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UNITED STATES

FORM 10-K

(Mark One)

	x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

OR

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to

Commission File Number 0-26247

VERITAS SOFTWARE CORPORATION

Registrant’s Telephone Number, including Area Code: (650) 527-8000

Securities to be registered pursuant to Section 12(b) of the Act: None

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

      Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x  No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

      As of February 28, 2002, 406,738,273 shares of the Registrant’s common stock were outstanding. The aggregate market value of the common stock held by non-affiliates of the Registrant as of February 28, 2002 was approximately $14.4 billion.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of Registrant’s definitive proxy statement, to be delivered to stockholders in connection with the Registrant’s Annual Meeting of Stockholders, are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

      VERITAS, VERITAS Software, the VERITAS logo and our product names are trademarks or registered trademarks of VERITAS Software Corporation in the United States and other countries. Other product names mentioned herein may be trademarks and/or registered trademarks of their respective companies.

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PART I

Item 1. Business

      This annual report on Form 10-K contains forward-looking statements, within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, that involve risks and uncertainties. These forward-looking statements include statements about our revenue, revenue mix, gross margin, operating expense levels, commitments under existing leases, research and development initiatives, sales and marketing initiatives and competitive pressure. In some cases, forward-looking statements are identified by word such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may” and similar expressions. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this annual report on Form 10-K. All these forward-looking statements are based on information available to us at this time, and we assume no obligation to update any of these statements. Actual results could differ from those projected in these forward-looking statements as a result of many factors, including those identified in the section titled “Factors That May Affect Future Results” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere. We urge you to review and consider the various disclosures made by us in this report, and those detailed from time to time in our filings with the Securities and Exchange Commission, that attempt to advise you of the risks and factors that may affect our future results.

Overview

      VERITAS is a leading independent supplier of storage software products and services. Storage software includes storage management and data protection software as well as clustering, replication and storage area networking software. In recent years, storage software has become a critical component in the success of business enterprises. Today, a key competitive factor for many businesses is whether their critical data and the related software applications are protected and available without interruption 24 hours a day, seven days a week.

      VERITAS offers solutions to help solve the problems of today’s data-intensive business environments by providing essential storage software and storage virtualization solutions that enable customers to protect and access their business-critical data. Our products operate across computing environments ranging from the desktop computer to the large enterprise data center, including storage area networks, or SAN, to protect critical data, to provide high availability and to guard against disasters. VERITAS products help businesses make sure that their data is protected, accessible at all times, and can be managed and used in compliance with business policies.

      Demand for storage software products and services is fueled by many factors. These factors include the rapid increase in the number of Internet users and the number of businesses doing business online, the continuing automation of traditional business processes, the ever increasing quantity of data being collected and the need for data to be protected and accessible at all times, particularly in the event of a disaster. Our products help to improve the levels of centralization, control, automation and manageability in computing environments, which allows information technology, or IT, managers to be significantly more effective with constrained human and financial resources. Specifically, our products offer protection against data loss and file corruption, allow rapid recovery after disk or computer system failure, enable IT managers to work efficiently with large numbers of files, and make it possible to manage data distributed on large networks of computer systems without harming productivity or interrupting users. In addition, our products provide continuous availability of data in clustered computer systems that share disk resources to maintain smooth business operations. Our products are highly scalable, allowing our customers to keep up with the growth of data and technologies deployed in their businesses. In summary, our products help our customers manage their data storage in complex and diverse computing environments efficiently and cost-effectively.

      We develop and sell products for most popular operating systems, including various versions of UNIX (including Linux) and Windows. We also develop and sell products that support a wide variety of servers, storage devices, databases and network solutions. Customers use our software solutions in a wide variety of

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Recent Developments

      On December 28, 2001, we acquired The Kernel Group Incorporated, a privately-held software company based in Austin, Texas, for cash. The Kernel Group Incorporated develops and markets enterprise software solutions, including the “Bare Metal Restore” technology that automates recovery of Windows and major UNIX platforms in the event of data corruption or hardware failure. Bare Metal Restore technology helps administrators quickly restore systems, including their configurations and settings, in the event of a server loss. We plan to integrate the Bare Metal Restore technology into VERITAS NetBackup to enhance its recovery capabilities and allow us to deliver a common and enterprise-wide recovery solution to minimize system downtime.

