VERITAS SOFTWARE CORP /DE/, 424B3, 1999-11-12

VERITAS SOFTWARE CORP /DE/
424B3, 1999-11-12
PREPACKAGED SOFTWARE

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<PAGE> 1

FILED PURSUANT TO RULE 424(b)(3) AND RULE 424(c)
REGISTRATION NO. 333-87589

PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 30, 1999)

------------------------

PROSPECTUS SUPPLEMENT

------------------------

VERITAS SOFTWARE CORPORATION

[VERITAS LOGO]
785,016 SHARES
COMMON STOCK
------------------------

This prospectus supplement supplements the prospectus dated September 30,
1999, as supplemented October 15, 1999 (the "Prospectus"), to which this
prospectus supplement is attached. This prospectus supplement should be read in
conjunction with the Prospectus, which is to be delivered with this prospectus
supplement. This prospectus supplement is qualified by reference to the
Prospectus extent to the extent that the information in this prospectus
supplement supersedes the information contained in the Prospectus. All
capitalized terms used but not defined in this prospectus supplement have the
meanings given to them in the Prospectus.

------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SHARES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS OR THIS PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus supplement is November 12, 1999.
S-1
<PAGE> 2

VERITAS SOFTWARE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 208,091 $139,086
Short-term investments.................................... 435,300 72,040
Accounts receivable, net of allowance for doubtful
accounts of $5,037 at September 30, 1999 and $2,572 at
December 31, 1998...................................... 73,030 52,697
Deferred income taxes..................................... 18,362 4,272
Other current assets...................................... 16,523 9,237
---------- --------
Total current assets.............................. 751,306 277,332
Long-term investments....................................... 65,036 31,925
Property and equipment, net................................. 60,681 26,518
Goodwill and other intangibles, net......................... 3,458,512 4,005
Deferred income taxes....................................... -- 7,928
Other assets................................................ 1,625 1,409
---------- --------
Total assets...................................... $4,337,160 $349,117
========== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 12,231 $ 4,958
Accrued compensation and benefits......................... 36,780 11,267
Accrued acquisition and restructuring costs............... 25,213 478
Other accrued liabilities................................. 43,769 10,718
Income taxes payable...................................... 4,265 13,424
Customer advances......................................... 9,946 --
Deferred revenue.......................................... 67,619 37,645
---------- --------
Total current liabilities......................... 199,823 78,490
Convertible subordinated notes.............................. 447,531 100,000
Deferred income taxes....................................... 171,230 --
Other non-current liabilities............................... 657 773
Commitments and contingencies
Stockholders' equity:
Common stock.............................................. 3,880,890 199,858
Accumulated deficit....................................... (361,738) (29,416)
Deferred compensation..................................... (8) (32)
Accumulated other comprehensive income (loss)............. (1,225) (556)
---------- --------
Total stockholders' equity........................ 3,517,919 169,854
---------- --------
Total liabilities and stockholders' equity........ $4,337,160 $349,117
========== ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.
S-2
<PAGE> 3

VERITAS SOFTWARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1999 1998 1999 1998
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Net revenue:
User license fees............................. $ 157,643 $ 45,807 $ 306,725 $114,833
Services.................................... 25,758 10,738 63,228 28,907
--------- -------- --------- --------
Total net revenue................... 183,401 56,545 369,953 143,740
Cost of revenue:
User license fees........................... 5,891 2,516 10,673 7,612
Services.................................... 10,787 5,327 25,568 14,619
Amortization of developed technology........ 15,258 -- 20,264 --
--------- -------- --------- --------
Total cost of revenue............... 31,936 7,843 56,505 22,231
--------- -------- --------- --------
Gross profit.................................. 151,465 48,702 313,448 121,509
Operating expenses:
Selling and marketing....................... 67,895 20,406 139,290 50,415
Research and development.................... 28,924 10,859 63,290 27,356
General and administrative.................. 11,020 2,663 21,431 7,075
Amortization of goodwill and other
intangibles.............................. 219,626 -- 291,183 --
In-process research and development......... 1,100 -- 104,200 2,250
Acquisition and restructuring costs......... -- -- 11,000 --
--------- -------- --------- --------
Total operating expenses............ 328,565 33,928 630,394 87,096
--------- -------- --------- --------
Income (loss) from operations................. (177,100) 14,774 (316,946) 34,413
Interest and other income, net................ 7,266 3,001 13,445 8,552
Interest expense.............................. (5,301) (1,420) (8,143) (4,268)
--------- -------- --------- --------
Income (loss) before income taxes............. (175,135) 16,355 (311,644) 38,697
Provision for income taxes.................... 8,441 3,762 20,678 8,508
--------- -------- --------- --------
Net income (loss)............................. $(183,576) $ 12,593 $(332,322) $ 30,189
========= ======== ========= ========
Net income (loss) per share -- basic.......... $ (0.72) $ 0.09 $ (1.71) $ 0.21
========= ======== ========= ========
Net income (loss) per share -- diluted........ $ (0.72) $ 0.08 $ (1.71) $ 0.20
========= ======== ========= ========
Number of shares used in computing per share
amounts -- basic............................ 256,564 141,686 194,743 140,542
========= ======== ========= ========
Number of shares used in computing per share
amounts -- diluted.......................... 256,564 156,978 194,743 154,649
========= ======== ========= ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.
S-3
<PAGE> 4

VERITAS SOFTWARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1999 1998
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $ (332,322) $ 30,189
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 16,474 4,634
Amortization of goodwill and other intangibles......... 291,183 --
Amortization of developed technology................... 20,264 --
In-process research and development.................... 104,200 2,250
Restructuring costs.................................... 948 --
Amortization of original issue discount on convertible
notes................................................. 1,889 --
Changes in operating assets and liabilities:
Accounts receivable.................................. (18,024) (10,992)
Other receivable..................................... 22,935 --
Deferred income taxes and other assets............... (5,343) (3,386)
Accounts payable..................................... 1,391 1,866
Accrued compensation and benefits.................... 18,759 1,758
Accrued acquisition and restructuring costs.......... (14,263) --
Other accrued liabilities............................ 7,672 4,041
Income taxes payable and deferred income taxes....... (29,467) 3,431
Customer advances and deferred revenue............... 22,581 12,842
---------- ---------
Net cash provided by operating activities................... 108,877 46,633
Cash flows from investing activities:
Purchases of investments.................................. (582,991) (245,729)
Investment maturities..................................... 186,622 205,634
Purchases of property and equipment....................... (36,267) (15,440)
Cash acquired from Seagate Software....................... 1,044 --
Cash acquired from TeleBackup............................. 1,493 --
Purchase of NuView, Inc................................... (6,400) --
Purchase of Frontier Software Development Pvt. Ltd........ (1,325) --
Purchase of Windward Technologies, Inc.................... -- (1,250)
---------- ---------
Net cash used for investing activities...................... (437,824) (56,785)
Cash flows from financing activities:
Net proceeds from issuance of convertible subordinated
notes.................................................. 334,137 --
Proceeds from issuance of common stock.................... 64,484 11,226
---------- ---------
Net cash provided by financing activities................... 398,621 11,226
Effect of exchange rate changes............................. (669) (14)
---------- ---------
Net increase in cash and cash equivalents................... 69,005 1,060
Cash and cash equivalents at beginning of period............ 139,086 75,629
---------- ---------
Cash and cash equivalents at end of period.................. $ 208,091 $ 76,689
========== =========
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ 2,625 $ 2,917
Cash paid for income taxes................................ $ 15,223 $ 4,441
Supplemental schedule of noncash investing and financing
transactions:
Issuance of common stock for business acquisitions........ $3,604,071 $ --
</TABLE>

See accompanying notes to condensed consolidated financial statements.
S-4
<PAGE> 5

VERITAS SOFTWARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, considered necessary for a fair
presentation have been included. The results for the interim periods presented
are not necessarily indicative of the results that may be expected for any
future period. The following information should be read in conjunction with the
consolidated financial statements and notes thereto included in VERITAS Software
Corporation's Annual Report on Form 10-K for the year ended December 31, 1998.

