S., which includes the $1 billion in net proceeds from our June debt offering that will be used to retire our $1 billion convertible notes maturing in June of 2013. Excluding this $1 billion, approximately 30% of our cash balance resides in the U.S.

We continued repurchasing our shares during the quarter, spending $301 million of our domestic cash to repurchase 19 million shares at an average price of $15.59. Foreign currency movements negatively impacted operating cash flow by $12 million year-over-year. Cash flow from operating activities for the June quarter totaled $340 million.

Now I'd like to spend a few minutes discussing our guidance for the September 2012 quarter. Given the recent strengthening of the U.S. dollar relative to other currencies, we expect GAAP revenue for the September 2012 quarter to be in the range of $1.635 billion to $1.665 billion dollars. We expect year-over-year revenue to be down 1% to 3% on an as-reported basis and up 1% to 3% in constant currency. Approximately 76% or $1.25 billion of our September quarter revenue is estimated to come from the balance sheet. LiveOffice is expected to contribute between $7 million and $8 million to our September quarter revenue.

As a result of raising $1 billion in senior notes during June, our interest expense for the next 4 quarters will be higher by $8 million per quarter. This will decrease EPS by $0.008 per quarter for a total of approximately $0.03 of dilution through June of 2013. GAAP earnings per share are estimated to be between $0.15 and $0.19 as compared to $0.24 in the year-ago period. Non-GAAP earnings per share are estimated to be between $0.35 and $0.39, down 10% to flat on an as-reported basis. GAAP deferred revenue is estimated to be between $3.49 billion and $3.55 billion. We are expecting deferred revenue to be up 1% to 3% on an as-reported basis and up 3% to 4% in constant currency.

I'd like to remind everyone that the September quarter typically produces the lowest quarterly operating cash flow of each year. Lastly, our guidance assumes an exchange rate of $1.23 per euro versus the weighted average rate of $1.41 and the end-of-period rate of $1.34 per euro in the September 2011 quarter. Our $1.23 per euro assumption reflects a decrease of 13% from our weighted average rate in the year-ago period and a decrease of 4% sequentially. Our guidance assumes an effective tax rate of 28.5% and a common stock equivalents total for the quarter of approximately 710 million shares.

And now, I'll turn it over to Helyn so that we can start taking some of your questions.

Helyn Corcos

Thank you, James. Operator, will you please begin polling for questions?

Question-and-Answer Session

Operator

[Operator Instructions]

Helyn Corcos

While the operator is polling for questions, I'd like to update you on our upcoming conference events. We will be presenting at the Citi Technology Conference on September 5 in New York City, and we'll be reporting our fiscal second quarter results on October 24. For a complete list of all of our investor-related events, please visit our Investors section of the Investor Relations website. Operator, we're ready to take our first question.

Operator

And our first question will come from Brad Zelnick with Macquarie.

Brad A. Zelnick - Macquarie Research

Steve, I appreciate the need to do some initial fact-finding over the next several months and go out and do the tour that you spoke of, but are there any observations as Chairman that you can share and any obvious changes that could be made to drive shareholder value?

Stephen M. Bennett

Brad, I think the answer is -- I debated whether to put this in the script or not. In the employee communication, what we're saying is a two-prong approach. While we spend 90 to 120 days working through to make sure that we have the right strategy to lead the security market in the future, to win in the mobile-connected virtual world like we won in the desktop PC world, we're also going to be making -- we're going to learn a lot of things in that process that we'll make action-oriented decisions as soon as we run into. I don't know exactly what those are. I don't come in to the job with some clarity on that, but rest assured that I want to make a difference quickly in Symantec and help energize the place and make the kind of decisions that are going to help us accelerate value creation. So it's a two-prong approach. While we're working on the strategy, we will also be making shorter-term decisions. But I can't give you any clarity around what those will be today.

Brad A. Zelnick - Macquarie Research

And just a follow-up for James. James, if I look at -- you mentioned in your prepared remarks that cross-selling was strong in the quarter, but if I look at the percentage of deals with both storage and security, it seems to be at an all-time low. Is there something about the coordination of the sales effort that might've changed, and do you still believe that Symantec has the right offering to be successful in the market in terms of going to market with both halves of the offering?