      In December 2001, we entered into an agreement with IBM to deliver storage management solutions for complex multi-vendor storage environments, for customers seeking to implement integrated storage and data infrastructure solutions and obtain those solutions from a single source. Under the agreement, IBM Global Services will add our products to its data infrastructure services for all major platforms — including AIX, Linux, Solaris, HP-UX and Windows. IBM Global Services will provide enterprise consulting, implementation, support and maintenance services as part of its multi-vendor coordinated point of contact for information technology solutions tailored to the specific needs of joint customers. We will provide the full range of our product portfolio to customers of IBM Global Services.

Products

      We offer a wide range of leading storage software products to manage the rapid growth of data and the increasing complexity and size of networked environments that our customers face. Our products allow businesses to improve the management of their data, to protect their data and to increase the availability of their data.

Data protection

      We offer products designed to protect, back up and restore data. Our leading data protection products include:

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File system and volume management

      We offer products designed to improve the manageability and performance of business critical data. Our principal management and performance products include:

Application solutions

      Businesses need integrated solutions engineered to work with specific databases or applications in order to optimize their data availability strategies. Our principal products offering these integrated solutions include:

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Clustering and replication

      We offer products that improve availability of key applications in complex computing environments. These products include:

SAN and Appliance Products

      The widespread use of business computer applications, coupled with the growth of corporate data, has exceeded the ability of current computing architectures to handle availability, scalability and manageability issues. Storage-centric architecture, called storage area networking, or SAN, has emerged to handle these issues. A SAN is a high-speed computing network that directly connects storage hardware devices, such as storage arrays, clustered servers, disk drives and tape drives, to client and server computers. The typical SAN infrastructure is capable of handling more data and transactions faster than a traditional network, can grow along with a business’ needs, and is more cost-effective than traditional network architectures. We are a leading innovator in developing SAN technology designed to reduce the cost and complexity of managing expanding networked storage environments.

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      In addition, dedicated storage appliances are emerging as a solution to data storage needs. VERITAS ServPoint Appliance software transforms Sun servers and Sun or third party storage into dedicated storage appliances for UNIX and Windows NT clients. Open, scalable and highly available, VERITAS ServPoint Appliance software simplifies, consolidates, and reduces the total cost of storage deployment and management. Many of our products listed above are enabled to operate in a SAN environment and we have developed the SAN-specific products listed below:

Services

      We provide a full range of services to assist our customers in assessing, architecting and implementing their storage solutions. Our customer services and support organization provides customers with maintenance, technical support, consulting and training services. We believe that providing a high level of customer service and technical support is critical to customer satisfaction and our success in increasing the adoption rate of our solutions. Most of our customers have support agreements with us that provide for fixed fee, renewable annual maintenance consisting of technical and emergency support, and minor when-and-if-available product upgrades free of charge.

Maintenance and technical support

      We offer seven-day, 24-hour telephone support, as well as electronic mail and fax customer support. Our customers can choose from a variety of support packages to address their specific needs, ranging from one-time incident charges to comprehensive support services with a dedicated single point of contact at VERITAS

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Consulting

      We believe that most customers need assistance before product selection and not just for the implementation of purchased products. Therefore, we offer strategy and analysis consulting services for planning the management and control of enterprise computing in specific customer environments, including SAN environments. For example, we can assist our customers with their business continuity readiness evaluation and their disaster recovery planning. In addition, we offer services to assist customers with product implementation.

Education and training

      We have a worldwide customer education and training organization. We offer training that enables customers to utilize our products, reduces the need for technical support and provides customers with a means to optimize their personnel investment by allowing their technical staff access to high quality, comprehensive instruction. The focus of this organization is aligned with our strategy to offer end-to-end storage software solutions by providing instruction from highly experienced training professionals either at the customer location or at one of our multi-platform classrooms.

Marketing, sales and distribution

      We market our products and related services through original equipment manufacturers, direct sales channels and indirect sales channels such as resellers, value-added resellers, hardware distributors, application software vendors and systems integrators. Some original equipment manufacturers incorporate our products into their products, some bundle our products with their products and some license our products to third parties as optional products. In general, we receive a fee for each sublicense of our products granted by the original equipment manufacturer to third parties. We provide our software products to customers under non-exclusive license agreements, including shrink-wrap or clickwrap licenses for some products. As is customary in the software industry, in order to protect our intellectual property rights, we do not sell or transfer title to our software products to customers. We enter into both object-code only and source-code licenses of our products.

      Our principal original equipment manufacturer relationships are with Compaq, Dell, Hewlett-Packard, IBM, Microsoft and Sun Microsystems.