On May 28, 1999, VERITAS acquired the Network & Storage Management Group
business of Seagate Software, Inc. As part of a reorganization in connection
with that acquisition, the Company succeeded to the business formerly conducted
by VERITAS Software Corporation, which is now a wholly-owned subsidiary and is
known as VERITAS Operating Corporation.

2. STOCK SPLITS

On June 7, 1999, the Company announced a two-for-one stock split in the
form of a stock dividend paid on July 8, 1999 to stockholders on record on June
18, 1999. On October 14, 1999, the Company announced a three-for-two split in
the form of a stock dividend that will be paid on November 19, 1999 to
stockholders on record on November 2, 1999. All share and per share data
applicable to prior periods have been restated to give retroactive effect to the
two stock splits.

3. RECLASSIFICATIONS

Certain reclassifications have been made to the 1998 Condensed Consolidated
Financial Statements to conform to the 1999 presentation.

4. NET INCOME (LOSS) PER SHARE

Basic net income and net loss per share is computed using the
weighted-average number of common shares outstanding during the period. Diluted
net income per share is computed using the weighted-average number of common
shares and dilutive potential common shares outstanding during the period.
Diluted net loss per share is computed using the weighted-average number of
common shares; however, dilutive potential common shares outstanding are not
included in the denominator as their effect would be anti-dilutive. Potential
common shares consist of employee stock options using the treasury stock method.

S-5
<PAGE> 6
VERITAS SOFTWARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

The following table sets forth the computation of basic and diluted net
income and net loss per share (in thousands, except per share data):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1999 1998 1999 1998
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss)............................. $(183,576) $ 12,593 $(332,322) $ 30,189
========= ======== ========= ========
Denominator:
Denominator for basic net income (loss) per
share -- weighted-average shares......... 256,564 141,686 194,743 140,542
Common stock equivalents.................... -- 15,292 -- 14,107
--------- -------- --------- --------
Denominator for diluted net income (loss)
per share................................ 256,564 156,978 194,743 154,649
========= ======== ========= ========
Basic net income (loss) per share............. $ (0.72) $ 0.09 $ (1.71) $ 0.21
========= ======== ========= ========
Diluted net income (loss) per share........... $ (0.72) $ 0.08 $ (1.71) $ 0.20
========= ======== ========= ========
</TABLE>

Common stock equivalents included in the denominator for purposes of
computing diluted net income (loss) per share do not include 6,976,743 shares
issuable upon conversion of the 5.25% convertible subordinated notes and
8,673,429 shares issuable upon conversion of the 1.856% convertible subordinated
notes, as their effect would be anti-dilutive for all periods presented. Common
stock equivalents included in the denominator for purposes of computing diluted
net loss per share do not include 24,791,252 potential common shares for the
three months ended September 30, 1999 and 23,989,287 potential common shares for
the nine months ended September 30, 1999, all related to employee stock options,
as their effect would be anti-dilutive.

5. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following are the components of comprehensive income (loss) (in
thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1999 1998 1999 1998
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Net income (loss)............................... $(183,576) $12,593 $(332,322) $30,189
Foreign currency translation adjustments........ (108) 190 (669) 41
--------- ------- --------- -------
Comprehensive income (loss)..................... $(183,684) $12,783 $(332,991) $30,230
========= ======= ========= =======
</TABLE>

6. BUSINESS COMBINATIONS

On May 28, 1999, VERITAS acquired the Network & Storage Management Group
business of Seagate Software, Inc., which the Company refers to as "NSMG." On
June 1, 1999 VERITAS acquired TeleBackup Systems, Inc., which the Company refers
to as "TeleBackup." On August 10, 1999, VERITAS acquired certain assets of
NuView, Inc., which the Company refers to as "NuView."

The NSMG business develops and markets software products and provides
related services that enable information technology professionals to manage
distributed network resources and to secure and protect enterprise data. NSMG
products offer features such as system backup, disaster recovery, migration,
replication, automated client protection, storage resource management,
scheduling, event

S-6
<PAGE> 7
VERITAS SOFTWARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

correlation and desktop management. In connection with the NSMG acquisition, in
consideration for the contribution of assets and liabilities related to the NSMG
business by Seagate Technology, Inc., Seagate Software, Inc., and their
respective subsidiaries, and based on the average closing price of VERITAS
common stock of $30.38 per share for 5 days before and after June 7, 1999, the
measurement date for the transaction, VERITAS issued 103,722,312 shares of its
common stock to Seagate Software, Inc. and issued options to purchase 10,417,572
shares of its common stock to VERITAS employees who were former NSMG employees.
VERITAS accounted for the NSMG acquisition using the purchase method of
accounting, and incurs charges of $221.5 million per quarter primarily related
to the amortization of developed technology, goodwill and other intangibles over
their estimated useful life of four years. The total NSMG purchase price was
$3,464.5 million and included $3,151.4 million for the issuance of VERITAS
common stock, $269.7 million for the issuance of options to purchase VERITAS
common stock, and $43.4 million of acquisition-related costs. In addition, the
Company recorded a restructuring charge of $11.0 million in the nine months
ended September 30, 1999 as a result of the NSMG acquisition. This one-time
restructuring charge related primarily to exit costs with respect to duplicative
facilities which VERITAS plans to vacate. These costs are in addition to the
liability for the costs to vacate duplicative facilities of the NSMG business,
which liability VERITAS assumed and included as a part of the purchase price.
Total acquisition and restructuring costs of $54.4 million, of which
approximately $13.3 million will be non-cash, consist primarily of direct
transaction costs, operating lease commitments on duplicative facilities and
involuntary termination benefits. At September 30, 1999, $19.1 million in
professional fees and severance costs were paid against the acquisition and
restructuring reserve; the Company expects the remaining $22.0 million to be
utilized primarily for servicing operating lease payments or negotiated buyout
of operating lease commitments on duplicative facilities, the lease terms of
which will expire at various times through the year 2013. The purchase price was
allocated, based on an independent valuation, to goodwill of $3,015.8 million,
distribution channels of $233.8 million, original equipment manufacturer
agreements of $23.4 million, developed technology of $233.7 million, assembled
workforce of $12.8 million, trademarks of $22.8 million, in-process research and
development of $101.2 million, net deferred tax liabilities of $179.5 million,
other intangibles of $1.5 million and tangible net liabilities assumed of $1.0
million. For the three months ended September 30, 1999, the Company recorded
$206.9 million for the amortization of goodwill and other intangibles, and $14.6
million for the amortization of developed technology related to this acquisition
and for the nine months ended September 30, 1999, the Company recorded $275.6
million for amortization of goodwill and other intangibles, and $19.5 million
for amortization of developed technology related to this acquisition.

