Symantec writes off $10 million after faulty AV activation

Some customers had to wait before service was activated

Symantec has been forced to write off $US10 million in revenue after a glitch in its sales system prevented some consumers from activating their Norton antivirus software at the time they bought it.

The problem affected less than half a percent of Symantec's customers, CEO Enrique Salem said in an interview. "You'd sign up and there'd be a delay in getting your service activated," he said. "There was just a lag between the front-end system and the back-end system, but it's all been corrected and we've accounted for it."

Symantec has identified the customers affected by the problem and adjusted their accounts accordingly, Salem said. The issue was disclosed Wednesday in Symantec's quarterly earnings announcement.

Starting in November 2005, Symantec began automatically renewing subscriptions for its consumer antivirus product. The company says it keeps customers safe by preventing antivirus signatures from going out of date, but the product has had a few problems too. Symantec paid $375,000 earlier this year to settle a lawsuit brought by the New York attorney general over the practice. The company also faces a class-action suit, brought by a customer who said he was charged for a renewal without notification.

The refund was another piece of mixed news for a flat fiscal second quarter that was more profitable for Symantec than analysts had expected.

Symantec's revenue for the quarter, ended Oct. 1, was $1.48 billion, pretty much level with a year earlier. Hurt by a weakening U.S. dollar, Symantec's consumer and security businesses grew by three per cent and five per cent year-over-year, but its storage and services groups dipped by one per cent and 11 per cent, respectively.

Excluding charges, earnings per share were $0.34 for the second quarter, $0.06 ahead of analyst expectations, as compiled by Thomson Reuters.

Salem said the services group revenue dropped in part because partners are providing more of Symantec's services.

Its profits from three of its recent security acquisitions -- VeriSign, PGP and GuardianEdge -- weren't as high as expected. Symantec had predicted they would add $0.04 per share to its quarterly earnings, but they came in a penny shy of that figure.

Still, Salem said the company's August acquisition of VeriSign's security business is going better than expected, generating $18 million in revenue during the period. "Our team has been working very hard to get the VeriSign, PGP, and GuardianEddge acquisitions integrated," he said.

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Robert McMillan

IDG News Service
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