James A. Beer

Yes, Brad, I think our sales force absolutely continues to make more progress in terms of the cross-selling effort. I think what we're seeing in the marketplace right now is more, smaller transactions, customers really looking to purchase what they need for their immediate term rather than some of the broader transactions that we've seen in prior quarters. So I think that's just a reflection of the macro environment.

Operator

We'll take our next question from John DiFucci with JPMorgan.

John S. DiFucci - JP Morgan Chase & Co, Research Division

First question is for Steve. Steve, I appreciate that it's probably too early to say exactly what you're going to do, but one of the things whenever we see a change at the helm like this, there's always a high probability or high risk for disruptions in the business. And I guess, just a question, what you're going to do to try to offset that, at least over the next couple of quarters?

Stephen M. Bennett

Well, I think the advantage I have coming in from the Chairman role is I've been working and getting to know the management team over the last couple of years. And there's a lot of really positive things going on here. I'm quite excited about some of the new product launches that we've just launched. So I think it's too early to speculate, because I think it's -- there's going to be a lot of subtle things that have to change and evolve. This is an evolution, not a revolution. And so maybe I'll learn some things that as we go forward that we'll have to change, but I don't sense a big amount of disruption. I think we have a very strong leadership team. I compare this to what I saw when I came to Intuit in 2000, and I actually think Symantec has a lot of capabilities in place that we had to build at Intuit. So I don't see a lot of disruption, but we'll see and deal with that.

John S. DiFucci - JP Morgan Chase & Co, Research Division

And if I might change, I guess just a question on guidance. It looks pretty modest here, and probably appropriately. But does that have something to do with some of the change here? And I guess, what's behind us? Is it more about it's pretty much flattish revenue, and, I guess, kind of constant currency up 1% to 3%. But is there increased concerns about the economy? Are there -- it looks like Europe actually was up on a constant-currency basis or EMEA, which is interesting. I guess can you comment about that, about the macro environment and how that may be affecting guidance?

James A. Beer

Obviously, as we go through our usual guidance process, we think about the macro environment, the customer environment, so forth and we feel as though we've appropriately taken that into account in both the absolute guidance and the way in which we guide. You, I'm sure, have noticed we've broadened out our ranges, for example. We've also acknowledged that foreign exchange is a material headwind here, both year-over-year and sequentially as well by the looks of things. So I think those are important factors to really focus on as you think through the guide that we've offered this morning.

Operator

We'll take our next question from Walter Pritchard with Citi.

Walter H. Pritchard - Citigroup Inc, Research Division

James, just a follow-up on Brad's question on the multiproduct transactions. It does look like independent of size, both of those metrics, the 300 and under and the $1 million and over, took a pretty dramatic downtick. And, I mean, was that a factor of Backup Exec in the quarter? Just trying to maybe put a finer point on what drove that, because it was fairly steady, and those metrics did both take a tick-down.

James A. Beer

I think it's also fair to say that year-over-year, the June quarter was a tough compare for us on these large deal statistics. We had some quite robust statistics this time a year ago. And so Backup Exec, as we've acknowledged in our commentary that we have challenges there. And so yes, that's a component of it. But again, I see a clear shift towards people buying more so for their immediate needs rather than making longer-term commitments, necessarily, at this point in time. And I don't think that's surprising, given where we are in the overall environment.

Walter H. Pritchard - Citigroup Inc, Research Division

And then just a question on Europe. I guess maybe also for you, James. It looks like your performance was pretty good, especially in light of what's going on over there, and was just wondering if you could put a little bit finer point on either country commentary or some regional commentary around what you saw in the different geographies and if it varied between consumer and enterprise and so forth.

James A. Beer

Yes, we were very pleased with the continued performance of the U.K. and also in our emerging EMEA regions. So Middle East, parts of Africa, parts of Eastern Europe. Not surprisingly, Southern Europe was much tougher for us, and I was pleased by what we saw, both on the consumer and enterprise side of the house.

Operator

Our next question comes from Adam Holt with Morgan Stanley.

Adam H. Holt - Morgan Stanley, Research Division

Steve, welcome back into the game. I guess my first question is for you. Obviously, you've answered the operational questions, but can you just refresh us on your philosophy around capital distribution and capital structure?