S-7
<PAGE> 8
VERITAS SOFTWARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

$143.1 million. The TeleBackup purchase price included $134.1 million related to
the issuance of VERITAS common stock, $2.8 million for the issuance of options
to purchase VERITAS common stock and $6.2 million in acquisition-related costs.
The acquisition costs of $6.2 million consist primarily of direct transaction
costs and involuntary termination benefits. At September 30, 1999, of the total
$6.2 million acquisition costs, the Company paid $5.0 million in direct
transaction costs with the majority of the remaining $1.2 million anticipated to
be utilized by December 1999. The purchase price was allocated, based on an
independent valuation, to goodwill of $133.1 million, distribution channels of
$1.0 million, original equipment manufacturer agreements of $2.1 million,
developed technology of $6.6 million, assembled workforce of $0.3 million,
trademarks of $1.3 million, in-process research and development of $1.9 million,
net deferred tax liabilities of $3.0 million and tangible net liabilities
assumed of $0.2 million. For the three months ended September 30, 1999, the
Company recorded $8.6 million for amortization of goodwill and other
intangibles, and $0.4 million for the amortization of developed technology
related to this acquisition and for the nine months ended September 30, 1999,
the Company recorded $11.5 million for amortization of goodwill and other
intangibles, and $0.5 million for the amortization of developed technology
related to this acquisition.

Under an asset purchase agreement, VERITAS acquired certain assets of
NuView, including its Windows NT cluster management solution, Cluster X, for a
total cost of approximately $66.3 million. The Company accounted for the
acquisition using the purchase method of accounting, and incurs charges of $4.2
million per quarter primarily related to the amortization of developed
technology, goodwill and other intangibles over their estimated useful life of
four years. The purchase price included $46.1 million related to the issuance of
VERITAS common stock, $0.8 million for the issuance of options to purchase
VERITAS common stock to former NuView employees, $0.2 million in
acquisition-related costs and $19.2 million payable in cash, of which $6.4
million has been paid. The purchase price was allocated, based on an independent
valuation, to goodwill of $61.0 million, developed technology of $2.4 million,
assembled workforce of $0.6 million, trademarks of $0.3 million,
covenant-not-to-compete of $0.9 million and in-process research and development
of $1.1 million. For the three months and nine months ended September 30, 1999,
the Company recorded $4.0 million for amortization of goodwill and other
intangibles, and $0.2 million for the amortization of developed technology
related to this acquisition.

The following unaudited pro forma summary results of operations data have
been prepared assuming that the NSMG, TeleBackup and NuView acquisitions had
occurred at the beginning of the periods presented. The consolidated results are
not necessarily indicative of results of future operations nor of results that
would have occurred had the acquisitions been consummated as of the beginning of
the periods presented. The pro forma information excludes the impact of the
one-time charges related to in-process research and development costs of $104.2
million and the restructuring charges of $11.0 million recorded in 1999.

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenue................................. $ 183,401 $ 105,078 $ 473,868 $ 284,006
========= ========= ========= =========
Net loss.................................... $(182,272) $(204,096) $(567,647) $(617,802)
========= ========= ========= =========
Basic and diluted net loss per share........ $ (0.71) $ (0.82) $ (2.24) $ (2.48)
========= ========= ========= =========
</TABLE>

S-8
<PAGE> 9
VERITAS SOFTWARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

7. CONVERTIBLE SUBORDINATED NOTES

In August 1999, VERITAS and its wholly-owned subsidiary, VERITAS Operating
Corporation, issued $465.8 million aggregate principal amount at maturity of
1.856% convertible subordinated notes due 2006 (the "1.856% notes") for which
VERITAS received net proceeds of approximately $334.1 million. The interest rate
of 1.856% together with the accrual of original issue discount represent a yield
to maturity of 6.5%. VERITAS and VERITAS Operating Corporation are co-obligors
on the 1.856% notes. The 1.856% notes provide for semi-annual interest payments
each February 13 and August 13, commencing February 13, 2000. The 1.856% notes
are convertible into shares of VERITAS common stock at any time prior to the
close of business on the maturity date, unless previously redeemed or
repurchased, at a conversion price of $39.85 per share, subject to adjustment in
certain events, equivalent to an initial conversion rate of 18.623 shares of
common stock per $1,000 principal amount at maturity. On or after August 16,
2002, the 1.856% notes will be redeemable over the period of time until maturity
at the option of VERITAS at issuance price plus accrued original issue discount
and any accrued interest. If a fundamental change, as defined in the Amended and
Restated First Supplemental Indenture dated July 30, 1999, occurs prior to
August 13, 2006, each holder has the right to require VERITAS to redeem all or
part of the 1.856% notes at issuance price plus accrued original discount and
any accrued interest. The debt issuance costs are being amortized over the term
of the 1.856% notes using the interest method.

8. SUMMARY FINANCIAL INFORMATION OF SUBSIDIARY

VERITAS and its wholly-owned subsidiary, VERITAS Operating Corporation, are
co-obligors on VERITAS' 5.25% convertible subordinated notes due 2004 and 1.856%
convertible subordinated notes due 2006. In accordance with Staff Accounting
Bulletin No. 53, Financial Statement Requirements in Filings Involving the
Guarantee of Securities by the Parent, VERITAS provides the following unaudited
summary financial information with respect to VERITAS Operating Corporation. The
following presents the operations of, and the assets held by, the legal entity
VERITAS Operating Corporation and does not necessarily, nor is intended to,
represent the operations of VERITAS Operating Corporation had it continued as a
separate entity absent the NSMG acquisition (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1999 1998 1999 1998
-------- ------- -------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total net revenue.............................. $120,662 $56,545 $282,249 $143,740
Amortization of goodwill and other
intangibles.................................. 12,733 -- 15,574 --
In-process research and development............ 1,100 -- 3,000 2,250
Acquisition and restructuring costs............ -- -- 11,000 --
Income from operations......................... 22,844 14,774 48,189 34,413
Net income..................................... 16,425 12,593 32,681 30,189
</TABLE>

S-9
<PAGE> 10
VERITAS SOFTWARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $568,583 $198,842
Goodwill and other intangibles.............................. 209,853 --
Total assets................................................ 975,990 349,117
Long-term obligations....................................... 448,167 100,773
Retained earnings (accumulated deficit)..................... 3,265 (29,416)
Stockholders' equity........................................ 454,117 169,854
</TABLE>

9. SEGMENT INFORMATION

VERITAS continues to operate in one segment, storage management solutions.
The Company's products and services are sold throughout the world, through
direct, original equipment manufacturer, other reseller and distributor
channels. The Company's chief operating decision maker, the chief executive
officer, evaluates the performance of the Company based upon stand-alone
software product and service revenue by product channels and revenues by
geographic regions of the segment and does not receive separate, discrete
financial information about asset allocation, expense allocation or
profitability from the Company's storage products or services. The recent
acquisitions of NSMG and TeleBackup did not create a new segment, as the Company
is integrating the business and products of NSMG and TeleBackup with those of
VERITAS and the financial information related to the NSMG business and products
is not evaluated separately.