	•	Compaq. We have granted Compaq rights to distribute VERITAS Volume Manager and VERITAS File System on certain of its operating systems, and to distribute a limited functionality version of Backup Exec into specific systems. Compaq resells our products and services through the Compaq Global Services consulting division. Compaq is not obligated to sell our products or services under these agreements.
	•	Dell. Under our agreements with Dell, Dell sells a specialized version of VERITAS Volume Manager, branded as Dell Open Manage Away Manager, and Dell bundles our clustering software with its products. Dell also serves as an authorized enterprise reseller of our products. Dell is not obligated to sell our products or services under these agreements.
	•	Hewlett-Packard. We enable Hewlett-Packard to offer limited functionality versions and full-featured versions of VERITAS Volume Manager and VERITAS File System with copies of the HP-UX operating system that they sell. We receive no license fees for these limited functionality versions, but we do receive license fees for copies of the full-featured versions that are sold. Hewlett-Packard also serves as a reseller of some of our other products and services, but is not obligated to sell products under our reseller agreements. Under an agreement with Hewlett-Packard, we integrate our support services with Hewlett-Packard’s support services so Hewlett-Packard may provide the combined services to our joint customers. We have dedicated personnel to define and build versions of our products that meet the needs specific to the Hewlett-Packard marketplace and to focus sales and

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		marketing efforts on the Hewlett-Packard sales channel. We cannot assure you that this strategy will be successful. Our relationship with Hewlett-Packard is governed by numerous agreements, which come up for renewal periodically. We cannot predict whether these agreements will be extended, and if they are, whether they will be extended on the same or different terms.
	•	IBM. Under our agreements with IBM, we agreed to port and optimize our set of data availability solutions, including VERITAS Volume Manager and VERITAS File System, to AIX/ Monterey for IBM POWER PC and Intel IA-64 processor-based systems. This relationship is designed to augment our solutions that are already available from VERITAS for the IBM platform. Under our agreements, IBM is not obligated to sell any of our products, and we have not recognized any significant revenue under this agreement to date. We cannot assure you that we will realize any benefits from this arrangement with IBM.
	•	Microsoft. Under our agreements with Microsoft, we agreed to develop a limited functionality version of VERITAS Volume Manager, which Microsoft has called Logical Disk Manager, to be ported to and embedded in version 5.0 of Microsoft’s Windows NT operating system, which now has been released as Windows 2000. We do not receive user license fees for licenses of Logical Disk Manager by Microsoft. Our products may not become available for use in future versions of Windows, and Microsoft is not required to use our products in future versions of Windows. We cannot assure you that we will realize any benefits from the inclusion of these embedded products in Windows 2000 or future versions of the Windows operating system. In addition, we authored a few other customized versions of our products that are packaged with Windows 2000.
	•	Sun Microsystems. We have agreed with Sun Microsystems that Sun Microsystems may bundle a version of VERITAS Volume Manager with some of its storage technologies. We also license full versions of some of our products and add-on modules to Sun Microsystems for bundling with its products. Under these agreements, we granted Sun Microsystems a license to distribute and sub-license VERITAS NetBackup, VERITAS NetBackup Storage Migrator and some of the VERITAS Editions. This license is non-exclusive except with respect to certain named resellers for which Sun Microsystems retained exclusive distribution rights. Sun Microsystems is not obligated to sell any of our products under this agreement. Sun Professional Services provides our packaged professional services as well as our custom consulting services. This is designed to enable Sun Microsystems’ customers and our customers to maximize their system availability through optimal configurations and reliable installations. We cannot assure you that this arrangement will be successful. Our relationship with Sun Microsystems is governed by numerous agreements, which come up for renewal periodically. We cannot predict whether these agreements will be extended, and if they are, whether they will be extended on the same or different terms.

Sales, marketing and support organization

      During 2001, we continued to build our sales, marketing and customer support organization with a focus on delivering our products to resellers, integrators and end users. We have sales subsidiaries and direct sales personnel in North America, South America, Europe and Asia-Pacific. We also have resellers located in North America, South America, Europe, Asia-Pacific and the Middle East.

      We expect to increase the number of our sales, marketing and customer support employees in the future in order to expand our direct sales efforts to resellers and to end users. We may not have the necessary resources to accomplish this. It is also possible that we will not be able to establish and expand these new distribution channels successfully. We expect to hire additional sales employees during 2002. Competition for qualified sales, technical and other personnel is intense, and we may not be able to attract, assimilate or retain additional highly qualified employees in the future.