Stephen M. Bennett

I think that it's emerged over time. I think that at the end of the day, and we've had this discussion at the board meeting in my previous role, to be clear on our capital allocation philosophy is to first define how much money we need to run the company, kind of a minimum cash threshold. And then above that, I think a lot of companies now that I've been involved in, are evaluating the best way to return excess cash to shareholders. And so that's a discussion that we're having. We don't have any decisions or any change in direction at this point, but that's something. And then I think obviously, we want to look hard at adjusted rate of return on acquisitions that is accretive to our portfolio. I give Enrique and James and team credit for really putting a lot more rigor in the acquisition process at Symantec over the last couple of years, both on the pricing, the negotiations and the integration, and I think the results have been better. So I think that we're going to continue to think about how we return excess cash to shareholders. I think the company will continue to produce excess cash and that we will produce more cash than we will spend on acquisitions. So the real question is what's the most thoughtful way to return that to shareholders? And I think that will be an ongoing discussion for the board, and if we change some thoughts on how to deal with that, I think we'll let you know. But it is a topic that's on the agenda for discussions.

Adam H. Holt - Morgan Stanley, Research Division

And then maybe a question for you, James. If you look at your license revenue growth in the last several quarters, it had been kind of stable, and obviously, it's starting to move around a little bit. Is the -- license revenue growth down 6% in constant currency. Is that something that starts to improve as you get better mix around some of the emerging products? Or is there something else that you have to do at this point to get that business or that part of business, I should say, reaccelerated?

James A. Beer

Adam, in terms of the license revenue growth percentage year-over-year, obviously, we saw a bounce-back from what we were recording in the last quarter. So that was important to see, and clearly, we'll continue work on building that statistic. But once again, I really emphasized in my remarks the growth of subscription, because more of our new offerings into the market are on a subscription basis. And so, we're really pleased by the strong growth that we continue to see on our subscription business basically, overall, but we particularly also break out the enterprise subscription, which is growing at quite a nice 20%-plus pace.

Adam H. Holt - Morgan Stanley, Research Division

So should we be thinking about that business, then, as continuing to decline going forward? Or is there a level at which there's kind of a run rate where it stabilizes, the license side?

James A. Beer

Clearly, when you think about the license drivers of the business, it's largely on the enterprise side, and products like Backup Exec, as we work to get that back on track, that will be a relatively license-revenue-rich product, as is today NetBackup and so forth. And you know how we're focused on building our appliance activities around both of our backup product areas. So I think there are opportunities to continue to build on the year-over-year license revenue statistics. But I would just really emphasize the continued growth of the subscription business on the enterprise side. And of course, largely, the Consumer business is a subscription service as well.

Operator

Our next question is Phil Winslow with Crédit Suisse.

Philip Winslow - Crédit Suisse AG, Research Division

Steve, just a question for you. As you start to evaluate the business here, are all sort of strategic options on the table and in your mind, i.e., sale, divestiture, or do you actually believe that the current structure of Symantec is the appropriate one right now?

Stephen M. Bennett

Phil, I think it's a good question, and I guess my view on this is one of the advantages of coming in from the outside is you start with a clean sheet of paper. And that's why I'm so excited about the listening tour where I'll be out talking to investors, customers, partners, employees. But I don't feel constrained at all by anything. And I think that will be healthy for our company, to take a clean sheet of paper, zero base to look, and I have lots of questions to ask. And I'm going to collect a lot of data. But I'm completely wide open, I start with a clean sheet of paper. But the most important thing is strategy, and structure follows strategy. So this is an important thing for me to really get right, working with the team. I'm not going to figure it out by myself, but we have a team of really smart people here, and I think this fresh look will really help us. But I will tell you that I don't feel at all constrained by the board. I took this job because I believe that our assets are better than our performance, and I need to learn what's getting in the way. And I think there's strategic clarity that we should be able to bring that will improve our focus and execution and resource allocation, and as I said earlier, so that we get back to the leadership position in the future, mobile-connected world that we had in the desktop PC world. That's my goal, is to bring a strategy to the table in the next 90 to 120 days that positions us for that position in the future.