Geographic information (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1999 1998 1999 1998
-------- ------- -------- --------
<S> <C> <C> <C> <C>
User license fees(1):
United States.................................. $113,939 $32,724 $228,695 $ 83,163
Europe(2)...................................... 32,669 9,679 57,336 22,232
Other(3)....................................... 11,035 3,404 20,694 9,438
-------- ------- -------- --------
Total................................ 157,643 45,807 306,725 114,833
-------- ------- -------- --------
Services(1):
United States.................................. 20,158 8,575 49,462 23,022
Europe(2)...................................... 4,215 2,027 10,421 5,527
Other(3)....................................... 1,385 136 3,345 358
-------- ------- -------- --------
Total................................ 25,758 10,738 63,228 28,907
-------- ------- -------- --------
Total net revenue.................... $183,401 $56,545 $369,953 $143,740
======== ======= ======== ========
</TABLE>

S-10
<PAGE> 11
VERITAS SOFTWARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Long-lived assets(4):
United States............................................... $3,507,930 $25,202
Europe(2)................................................... 11,313 3,644
Other(3).................................................... 1,575 380
---------- -------
Total............................................. $3,520,818 $29,226
========== =======
</TABLE>

- ---------------
(1) License and services revenues are attributed to geographic regions based on
location of customers.

(2) Europe includes the Middle East and Africa.

(3) Other consists of Canada, Latin America, Japan and the Asia Pacific region.

(4) Long-lived assets include all long-term assets except those specifically
excluded under SFAS No. 131, such as deferred income taxes and long-term
investments. Reconciliation to total assets reported (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Total long-lived assets.............................. $3,520,818 $ 29,226
Other assets, including current...................... 816,342 319,891
---------- --------
Total consolidated assets.................. $4,337,160 $349,117
========== ========
</TABLE>

Sales to one customer accounted for approximately $19.5 million, or 11%, of
the Company's net revenues in the three months ended September 30, 1999 and
$48.6 million, or 11%, in the nine months ended September 30, 1999.

10. COMMITMENTS AND CONTINGENCIES

Facilities lease commitment

During the second quarter of 1999, the Company signed a lease for new
corporate campus facilities in Mountain View, California. This facility will
replace certain facilities the Company currently leases in Mountain View. The
campus facilities will be developed in two phases. The first phase is for
175,000 square feet. The second phase will add 250,000 square feet subject to
certain entitlements required from the City of Mountain View. The campus
facilities will provide space for sales, marketing, administration and research
and development functions. The lease term for the first phase facilities is five
years beginning in April 1999, with an option to extend the lease term for two
successive periods of one year each. The Company has an option to purchase the
property (land and facilities) for $72.0 million or, at the end of the lease, to
arrange for the sale of the property, with VERITAS retaining an obligation to
the owner for the difference between the sales price and the $72.0 million if
the sales price is less than this amount, subject to certain provisions of the
lease. The Company anticipates that construction of the facilities will begin in
the first quarter of 2000, and that the Company will occupy the facilities in
the second quarter of 2001. Lease payments on the first phase facilities will
begin in the second quarter of 2001. The lease requires VERITAS to maintain
specified financial covenants such as leverage ratio, quick ratio and earnings
before interest, taxes, depreciation and amortization, all of which the Company
was in compliance with as of September 30, 1999.

S-11
<PAGE> 12

VERITAS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial
statements and accompanying notes, which appear elsewhere in this prospectus
supplement. The following discussion contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934 and Section
27A of the Securities Act of 1933, that involve risks and uncertainties. These
forward-looking statements include statements that reflect our plans, estimates
and beliefs, based on information available to us at the time of this report. We
assume no obligation to update any such forward-looking statements. Actual
results could differ materially from those anticipated in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those detailed from time to time in our filings with the
Securities and Exchange Commission and those discussed below and elsewhere in
this prospectus supplement, particularly in "Factors That May Affect Future
Results," and those discussed in the Prospectus to which this prospectus
supplement is attached under the heading "Risk Factors."

Unless expressly stated or the content otherwise requires, the terms "we",
"our", "us", "the Company" and "VERITAS" refer to VERITAS Software Corporation
and its subsidiaries.

OVERVIEW

VERITAS is the leading independent supplier of enterprise data storage
management solutions, providing advanced storage management software for open
system environments. Our products provide performance improvement and
reliability enhancement features that are critical for many commercial
applications. These products enable protection against data loss and file
corruption, rapid recovery after disk or system failure, the ability to process
large files efficiently and the ability to manage and back up data distributed
on large networks of systems without interrupting users. In addition, our
products provide an automated fail over between computer systems organized in
clusters sharing disk resources. Our highly scalable products can be used
independently, and certain products can be combined to provide interoperable
client/server storage management solutions. Some of our products offer
centralized administration with a high degree of automation, enabling customers
to manage complex, distributed environments cost-effectively by increasing
system administrator productivity and system availability. We also provide a
comprehensive range of services to assist customers in planning and implementing
storage management solutions. We market our products and associated services to
original equipment manufacturers and end-user customers through a combination of
direct sales and indirect sales channels such as resellers, value-added
resellers, hardware distributors, application software vendors and systems
integrators.

We derive our user license fee revenue from shipments of our software
programs to end-user customers through direct sales channels, indirect sales
channels and original equipment manufacturer customers. Our original equipment
manufacturer customers either bundle VERITAS products with the original
equipment manufacturer products licensed by such original equipment
manufacturers or offer them as options. Some original equipment manufacturers
also resell VERITAS' products. VERITAS receives a royalty each time the original
equipment manufacturer licenses to a customer a copy of the original equipment
manufacturer's products that incorporates one or more of VERITAS' products. Our
license agreements with our original equipment manufacturer customers generally
contain no minimum sales requirements and there can be no assurance that any
original equipment manufacturer will either commence or continue shipping
operating systems incorporating our products in the future. When VERITAS enters
into new agreements with original equipment manufacturer customers and
resellers, a significant period of time may elapse before VERITAS realizes any
associated revenues, due to development work which VERITAS must generally
undertake under such

S-12
<PAGE> 13

agreements and the time needed for the sales and marketing organizations within
such customers and distributors to become familiar with and gain confidence in
our products.

Our services revenue consists of fees derived from annual maintenance
agreements, from consulting and training services and from porting fees. The
original equipment manufacturer maintenance agreements covering our products
provide for technical and emergency support and minor unspecified product
upgrades for a fixed annual fee. The maintenance agreements covering products
that are licensed through channels other than original equipment manufacturers
provide for technical support and unspecified product upgrades for an annual
service fee based on the number of user licenses purchased and the level of
service subscribed. Porting fees consist of fees derived from porting and other
non-recurring engineering efforts when VERITAS ports, or adapts, its storage
management products to an original equipment manufacturer's operating system and
when VERITAS develops new product features or extensions of existing product
features at the request of a customer. In most cases, VERITAS retains the rights
to technology derived from porting and non-recurring engineering work and
therefore generally performs such work on a relatively low, and sometimes
negative, margin.