Customers

      Our software solutions are used by customers in a wide variety of industries, including many leading global corporations and e-commerce businesses. We market and sell our products and services to end user

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Concentration of customers

      In 2001, 2000 and 1999, no customer accounted for more than 10% of our net revenue.

Competition

      The markets in which we compete are intensely competitive and rapidly changing.

      We compete with internal development groups within our original equipment manufacturer partners that provide storage functions to support their systems. These internal development groups have the resources and capability to develop their own storage solutions. Some original equipment manufacturer customers are also our competitors, including Compaq Computer, EMC, Hewlett-Packard, IBM, Microsoft and Sun Microsystems. Relationships between VERITAS and these competitors are complex. While we may compete with them for a share of the market, they also resell our products, and in some cases incorporate our technology into their products. We also may be involved with them in collaborative efforts to address interoperability issues and to set standards for evolving technology.

      In addition, we compete with:

	•	hardware and software vendors that offer data protection;
	•	hardware and software vendors that offer file system and volume management products;
	•	hardware and software vendors that offer clustering and replication products;
	•	hardware and software vendors that offer storage area networking management solutions and systems management companies that are integrating storage management functions into their platforms; and
	•	hardware and software vendors that offer network attached storage and file serving solutions.

      The principal markets in which we compete are: data protection, file system and volume management, clustering, replication, storage area networking and network attached storage management solutions. Our principal competitors in each of these areas, including the original equipment manufacturer customers listed above, include:

	•	Data protection. Commvault Systems, Computer Associates, EMC, Hewlett-Packard, IBM and Legato.
	•	File system and volume management. Hewlett-Packard, IBM, Microsoft and Sun Microsystems.
	•	Clustering and replication. Compaq Computer, EMC, Hewlett-Packard, Hitachi Data Systems, IBM, Legato, Microsoft, Oracle, Quest Software and Sun Microsystems.
	•	Storage area networking management. BMC Software, Compaq Computer, Computer Associates, EMC, IBM and network switch vendors.
	•	Network attached storage. EMC and Network Appliance.

      The principal competitive factors in our industry include price, product functionality, product integration, platform coverage, ability to scale, worldwide sales infrastructure and global technical support. Although many of our competitors have greater financial, technical, sales, marketing and other resources than we do, as well as greater name recognition and a larger installed customer base, we believe we compete favorably on the basis of each of these competitive factors relative to our competitors and that our hardware independent approach to storage software gives us an advantaged position in the market.

      Our future anticipated growth and success will depend on our ability to develop superior products more rapidly and less expensively than our competitors, and to educate potential customers as to the benefits of

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Research and development

      Our research and development efforts have been directed toward developing new products for UNIX and Windows, developing new features and functionality for existing products, integrating products in the existing product line and porting new and existing products to different operating systems.

      Our major research and development initiatives include:

	•	additional integration of the full family of storage software products, including further integration of VERITAS Volume Manager, VERITAS File System and VERITAS NetBackup;
	•	development of additional applications solutions;
	•	development of additional Linux versions of our products;
	•	development of additional clustering products;
	•	development of additional storage area network products;
	•	localization and translation of our products to improve our ability to compete internationally; and
	•	porting of our technology to additional platforms to further our heterogeneous storage software strategy.

      Each of these initiatives involves technical and competitive challenges, which we may not be able to overcome successfully.

Development work under original equipment manufacturer agreements

      We devote a substantial amount of development effort to making sure that our products work on our original equipment manufacturer customer’s platforms. This is technically challenging, and we may not succeed in our effort.

      We have contractual development obligations with some of our original equipment manufacturer customers. Our agreements with EMC, Hewlett-Packard, IBM, and Sun Microsystems require us to commit staffing to our projects with them. We may not have the resources necessary to perform our obligations under these agreements.

Size and location of research and development group

      As of December 31, 2001, our research and development staff consisted of 1,585 employees located mainly at our Mountain View, California headquarters, and our Roseville, Minnesota, Heathrow, Florida and Pune, India locations.

Research and development expenditures

      We had research and development expenses of $241.2 million in 2001, $175.9 million in 2000 and $94.5 million in 1999. These amounts exclude $0.9 million in 2001 for stock-based compensation and $104.2 million in 1999 for in-process research and development charges in connection with acquisitions. We believe that technical leadership is essential to our success and we expect to continue to commit substantial

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Need to hire research and development personnel

      We need to hire additional research and development personnel to complete new products on a timely basis and to perform our obligations to key original equipment manufacturer partners. The market for these personnel is very competitive and we cannot assure that we can hire them on a timely basis or at all. We may consider acquiring and purchasing technology to achieve some of our objectives, but we may not be able to accomplish this successfully.