Philip Winslow - Crédit Suisse AG, Research Division

And then just one quick follow-up. I have a lot of questions today on sort of the cross-sell percentage of this company. Do you actually believe a single sales force for both storage and security is appropriate? Or is that a to be determined?

Stephen M. Bennett

My view on this is I think it's a good use case to run through the previous thing. I think it will be a great thing for me to learn, and I think we want to be sensitive, obviously, to any transition. I don't think you'll see any big decisions like that until we have a strategy. But structure and resource allocation follow strategy. So let's figure out where we're winning and why, where we're losing and why and then make thoughtful, informed decisions based on which hills we're going to charge and then get everybody mobilized to charge those hills, and we're going to pick hills that we believe we can win based on the competitive environment, the resources and assets we have, and then we'll make whatever decisions are required, whether organizational, resource allocation, sales force alignment, to get all of our employees in the boat rowing in the same direction. And I think that clarity of purpose will produce better results than what we've produced over the last few years.

Operator

Our next question comes from Raimo Lenschow with Barclays.

Raimo Lenschow - Barclays Capital, Research Division

A lot of my questions have been answered, but can we go quickly, James, maybe into the cost base? You've done consistently better on the sales to market side than we have kind of anticipated. Can you just talk a little bit of, as you go through the transition, as you kind of see how the top line is growing, how you think about cost in that process?

James A. Beer

Well, Bill Robbins and his team have been focusing for some years now on gradually improving their productivity and so forth, and I'm pleased by the progress that we've all made together. We certainly feel as though there are opportunities for continued improvement over time. Some of what Bill has been focusing on of late is redesigning the way we have our specialist teams in the marketplace in order to gather together what were previously separate specialist groups into larger groups that focus on related technologies. And so it's things like that, that are allowing us to be more effective in terms of serving our customers and getting a greater productivity as a result. And of course, the best leverage here in terms of productivity is by growing the top line.

Operator

Our next question comes from Aaron Schwartz with Jefferies.

Aaron Schwartz - Jefferies & Company, Inc., Research Division

I think a question that's come up a little bit that some people may have is, Steve, whether this is sort of a transitory role for you or this is sort of a long-term position that you're going to commit to. And in this process, I know you pointed out that this was not sort of based on any singular event but whether sort of full sort of outside candidate was also looked at.

Stephen M. Bennett

The answer to that is no, because the board believed that because of my experience and track record and knowledge of the company that I was the right CEO. Some background on that is they did look at and did a dry search, actually, before the decision was made to promote Enrique 3 years ago, and it just turns out coincidentally, I was on the short list for that decision 3 years ago, so although that search was never commenced and the decision was made to hire Enrique. So no, I'm the CEO, and I have told my wife, Ma [ph], "This might be a 5-year deal, it might be a 3-year deal, but the commitment I made to the board when I took the job is that I will do this job until I'm comfortable we're in a position and have either an internal candidate, preferably, that -- like we did at Intuit, turning over the reins to Brad Smith. I will not turn over the leadership of this company until I've been able to get it on a course I'm comfortable with, and my goal would be to stay on as Chairman at that point. So I have a long-term involvement. And in the mix of what the roles are and how that shapes out will be determined by our ability to make sure we've got the leadership in place to help the company achieve the strategy we're going to set out."

Aaron Schwartz - Jefferies & Company, Inc., Research Division

And then maybe a follow-up question for James. You made some comments about sort of the seasonality to the cash flow here in the second quarter, but would you expect still that for the year that the cash flow could be sort of flattish with prior year?

James A. Beer

Well, we don't guide to the full year for cash flow, but I'll just remind everyone, obviously, over the last couple of years, we've grown cash flow consistently, and obviously, that's a key goal for the company overall.

Operator

Our next question comes from Robert Breza with RBC Capital Markets.

Robert P. Breza - RBC Capital Markets, LLC, Research Division

James, maybe just a couple of questions. You talked about as it relates to the segments of the business, Backup Exec being kind of 2- to 3-quarter decision process that we got to work through here. It looks like the Consumer business, we all know the PC market doesn't look very good, at least for the next quarter or 2. Can you just talk to us directionally on how you see, given that you have the deferred revenue visibility that maybe we don't have, how do you expect the Consumer business to trend over the next -- or over the year, I should say? And then maybe just as a backup question to the prior analyst, when you think about cash flow, you're coming in at $340 million and seasonally low, it would appear difficult that it would actually grow year-on-year just given where DSOs are at 34 days for the quarter. Any other finer points would be helpful.