We have made, and intend to continue to make, substantial investments in
porting our products to new operating systems, including Windows NT. The success
of Windows NT product development efforts depends in part on receipt of
development funding from third parties, including Microsoft, and failure to
receive such funding could hamper our efforts to extend our products into the
Windows NT market. The porting and development process requires substantial
capital investment and the devotion of substantial employee resources to such
effort and the added focus on Windows NT development has required, and will
continue to require, us to hire additional personnel. Under an agreement with
Microsoft, we have agreed to develop a functional subset of our Volume Manager
product that will be ported to and embedded in Windows NT. The agreement also
requires us to develop a disk management graphical user interface designed
specifically for Windows NT. Microsoft has provided us with significant funding
towards such development effort. We recognize revenue under our development
contract with Microsoft on a percentage-of-completion basis consistent with our
policy for revenue recognition for other similar agreements. The payment terms
in the Microsoft agreement do not directly correlate to the timing of
development efforts and therefore revenue recognition does not directly
correlate to contract billings. The Microsoft agreement requires us to expand
our marketing and sales operations to deal with higher volume markets in which
we have limited experience. See "Risk Factors -- We face uncertainties porting
products to new operating systems and developing new products" and "-- We
distribute products through multiple distribution channels, each of which is
subject to risks" in the Prospectus to which this prospectus supplement is
attached.

Our international sales are generated primarily through our international
sales subsidiaries. International revenue, most of which is collectible in
foreign currencies, accounted for 27% of our total revenue for the three months
ended September 30, 1999 and September 30, 1998, for 25% of our total revenue
for the nine months ended September 30, 1999 and 26% of our total revenue for
the nine months ended September 30, 1998. Our international revenue increased
223% from $15.2 million for the three months ended September 30, 1998 to $49.3
million for the three months ended September 30, 1999 and increased 144% from
$37.6 million for the nine months ended September 30, 1998 to $91.8 million for
the nine months ended September 30, 1999. Since much of our international
operating expenses are also incurred in local currencies, the relative impact of
exchange rates on net income or loss is less than the impact on revenues.
Although our operating and pricing strategies take into account changes in
exchange rates over time, our operating results may be significantly affected in
the short term by fluctuations in foreign currency exchange rates. Our
international subsidiaries purchase licenses from the parent company resulting
in intercompany receivables and payables. These receivables and payables are
carried on each company's books at the local currency that existed at the time
of the transaction. Such receivables and payables are

S-13
<PAGE> 14

eliminated for financial statement reporting purposes. Prior to elimination, the
amounts carried in foreign currencies are converted to U.S. Dollars at the then
current rate, or "marked to market", which may give rise to currency gains and
losses. Such gains or losses are recognized on our statement of operations as a
component of other income, net. To date, such gains or losses have not been
material.

VERITAS believes that its success depends upon continued expansion of its
international operations. VERITAS currently has sales and service offices in the
United States, Canada, Japan, the United Kingdom, Germany, France, Sweden,
Switzerland and the Netherlands, a development center in India, and resellers
located in North America, Europe, Asia Pacific, South America and the Middle
East. International expansion may require VERITAS to establish additional
foreign offices, hire additional personnel and recruit additional international
resellers, resulting in the diversion of significant management attention and
the expenditure of financial resources. To the extent that VERITAS is unable to
effect these additions efficiently, growth in international sales will be
limited, which would have a material adverse effect on VERITAS' business,
operating results and financial condition. International operations also subject
VERITAS to a number of risks inherent in developing and selling products outside
the United States, including potential loss of developed technology, limited
protection of intellectual property rights, imposition of government regulation,
imposition of export duties and restrictions, cultural differences in the
conduct of business, and political and economic instability. Furthermore,
certain global markets, including Asia, Russia and Latin America, are currently
undergoing significant economic turmoil which could result in deferral of
purchase of information technology products and services by potential customers
located in such markets, thereby further limiting VERITAS' ability to expand
international operations. See "Risk Factors -- Expanding our international sales
depends on economic stability in regions that recently have been unstable" in
the Prospectus to which this prospectus supplement is attached.

On May 28, 1999, VERITAS acquired the Network & Storage Management Group
business of Seagate Software, Inc., which we refer to as "NSMG." On June 1, 1999
VERITAS acquired TeleBackup Systems, Inc., which we refer to as "TeleBackup." On
August 10, 1999, VERITAS acquired certain assets of NuView, Inc., which we refer
to as "NuView." In the following paragraphs, all share and per share data have
been restated to give retroactive effect to the two recent stock splits (see
Note 2 to Condensed Consolidated Financial Statements).

The NSMG business develops and markets software products and provides
related services enabling information technology professionals to manage
distributed network resources and to secure and protect enterprise data. Its
products offer features such as system backup, disaster recovery, migration,
replication, automated client protection, storage resource management,
scheduling, event correlation and desktop management. In connection with the
NSMG acquisition, in consideration for the contribution of assets and
liabilities related to the NSMG business by Seagate Technology, Inc., Seagate
Software, Inc., and their respective subsidiaries, and based on the average
closing price of our common stock of $30.38 per share for 5 days before and
after June 7, 1999, the measurement date for the transaction, we issued
103,722,312 shares of our common stock to Seagate Software, Inc. and issued
options to purchase 10,417,572 shares of our common stock to our employees who
were former NSMG employees. We accounted for the NSMG acquisition using the
purchase method of accounting, and incur charges of $221.5 million per quarter
primarily related to the amortization of developed technology, goodwill and
other intangibles over their estimated useful life of four years. The total NSMG
purchase price was $3,464.5 million and included $3,151.4 million for the
issuance of our common stock, $269.7 million for the issuance of options to
purchase our common stock and $43.4 million of acquisition-related costs. In
addition, we recorded a restructuring charge of $11.0 million in the nine months
ended September 30, 1999 as a result of the NSMG acquisition. This one-time
restructuring charge related primarily to exit costs with respect to duplicative
facilities that we plan to vacate. These costs are in addition to the liability
for the costs to vacate duplicative

S-14
<PAGE> 15

facilities of the NSMG business, which liability we assumed and included as a
part of the purchase price. Total acquisition and restructuring costs of $54.4
million consist primarily of direct transaction costs, operating lease
commitments on duplicative facilities and involuntary termination benefits of
which approximately $13.3 million will be non-cash. At September 30, 1999, $19.1
million in professional fees and severance costs were paid against the
acquisition and restructuring reserve with the remaining $22.0 million
anticipated to be utilized primarily for servicing operating lease payments or
negotiated buyout of operating lease commitments, the lease terms of which will
expire at various times through the year 2013. The purchase price was allocated,
based on an independent valuation, to goodwill of $3,015.8 million, distribution
channels of $233.8 million, original equipment manufacturer agreements of $23.4
million, developed technology of $233.7 million, assembled workforce of $12.8
million, trademarks of $22.8 million, in-process research and development of
$101.2 million, net deferred tax liabilities of $179.5 million, other
intangibles of $1.5 million and tangible net liabilities assumed of $1.0
million. For the three months ended September 30, 1999, we recorded $206.9
million for the amortization of goodwill and other intangibles, and $14.6
million for the amortization of developed technology related to this acquisition
and for the nine months ended September 30, 1999, we recorded $275.6 million for
amortization of goodwill and other intangibles, and $19.5 million for
amortization of developed technology related to this acquisition.