Effect of technological advances

      From time to time, we or our competitors may announce new products, capabilities or technologies that have the potential to replace or shorten the life cycles of our existing products. Announcements of currently planned or other new products could cause customers to defer purchasing our existing products. We have from time to time in the past experienced delays of up to several months due to the complex nature of software developed by us and other software developers for whose systems or applications we offer products. We could experience delays in connection with our current or future product development activities. Any of these delays could harm our business.

Proprietary rights

Measures we take to protect our intellectual property

      We regard some of the features of our internal operations, software and documentation as proprietary and rely on copyright, patent, trademark and trade secret laws, confidentiality procedures, contractual and other measures to protect our proprietary information.

      As part of our confidentiality procedures, we generally enter into non-disclosure agreements with our employees, distributors and corporate partners, and license agreements with respect to our software, documentation and other proprietary information. These licenses are generally non-transferable and have a perpetual term.

Trademarks and patents

      VERITAS is a registered trademark in the United States. VERITAS Software and the VERITAS logo are trademarks or registered trademarks in the United States and other countries. We have used, registered, and/or applied to register specific trademarks and service marks to distinguish genuine VERITAS products, technologies and services from those of its competitors in the U.S. and in foreign countries and jurisdictions. We enforce our trademark, service mark and trade name rights in the U.S. and abroad.

      We have a number of U.S. and foreign issued patents and pending patent applications, including patents and rights to patent applications acquired from the NSMG business, TeleBackup Systems, Inc., NuView, Inc. and The Kernel Group Incorporated, that relate to various aspects of our products and technology. While we believe that patent protection is important, any patents obtained may not provide substantial protection or be of commercial benefit to us. It is also possible that their validity will be challenged.

Employees

      As of December 31, 2001, we had 5,605 full-time employees, including 1,585 in research and development, 3,237 in sales, marketing, consulting, customer support and strategic initiatives and 783 in finance and administrative services. We expect to hire additional employees in 2002, particularly in research

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Executive Officers

      The names of our executive officers, their ages as of December 31, 2001, and their positions are shown below. The dates given for time of service with VERITAS include time, where applicable, served by each individual with one of our principal predecessor companies.

      Mr. Bloom has served as our President and Chief Executive Officer since November 2000. Mr. Bloom became our Chairman of the Board effective January 1, 2002. Mr. Bloom joined us after a 14-year career with Oracle Corporation, where he served as Executive Vice President responsible for server development, platform technologies, marketing, education, customer support and corporate development from May 1999 to November 2000, as Executive Vice President of the systems product division from March 1998 to May 1999, as Senior Vice President of the system products division from November 1997 to March 1998, as Senior Vice President of the worldwide alliances and technologies division from May 1997 to October 1997, as Senior Vice President of the product and platform technologies division from May 1996 to May 1997, and as Vice President of the mainframe and integration technology division and Vice President of the massively parallel computing division from 1992 to May 1996. Before joining Oracle Corporation in 1986, Mr. Bloom held technical positions in the mainframe area at both IBM Corporation and Chevron Corporation. Mr. Bloom serves on the board of directors of Globespan Virata, Inc., a supplier of communications software and semiconductors.

      Mr. Squire has served as our Executive Vice President and Vice Chairman of the Board since April 1997, when we merged with OpenVision Technologies, Inc. Mr. Squire became a director of OpenVision in 1994 and was appointed Chief Executive Officer of OpenVision in 1995, after serving as its President and Chief Operating Officer from 1994 to 1995. Mr. Squire was President of the U.K. Computing Services and Software Association in 1994 and, in 1995, was elected as the founding President of the European Information Services Association. Mr. Squire also serves on the board of directors of Industri-Mathematik International Corp., a provider of supply chain and customer service software, and The Innovation Group PLC.

      Mr. van den Bosch has served as our Executive Vice President, Product Strategy and New Product Initiatives since July 1997. Mr. van den Bosch served as our Senior Vice President, Engineering from 1991 to July 1997 and was appointed as a director in 1996. From 1970 until 1990, he served in various positions with Philips Information Systems, including Director of Technology.

      Mr. Sallaberry has served as our Executive Vice President, Worldwide Field Operations since December 1999 after serving as our Senior Vice President, Worldwide Sales from July 1999 to December 1999, and Vice President, Worldwide Sales from April 1997 to July 1999. Mr. Sallaberry was OpenVision’s Senior Vice President of North American Operations from 1995 until the merger with VERITAS in April 1997.