James A. Beer

First of all, in terms of the Consumer business, we're very pleased by the ongoing growth there. Janice and her team have put together a remarkable string of quarters of continued and consistent growth. And obviously, we are very focused on continuing that. Underlying that is the fundamental strength of our core products that get terrific reviews consistently, while at the same time, we're very much focused on bringing new services to market, as we talked about in our prepared remarks, very much oriented around the mobile world. And I think underpinning all of that is the investment that we've put in recent years into the e-commerce engine, which offers us such greater granularity into pricing, the behavior of different segments of our customer base on a geographic basis. So we're able to continue learning, continue developing in order to allow us this consistent ability to upsell and cross-sell, which drives the growth as we, in essence, seed and develop our place in the newer mobile space. So that's the strategy. We're absolutely focused in continuing on that, and as we execute, I think there's more opportunity for the Consumer business to grow. So we're pleased by how that is consistently developing. Now in terms of cash flow, obviously, I did note earlier how we had an FX headwind. And certainly, looking at how the euro is going, it's perfectly plausible that there would be those continuing headwinds for the next several months. We'll see. But that said, we're very focused on continuing to grow the top line. We've got a strong set of products and services that are very relevant to the marketplaces in which we operate. Yes, we have a problem in the Backup Exec area. We're really focused on sorting that out. And with that focus, with that level of effort, we'll keep building the cash flow. And it is volatile, more volatile than an accounting metric, obviously, in any 1 quarter, but I think we have plenty of opportunity ahead.

Operator

Our next question comes from Michael Turits with Raymond James.

Michael Turits - Raymond James & Associates, Inc., Research Division

Steve, a question for you, then a follow-up for James. Stephen, obviously the business has been pretty flat. If you had to take a look and say what you thought were the areas that would be most likely to drive reaccelerated growth near term and those that would be most likely to drive it long term, what would those be?

Stephen M. Bennett

I think that's too early for me to answer that question, because I'm going to start from a customer-back -- Intuit has been successful by starting with the important customer problem and then working back. So I'm going to actually -- in my listening and learning tour, I'm going to be out talking to futurists and people that are very "where is the world going in the future?" And I'm going to start from the market back and as we build the strategy. So I actually prefer not to articulate, because I want to start with customer and projected future needs and work back and then organize around the company around what are the mountains that we are going to charge, what are the hills we're going to take? And so I actually think it would be inside out to think about products and services today. And I actually think that's part of our opportunity, is to rethink strategically the whole way the company approaches the market, come market back and be unconstrained by existing structures and existing way we think about things. And so I'm actually quite excited to go on this listening tour and get opinions from all over the world on the most important customer problems that we can solve better than anybody else and make money. And if we do that right and focus on those critical areas, I think we'll accelerate the rate of value creation for our investors and our other stakeholders. So I'm going to defer that, but that will be a robust discussion in the next 30 -- 90 to 120 days or whenever I get to the point to share that. And you guys, I'm sure, will be, other than our employees, some of the first ones to hear where we come down.

Michael Turits - Raymond James & Associates, Inc., Research Division

And James, we had down bookings this quarter and last quarter, and it looks like the guidance is for slightly down next. I think the hope had been in the second half, you would start to see bookings positive in terms of growth. Do you think we're still on track to that?

James A. Beer

Well, I wouldn't try to go beyond the guidance that we've already offered this morning, but as you look at the implied billings statistics, if you do the foreign exchange adjustments and just really focus on the organic statistics, the June quarter implied billings were up 4% year-over-year. So that was an important rebound from where we had been in the previous 2 quarters, where we were down year-over-year in both of those.

Operator

Our next question will come from Gregg Moskowitz with Cowen & Company.

Gregg Moskowitz - Cowen and Company, LLC, Research Division

Steve, you had mentioned earlier that Symantec has a lot of capabilities in place that did not exist at Intuit when you joined 12 years prior. Just wondering if you could elaborate on that and perhaps provide some examples of what you think currently works very well at Symantec, whether from an R&D, distribution or operational standpoint?