TeleBackup designs, develops and markets software solutions for local and
remote backup and recovery of electronic information stored on networked, remote
and mobile personal computers. TeleBackup became a wholly owned subsidiary of
VERITAS in exchange for the issuance of 4,561,863 shares of either our common
stock or exchangeable shares to the holders of TeleBackup common shares and the
grant of options to purchase 103,137 shares of our common stock to our employees
who were former employees of TeleBackup. We accounted for the TeleBackup
acquisition using the purchase method of accounting, and incur charges of $9.0
million per quarter primarily related to the amortization of developed
technology, goodwill and other intangibles over their estimated useful life of
four years. Based on the average closing price of our common stock of $29.40 per
share for 5 days before and after June 1, 1999, the measurement date for the
transaction, the total purchase price for TeleBackup was $143.1 million. The
TeleBackup purchase price included $134.1 million related to the issuance of our
common stock, $2.8 million for the issuance of options to purchase our common
stock and $6.2 million in acquisition-related costs. The acquisition costs of
$6.2 million consist primarily of direct transaction costs and involuntary
termination benefits. At September 30, 1999, of the total $6.2 million
acquisition costs, we paid $5.0 million in direct transaction costs with the
majority of the remaining $1.2 million anticipated to be utilized by December
1999. The purchase price was allocated, based on an independent valuation, to
goodwill of $133.1 million, distribution channels of $1.0 million, original
equipment manufacturer agreements of $2.1 million, developed technology of $6.6
million, assembled workforce of $0.3 million, trademarks of $1.3 million,
in-process research and development of $1.9 million, net deferred tax
liabilities of $3.0 million and tangible net liabilities assumed of $0.2
million. For the three months ended September 30, 1999, we recorded $8.6 million
for amortization of goodwill and other intangibles, and $0.4 million for the
amortization of developed technology related to this acquisition and for the
nine months ended September 30, 1999, we recorded $11.5 million for amortization
of goodwill and other intangibles, and $0.5 million for the amortization of
developed technology related to this acquisition.

S-15
<PAGE> 16

acquisition-related costs and $19.2 million payable in cash, of which $6.4
million has been paid. The purchase price was allocated, based on an independent
valuation, to goodwill of $61.0 million, developed technology of $2.4 million,
assembled workforce of $0.6 million, trademarks of $0.3 million,
covenant-not-to-compete of $0.9 million and in-process research and development
of $1.1 million. For the three months and nine months ended September 30, 1999,
we recorded $4.0 million for amortization of goodwill and other intangibles, and
$0.2 million for the amortization of developed technology related to this
acquisition.

RESULTS OF OPERATIONS

The following tables set forth the percentage of total net revenue
represented by certain line items from our condensed consolidated statement of
operations for the three months and nine months ended September 30, 1999 and
1998, respectively, and the percentage changes between the comparable periods,
including four month results of NSMG and TeleBackup since the date of
acquisition:

<TABLE>
<CAPTION>
PERCENTAGE OF PERIOD-TO-PERIOD
TOTAL NET REVENUE PERCENTAGE CHANGE
------------------ ------------------
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, 1999
------------------ ------------------
1999 1998 COMPARED TO 1998
----- ----- ------------------
<S> <C> <C> <C>
Net revenue:
User license fees..................................... 86% 81% 244%
Services.............................................. 14 19 140%
---- ---
Total net revenue............................. 100 100 224%
Cost of revenue:
User license fees..................................... 3 4 134%
Services.............................................. 6 10 102%
Amortization of developed technology.................. 8 -- n/m
---- ---
Total cost of revenue......................... 17 14 307%
---- ---
Gross profit............................................ 83 86 211%
Operating expenses:
Selling and marketing................................. 37 36 233%
Research and development.............................. 16 19 166%
General and administrative............................ 6 5 314%
Amortization of goodwill and other intangibles........ 119 -- n/m
In-process research and development................... 1 -- n/m
Acquisition and restructuring costs................... -- -- n/m
---- ---
Total operating expenses...................... 179 60 868%
---- ---
Income (loss) from operations........................... (97) 26
Interest and other income, net.......................... 4 5
Interest expense........................................ (2) (2)
---- ---
Income (loss) before income taxes....................... (95) 29
Provision for income taxes.............................. (5) (7)
---- ---
Net income (loss)....................................... (100)% 22%
==== ===
</TABLE>

- ---------------
n/m = not meaningful

S-16
<PAGE> 17

<TABLE>
<CAPTION>
PERCENTAGE OF PERIOD-TO-PERIOD
TOTAL NET REVENUE PERCENTAGE CHANGE
------------------ -----------------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30,
------------------ -----------------
1999 1998 COMPARED TO 1998
----- ----- -----------------
<S> <C> <C> <C>
Net revenue:
User license fees...................................... 83% 80% 167%
Services............................................... 17 20 119%
--- ---
Total net revenue.............................. 100 100 157%
Cost of revenue:
User license fees...................................... 3 5 40%
Services............................................... 7 10 75%
Amortization of developed technology................... 5 -- n/m
--- ---
Total cost of revenue.......................... 15 15 154%
--- ---
Gross profit............................................. 85 85 158%
Operating expenses:
Selling and marketing.................................. 37 35 176%
Research and development............................... 17 19 131%
General and administrative............................. 6 5 203%
Amortization of goodwill and other intangibles......... 79 -- n/m
In-process research and development.................... 28 2 n/m
Acquisition and restructuring costs.................... 3 -- n/m
--- ---
Total operating expenses....................... 170 61 624%
--- ---
Income (loss) from operations............................ (86) 24
Interest and other income, net........................... 4 6
Interest expense......................................... (2) (3)
--- ---
Income (loss) before income taxes........................ (84) 27
Provision for income taxes............................... (6) (6)
--- ---
Net income (loss)........................................ (90)% 21%
=== ===
</TABLE>

- ---------------
n/m = not meaningful

Net Revenue. Total net revenue increased 224% from $56.5 million for the
three months ended September 30, 1998 to $183.4 million for the three months
ended September 30, 1999, and increased 157% from $143.7 million for the nine
months ended September 30, 1998 to $370.0 million for the nine months ended
September 30, 1999. We believe that the percentage increases in total revenue
achieved in these periods are not necessarily indicative of future results. Our
revenue comprises user license fees and service revenue. User license fees
represented 86% of total net revenue for the three months ended September 30,
1999, and 81% of total net revenue for the three months ended September 30,
1998. User license fees were 83% of total net revenue for the nine months ended
September 30, 1999, and 80% of total net revenue for the nine months ended
September 30, 1998.

User License Fees. User license fees increased 244% from $45.8 million for
the three months ended September 30, 1998 to $157.6 million for the three months
ended September 30, 1999, and increased 167% from $114.8 million for the nine
months ended September 30, 1998 to $306.7 million for the nine months ended
September 30, 1999. The increases were primarily the result of the acquisition
of NSMG in the second quarter of 1999, continued growth in market acceptance of
our software products, a greater volume of large end-user transactions,
increased revenue from original equipment manufacturer resales of bundled and
unbundled products and the introduction of new products. In particular, our user
license fees from storage products increased by approximately 147% for the nine
months ended September 30, 1999 compared to the nine months ended September 30,

S-17
<PAGE> 18

1998, and accounted for 86% of user license fees in the nine months ended
September 30, 1999 and 89% of user license fees in the nine months ended
September 30, 1998.

