Symantec 2006 Annual Report Download - page 23

Fluctuations in demand for our products and services are driven by many factors and a decrease in
demand for our products could adversely affect our financial results.
We are subject to fluctuations in demand for our products and services due to a variety of factors,
including competition, product obsolescence, technological change, budget constraints of our actual and
potential customers, level of broadband usage, awareness of security threats to IT systems, and other factors.
While such factors may, in some periods, increase product sales, fluctuations in demand can also negatively
impact our product sales. For example, until recently we had experienced a higher than expected rate of
growth in sales of our consumer security products that we believe was spurred, in part, by several well-
publicized threats to computer security. As consumer attention to security threats fluctuates, the growth rates
in sales of consumer security products have been impacted. If demand for our products declines, our revenues
and gross margin could be adversely affected.
We operate in a highly competitive environment, and our competitors may gain market share in the
markets for our products that could adversely affect our business and cause our revenues to decline.
We operate in intensely competitive markets that experience rapid technological developments, changes
in industry standards, changes in customer requirements, and frequent new product introductions and
improvements. If we are unable to anticipate or react to these competitive challenges or if existing or new
competitors gain market share in any of our markets, our competitive position could weaken and we could
experience a drop in revenues that could adversely affect our business and operating results. To compete
successfully, we must maintain a successful research and development effort to develop new products and
services and enhance existing products and services, effectively adapt to changes in the technology or product
rights held by our competitors, appropriately respond to competitive strategy, and effectively adapt to
technological changes and changes in the ways that our information is accessed, used, and stored within our
enterprise and consumer markets. If we are unsuccessful in responding to our competitors or to changing
technological and customer demands, we could experience a negative effect on our competitive position and
our financial results.
Our traditional competitors include independent software vendors which offer software products that
directly compete with our product offerings. In addition to competing with these vendors directly for sales to
end users of our products, we compete with them for the opportunity to have our products bundled with the
product offerings of our strategic partners such as computer hardware OEMs and ISPs. Our competitors could
gain market share from us if any of these strategic partners replace our products with the products of our
competitors or if they more actively promote our competitors' products than our products. In addition,
software vendors who have bundled our products with theirs 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.
We face growing competition from network equipment and computer hardware manufacturers and large
operating system providers. These firms are increasingly developing and incorporating into their products data
protection and storage and server management software that competes at some levels with our product
offerings. Our competitive position could be adversely affected to the extent that our customers perceive the
functionality incorporated into these products as replacing the need for our products. Microsoft has added
remote access features to its operating systems and has made announcements of actual and anticipated
product features and new product offerings that compete with a number of our product offerings. In addition,
we believe that Microsoft has recently made changes to its operating systems that make it more difficult for
independent security vendors to provide effective solutions for their customers. We could be adversely affected
if customers, particularly consumers, perceive that features incorporated into the Microsoft operating system
reduce the need for our products or if they prefer to purchase other Microsoft products that are bundled with
its operating systems and compete with our products.
Many of our competitors have greater financial, technical, sales, marketing, or other resources than we do
and consequently may have an ability to influence customers to purchase their products instead of ours. We
17