Stephen M. Bennett

I think, Gregg, it's an excellent question, and let me just give you a couple of specific answers, because as you know, what you see in the depth of level of knowledge you see as a board member or a Chairman is a lot different than you see as a CEO. So there's some things I know, but there's a lot of things I don't know. The board actually went through and did a tour on Monday of the -- I think it was Monday now -- of the new e-commerce platform that Janice and her team built that James referred to earlier, and I saw just an incredible e-commerce platform, that I say this is an unbelievable asset in our A-B testing capability, and the team that is running that is very exciting. Frankly, my conclusion on that is, "Boy, there's a lot of companies out there that should be using this, because it's better than anything I'd seen. And so what do you do with that now as a company? I mean, we've built it internally. It's awesome." So that's the kind of thing, Gregg, that I've got to learn more about and say, "Hey, this is an asset. Are we really leveraging this in the way that we could, or we are just using it internal?" Now there may be something there. There may not be anything there. So it's another -- I'd give Enrique credit for. I mean, we have a performance management system for the organization here that's pretty robust. That's pretty important as we move forward. So there's organizational things, there's assets in the customer and marketing area. I think there's a lot of questions. To be honest, I bet I have the same questions that many of you would have, and those are all things I'm going to take on in this listening and learning tour, and I'll be much better prepared to talk about that as we get together here again toward the end of the year, 120 days from now. But I'm actually looking forward to that discussion, because I think that I'll be much better informed now than I am then -- or then than I am now.

James A. Beer

And just building on one of those points, Steve, one of the areas where the team is already under way around thinking -- the next step, if you will, is around the e-commerce engine, where we see potential to bring it also over onto the enterprise side of the business, particularly focusing around small-, medium-size businesses where you put a lot of the same types of needs and capabilities. So there are -- I think there's some very interesting opportunities in the areas like that.

Operator

Our next question comes from Steve Ashley with Robert W. Baird.

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

I just was going to go back to the "blank sheet of paper" kind of line of questioning, and I believe the mission, I don't know if it's written into the formal mission statement, has been to protect information. Do you go to the field in just fact finding kind of under that existing mission statement or is that mission statement subject to revision in the future after you go through this process?

Stephen M. Bennett

I think it's a very thoughtful question. When I -- all I can do is give you kind of my experience at Intuit, which is the most relevant, which the mission statement is revolutionize people's lives by solving important problems. And it was an unconstraining mission statement, because there's a lot of problems, but the logic there was uncover important customer problems that we can solve better than anybody else in the world and make money. And that's the same logic I'm going to apply at Symantec. I learned that from Scott Cook and Bill Campbell at Intuit. I think it was very powerful, simple, strategic logic. Symantec has very strong assets in many areas. The customers' needs are changing dramatically and radically. As I said, our goal is to lead in the future mobile interconnected world like we did on the desktop PC world. So I believe, and I'm very sensitive, we did not change the mission at Intuit, but it was broad enough to allow us to change the strategy. And so I don't know, to be honest. I don't believe we will be constrained by the mission of Symantec. I'd like to be consistent there if it does not constrain us, but that's one of the questions I'm going to have to figure out. I will not be constrained in how I think about finding important customer problems that we can solve better than anybody else in the world and make money. And that will be the foundation for the strategy this company is going to move forward on.

Operator

Our next question comes from Ed Maguire with CLSA.

Edward Maguire - Credit Agricole Securities (USA) Inc., Research Division

I had a question really for James. As -- you had mentioned that enterprise subscriptions saw 22% growth, and this really goes back to the question about the mix between products and subscriptions and the transitions toward more cloud-based solutions. Could you comment on how this is -- how you're seeing this impact the mix in the business? And for Steve, how this broader transition may inform the questions that you ask and how you may be looking to derive value out of some of the assets like the e-commerce platform?

James A. Beer

First of all, the enterprise subscriptions business actually grew 24% year-over-year, so a good strong number, and where we're in the financial model seeing this manifest itself is a continued increase in the volume of our in-period revenue that is rolling straight off the balance sheet. So in this September quarter, we're going to have 76% of our revenue coming off the balance sheet. So that's been a steady increase over the last couple of years, and I would expect that to continue as we bring more service offerings into the marketplace.