Service Revenue. Service revenue is derived primarily from contracts for
software maintenance and technical support and, to a lesser extent, consulting
services, training services and porting fees. Porting fees are derived from
funded development efforts that are typically associated with original equipment
manufacturers. Service revenue increased 140% from $10.7 million for the three
months ended September 30, 1998 to $25.8 million for the three months ended
September 30, 1999, and increased 119% from $28.9 million for the nine months
ended September 30, 1998 to $63.2 million for the nine months ended September
30, 1999. The increases were primarily due to increased sales of service and
support contracts on new licenses, renewal of service and support contracts on
existing licenses and, to a lesser extent, an increase in demand for consulting
and training services and the acquisition of NSMG.

Cost of Revenue. Total cost of revenue increased 307% from $7.8 million for
the three months ended September 30, 1998 to $31.9 million for the three months
ended September 30, 1999, and increased 154% from $22.2 million for the nine
months ended September 30, 1998 to $56.5 million for the nine months ended
September 30, 1999. Gross margin on user license fees is substantially higher
than gross margin on service revenue, reflecting the low materials, packaging
and other costs of software products compared with the relatively high personnel
costs associated with providing maintenance, technical support, consulting,
training services and development efforts. Cost of service revenue also varies
based upon the mix of maintenance, technical support, consulting and training
services.

Cost of User License Fees (including amortization of developed
technology). Cost of user license fees consists primarily of royalties, media,
manuals and distribution costs. Also included in the cost of user license fees
is the amortization of developed technology acquired in the NSMG, TeleBackup and
NuView acquisitions. Cost of user license fees increased 741% from $2.5 million
for the three months ended September 30, 1998 to $21.1 million for the three
months ended September 30, 1999 and increased 306% from $7.6 million for the
nine months ended September 30, 1998 to $30.9 million for the nine months ended
September 30, 1999. The increase in cost of user license fees is due to the
amortization of developed technology acquired in the NSMG, TeleBackup and NuView
acquisitions. Gross margin on user license fees decreased from 95% for the three
months ended September 30, 1998 to 87% for the three months ended September 30,
1999 and decreased from 93% for the nine months ended September 30, 1998 to 90%
for the nine months ended September 30, 1999. The decreases in gross margin on
user license fees were due to the inclusion of the amortization of developed
technology. If we excluded the amortization of developed technology from the
cost of user license fees, the gross margin would be 96% for the three months
ended September 30, 1999 and 97% for the nine months ended September 30, 1999.
The gross margin on user license fees may vary from period to period based on
the license revenue mix and certain products having higher royalty rates than
other products. VERITAS does not expect gross margin on user license fees to
increase.

Cost of Service Revenue. Cost of service revenue consists primarily of
personnel-related costs in providing maintenance, technical support, consulting
and training to customers, and development efforts in porting. Cost of service
revenue increased 102% from $5.3 million for the three months ended September
30, 1998 to $10.8 million for the three months ended September 30, 1999, and
increased 75% from $14.6 million for the nine months ended September 30, 1998 to
$25.6 million for the nine months ended September 30, 1999. Gross margin on
service revenue increased from 50% for the three months ended September 30, 1998
to 58% for the three months ended September 30, 1999, and increased from 49% for
the nine months ended September 30, 1998 to 60% for the nine months ended
September 30, 1999. The increases in absolute dollars were primarily due to
personnel

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<PAGE> 19

additions in customer support and training and consulting organizations, in
anticipation of increased demand for such services. The improvement in gross
margins in the three months and nine months ended September 30, 1999 compared to
the three and nine months ended September 30, 1998 was a result of increased
productivity and higher service revenue growth due to a larger installed
customer base paying support fees.

Amortization of Developed Technology. Amortization of developed technology
was $15.3 million for the three months ended September 30, 1999 and $20.3
million for the nine months ended September 30, 1999. For the nine months ended
September 30, 1999, the amount mainly represents four months of amortization of
the developed technology recorded upon acquisitions of NSMG and TeleBackup. The
useful life of the developed technology acquired in the NSMG, TeleBackup and
NuView acquisitions is four years and the amortization is expected to be
approximately $15.3 million per quarter.

Operating Expenses. The NSMG and the TeleBackup acquisitions have
contributed to increases in all operating expense categories. However, due to
the integration that has taken place to date, it is not possible to quantify the
portion of the increase that is directly related to these acquisitions.

Selling and Marketing. Selling and marketing expenses consist primarily of
salaries, related benefits, commissions, consultant fees and other costs
associated with VERITAS' sales and marketing efforts. Selling and marketing
expenses increased 233% from $20.4 million for the three months ended September
30, 1998 to $67.9 million for the three months ended September 30, 1999, and
increased 176% from $50.4 million for the nine months ended September 30, 1998
to $139.3 million for the nine months ended September 30, 1999. Selling and
marketing expenses as a percentage of total net revenue increased from 36% for
the three months ended September 30, 1998 to 37% for the three months ended
September 30, 1999, and increased from 35% for the nine months ended September
30, 1998 to 37% for the nine months ended September 30, 1999. The increases were
primarily the result of higher personnel and related costs associated with
increased staffing resulting from new hires and the acquisitions. VERITAS
intends to continue to expand its global sales and marketing infrastructure, and
accordingly, expects its selling and marketing expenses to increase in absolute
dollars but not to change significantly as a percentage of total revenue in the
future.

Research and Development. Research and development expenses consist
primarily of salaries, related benefits, third-party consultant fees and other
engineering related costs. Research and development expenses increased 166% from
$10.9 million for the three months ended September 30, 1998 to $28.9 million for
the three months ended September 30, 1999, and increased 131% from $27.4 million
for the nine months ended September 30, 1998 to $63.3 million for the nine
months ended September 30, 1999. The increases were primarily due to increased
staffing levels associated with new hires and the acquisitions. As a percentage
of net revenue, research and development expenses decreased from 19% for the
three months ended September 30, 1998 to 16% for the three months ended
September 30, 1999 and decreased from 19% for the nine months ended September
30, 1998 to 17% for the nine months ended September 30, 1999. VERITAS believes
that a significant level of research and development investment is required to
remain competitive, and expects such expenses will continue to increase in
absolute dollars in future periods and may increase slightly as a percentage of
total net revenue. Research and development expenses can be expected to
fluctuate from time to time to the extent that VERITAS makes periodic
incremental investments in research and development and VERITAS' level of
revenue fluctuates.

General and Administrative. General and administrative expenses consist
primarily of salaries, related benefits and fees for professional services, such
as legal and accounting services. General and administrative expenses increased
314% from $2.7 million for the three months ended September 30, 1998 to $11.0
million for the three months ended September 30, 1999, and increased 203% from
$7.1 million for the nine months ended September 30, 1998 to $21.4 for the nine
months ended

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<PAGE> 20

September 30, 1999. General and administrative expenses as a percentage of
revenue increased from 5% for the three and nine months ended September 30, 1998
to 6% for the three and nine months ended September 30, 1999. The increase in
absolute dollars was primarily due to additional personnel costs, including
additional personnel related to the acquisitions in the second quarter of 1999
and, to a lesser extent, to an increase in the provision for the allowance for
doubtful accounts and other expenses associated with VERITAS enhancing its
infrastructure to support expansion of its operations. General and
administrative expenses are expected to increase in absolute dollars, but not to
change significantly as a percentage of revenue in the future, as we expand our
operations.