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      Mr. Lonchar has served as our Chief Financial Officer since April 1997 and as our Executive Vice President, Finance since April 2001. Mr. Lonchar served as our Senior Vice President, Finance from January 1999 until April 2001 and as our Vice President, Finance from April 1997 until January 1999. Mr. Lonchar was Chief Financial Officer and Senior Vice President of OpenVision from 1995 until the merger with VERITAS in April 1997. Mr. Lonchar is a certified public accountant. Mr. Lonchar also serves on the board of directors of Citrix Systems, Inc., a provider of application delivery and management software and services.

      Mr. Bregman has served as our executive vice president of product operations since February 2002. From August 2000 to October 2001, Mr. Bregman served as the Chief Executive Officer of Airmedia, a wireless Internet company. Prior to joining AirMedia, Inc., Mr. Bregman served a 16-year career with IBM, most recently as general manager of IBM’s RS/6000 and pervasive computing divisions from 1995 to August 2000.

      Mr. Jones has served as our Senior Vice President and Chief Administrative Officer since January 1999. Mr. Jones served as our Vice President, General Counsel and Secretary from April 1997 to January 1999. Mr. Jones joined OpenVision as General Counsel in 1993 and was appointed Vice President, General Counsel and Secretary in 1994 and served in those capacities until the merger with VERITAS in April 1997. Mr. Jones is a member of the California Bar Association.

      Mr. Hagerman has served as our Senior Vice President, Strategic Operations since August 2001 and as our Vice President, Strategic Alliances from February 2001 to July 2001. Before joining VERITAS, Mr. Hagerman served as founder and chief executive officer at Affinia inc, an affiliate marketing network, from September 1998 to September 2000 and as founder and chief executive officer of BigBook, Inc, an Internet yellow pages service, from 1995 until its acquisition by GTE in 1998. Before BigBook, Mr. Hagerman held various management positions in consulting, sales and marketing, business development, and finance.

Item 2. Properties

      Our properties consist primarily of leased office facilities for sales, research and development, consulting and administrative personnel. Our corporate headquarters consist of approximately 425,000 square feet and is located in Mountain View, California. Our principal facilities are located in Mountain View, California and Heathrow, Florida. Large portions of our facilities are occupied under leases that expire at various times through 2021. The table below shows the approximate square footage of the premises that we lease as of December 31, 2001 in the United States and abroad, excluding approximately 37 executive suites in North America, 15 in Europe, 6 in Asia and 1 in South America.

      Total square footage total excludes approximately 27,212 square feet of space in the United States and 1,949 square feet of space in Australia that we sublease to third parties.

      In 2001, we occupied a new 425,000 square foot campus facility in Mountain View, California, and expanded our existing Roseville, Minnesota facility by an additional 142,000 square feet. Our Mountain View, California and Roseville, Minnesota facilities are each governed by operating lease agreements, which were entered into in 1999 and 2000, respectively. In 2000, we entered into an operating lease arrangement for land and a 466,000 square foot facility in Milpitas, California. We expect to commence occupying this facility in the fourth quarter of 2002. Additionally, there is approximately 150,000 square feet of space currently under construction at Green Park in Reading, UK, which we expect to occupy in two phases starting in April 2002. The existing Reading and Chertsey, UK facilities will be disposed thereafter. We believe our existing and

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Item 3. Legal Proceedings

      We are currently party to various legal proceedings. While we currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position or overall trends in results of operations, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the net income of the period in which the ruling occurs. The estimate of the potential impact on our financial position or overall results of operations for the above legal proceedings could change in the future.

Item 4. Submission of Matters to a Vote of Security Holders

      Not Applicable.

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PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

Price Range of Common Stock

      Our common stock is listed on the Nasdaq National Market under the symbol “VRTS.” The table below shows the range of high and low reported sale prices on the Nasdaq National Market for our common stock for the periods indicated.

      As of February 28, 2002, there were approximately 5,700 holders of record of our common stock. Brokers and other institutions hold many of such shares on behalf of stockholders. We estimate the total number of stockholders represented by these record holders to be approximately 215,000.

Dividend Policy

      We have never declared or paid any cash dividends on our capital stock. We currently anticipate that we will retain future earnings, if any, to fund development and growth of our business and do not anticipate paying any cash dividends in the foreseeable future.

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Item 6. Selected Financial Data

      The following selected consolidated financial data are derived from our consolidated financial statements. This data should be read in conjunction with the consolidated financial statements and notes thereto, and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.