Stephen M. Bennett

So Ed, strategically, again, I love the question, and I really appreciate the strategic nature a lot of these questions you folks are asking today, because I really do enjoy that kind of dialogue with our investors or our analysts. Look, the best thing I can do, again, is bring a philosophy that was developed at GE and applied at Intuit, which is I don't start with whether it's subscription or whether it's desktop or license. I start with how do we solve an important customer problem? How do we deliver that product or service? I actually call it an offering so we don't have a debate of whether it's a product or a service. And how do we be ubiquitous to how customers want to buy? Because I'm indifferent if they bought TurboTax on the web or as a Software-as-a-Service or on a desktop. What I want to do is win the product offering game, solve that problem than anybody else, however they want to buy it. Is it a license? Is it an appliance? Is it a Software-as-a-Service subscription? I want to be better than anybody else at meeting that customer need, and I don't want to start with growing -- now I think the outcome of that, based on the secular trends, is we're going to see more Software-as-a-Service and all that. But I want to be the best appliance solution and the best license solution and the best subscription-offering Software-as-a-Service solution and let customers pick what's right for them. And small businesses, consumers, different enterprises might pick different solutions. If you had to say, "How are you going to prioritize?" or, "What's your thinking going into it?" Look, I think we want to skate to where the puck's going, not to where it's been. And so we're going to be much more focused on the emerging and the future needs, and I think we're going to have to accelerate our pace and rate of change away from winning in the past to winning in the future. And that may take some courage and some leadership from our team. But that's what we're going to do.

Operator

Our next question comes from Dan Cummins with ThinkEquity.

Daniel T. Cummins - ThinkEquity LLC, Research Division

I'd like to ask if there's a possibility that you'll be back sooner than 90 or 120 days? It seems to me many of us on this call would say it won't take you that long to find out what the value perception is among your customers for signature-based anti-malware. So is there a chance you'd be back sooner just to let us know, perhaps, a binary statement about whether the plan will be incremental or bold with respect to your portfolio? And the second question's specifically on the Consumer business. Do you have a strong hypothesis or opinion about the changing risk profile of your Consumer business right now with respect to Windows 8 or Microsoft's willingness now to, perhaps, move strategically against its hardware partners and maybe close that platform up a good deal and resemble Apple much more?

Stephen M. Bennett

Look, I think we have to figure out a way to leverage our assets, do something that other folks can't do. And I think our products have big advantages over a single-platform system today. And I think what we will try and -- I mean, I think the answer -- first, let me answer your question. I think the answer is no. We will make some decisions that you might see or hear about that to me are more strategy-independent. But I think those will be more on the shorter-term value creation. I think the big, big leverage point and the big decisions will be sorting through the reality of how the market's evolving, to your point, and figuring out where to place our chips. So I would defer, I don't think there's going to be any big strategic decisions. And look, I want to travel around the world. I'm going to go to India, I've got to visit all of our customers. So there's a lot for me to learn not just about the strategy, but part of this is learning the organization's capability to execute the new strategy and make them part of the process. So I think there's something more than just figuring out the strategy. I think it's all part of getting the organization mobilized and starting that [ph] so we can execute the new strategy, however that comes down. So I actually think that's an important part of this process. If it was just the strategy process for presentation, I could do it faster than 90 days. But the big part of this is making sure I'm working the organizational and change-management part of this, which I've got a long track record of doing multiple times, to produce excellent results. And so that's what takes more time than just the strategy. Look, to me it's an integrated process, and that's why it will take the kind of timeframes I talked about.

Helyn Corcos

Thank you, operator. I think that's it.

Stephen M. Bennett

Let me just close to everybody. Thank you. I'm glad to be back in the game. Actually, the last day or so, I realized I might have missed it more than I thought, and I'm quite excited and energized to be back. I'd like to thank all the Symantec employees for delivering a solid quarter, and I look forward to working with all of them to make Symantec continue on the path to accelerate value creation for all our stakeholders. So thanks, and I look forward to our next discussion next quarter or at the appropriate time. Thanks for joining us, again, on short notice. Goodbye.

Operator

Thank you, and that does conclude today's conference. Thank you for your participation.

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