Amortization of Goodwill and Other Intangibles. Amortization of goodwill
and other intangibles was $219.6 million for the three months ended September
30, 1999 and $291.1 million for the nine months ended September 30, 1999. For
the nine months ended September 30, 1999, the amount mainly represents four
months of amortization of goodwill, acquired distribution channels, trademarks
and other intangible assets recorded upon acquisitions of NSMG and TeleBackup.
The estimated useful life of the goodwill and other intangibles is four years
and the amortization is expected to be approximately $219.6 million per quarter.

In-process Research and Development. In-process research and development
was $1.1 million for the three months ended September 30, 1999 and $104.2
million for the nine months ended September 30, 1999. This amount represents
one-time charges of $1.1 million recorded upon the acquisition of certain assets
of NuView in August 1999, $101.2 million recorded upon the acquisition of NSMG
in May 1999 and $1.9 million recorded upon the acquisition of TeleBackup in June
1999.

Acquisition and Restructuring Costs. Upon the acquisition of NSMG, we
recorded a one-time charge to acquisition and restructuring costs of $11.0
million, which included approximately $9.7 million in exit costs with respect to
duplicative facilities that we plan to vacate and approximately $1.3 million in
severance benefits.

Acquisition and restructuring costs are summarized below (in thousands):

<TABLE>
<CAPTION>
CASH PAYMENTS OR
PROVISION CHARGED AGAINST THE ACCRUED
RECORDED AT ASSETS FROM AS OF
ACQUISITION ACQUISITION DATE TO SEPTEMBER 30,
DATE SEPTEMBER 30, 1999 1999
----------- ------------------- -------------
<S> <C> <C> <C>
Cancellation of facility leases and other contracts... $ 8,717 $ -- $ 8,717
Involuntary termination benefits...................... 1,335 (654) 681
Write off of redundant equipment and leasehold
improvements........................................ 948 -- 948
------- ----- -------
$11,000 $(654) $10,346
======= ===== =======
</TABLE>

Of the accrued balance as of September 30, 1999, $8.7 million relates to
servicing operating lease payments or negotiated buyout of operating lease
commitments on duplicative facilities, the lease terms of which will expire at
various times through the year 2012. The remaining $1.6 million is expected to
be utilized by December 1999. Non-cash restructuring charges of approximately
$0.9 million relate to leasehold improvements and excess equipment.

Interest and Other Income, Net. Interest and other income, net increased
142% from $3.0 million for the three months ended September 30, 1998 to $7.3
million for the three months ended September 30, 1999, and increased 57% from
$8.6 million for the nine months ended September 30, 1998 to $13.4 for the nine
months ended September 30, 1999. The increases were due to increased amounts of
interest income attributable to the higher level of funds available for
investment, primarily from the net proceeds of the issuance of the 1.856%
convertible subordinated notes, in August 1999, and, to a lesser extent, from
the net cash provided by operating activities. Foreign exchange transaction
gains and losses which are included in other income, net, have not had a
material effect on VERITAS' results of operations.

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<PAGE> 21

Interest Expense. Interest expense increased 273% from $1.4 million for the
three months ended September 30, 1998 to $5.3 million for the three months ended
September 30, 1999, and increased 91% from $4.3 million for the nine months
ended September 30, 1998 to $8.1 million for the nine months ended September 30,
1999. Interest expense consists primarily of interest accrued under the
convertible subordinated notes issued by VERITAS in October 1997 and August
1999.

Income Taxes. VERITAS had effective tax rates of negative 5% and negative
7% for the three and nine months ended September 30, 1999, respectively,
compared to tax provisions of 23% and 22% for the three and nine months ended
September 30, 1998. VERITAS' 1999 effective tax rates were negative and differed
from the combined federal and state statutory rates primarily due to acquisition
related charges that were non-deductible for tax purposes. VERITAS' 1998
effective tax rates were lower than the combined federal and state statutory
rates primarily due to the utilization of federal net operating loss
carryforwards and other credit carryforwards, offset by the impact of state and
foreign taxes.

The realization of VERITAS' net deferred tax assets depends on VERITAS
generating sufficient taxable income in future periods. Although realization is
not assured, management believes it is more likely than not that the net
deferred tax assets will be realized. The amount of the net deferred tax assets
considered realizable, however, could be reduced or increased in the near term
if estimates of future taxable income are changed. Management intends to
evaluate the realizability of the net deferred tax assets on a quarterly basis
to assess the need for the valuation allowance.

New Accounting Pronouncements. In March 1998, the American Institute of
Certified Public Accountants, or AICPA, issued Statement of Position, or SOP,
98-1, Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use. SOP 98-1 requires that entities capitalize certain costs related
to internal-use software once certain criteria have been met. VERITAS has
implemented SOP 98-1 for its fiscal year ending December 31, 1999 and the impact
of SOP 98-1 on VERITAS' financial position, results of operations and cash flows
has not been material.

In December 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions. SOP 98-9
amends SOP 97-2 Software Revenue Recognition to require recognition of revenue
using the "residual method" when certain criteria are met. VERITAS will be
required to implement these provisions of SOP 98-9 for its fiscal year ending
December 31, 2000. SOP 98-9 also amends SOP 98-4, an earlier amendment to SOP
97-2, which extended the deferral of the application of certain passages of SOP
97-2. VERITAS does not believe the impact of SOP 98-9 will be material to
VERITAS' financial position, results of operations and cash flows.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. VERITAS will be
required to implement SFAS No. 133 for its fiscal year ending December 31, 2001.
VERITAS' foreign currency exchange rate hedging activities have been
insignificant to date and VERITAS does not believe that the impact of SFAS No.
133 will be material to its financial position, results of operations or cash
flows.

LIQUIDITY AND CAPITAL RESOURCES

VERITAS' cash, cash equivalents and short-term investments totaled $643.4
million at September 30, 1999 and represented 73.2% of tangible assets, net.
Cash and cash equivalents are highly liquid with original maturities of ninety
days or less. Short-term investments consist mainly of investment-grade
commercial paper, medium-term notes, corporate notes, government securities and

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<PAGE> 22

market auction preferred securities. At September 30, 1999, VERITAS had $447.5
million of long-term obligations and stockholders' equity was approximately
$3,517.9 million.

Net cash provided by operating activities was $108.9 million in the nine
months ended September 30, 1999, and $46.6 million in the nine months ended
September 30, 1998. For the nine months ended September 30, 1999, cash provided
by operating activities resulted primarily from income after adjustments to
exclude the non-cash charges including amortization of intangibles related to
acquisition activities. For the nine months ended September 30, 1998, cash
provided by operating activities resulted primarily from net income after
adjustments to exclude the non-cash charges, increases in other accrued
liabilities, income taxes payable and deferred income taxes, customer advances
and deferred revenue balances and reductions in accounts receivable and deferred
income taxes and other assets balances.

VERITAS' investing activities used cash of $437.8 million in the nine
months ended September 30, 1999 primarily due to the net increase in short-term
and long-term investments of $396.4 million, purchases of property and equipment
of $36.3 million and purchase of certain assets of NuView. VERITAS' investing
activities used cash of $56.8 million in the nine months ended September 30,
1998 due primarily to the net increase in short-term investments of $40.1
million and capital expenditures of $15.4 million.

Financing activities provided cash of $398.6 million in the nine months
ended September 30, 1999, from the net proceeds of $334.1 million from the
issuance of the 1.856% convertible subordinated notes in August 1999 and $64.5
million from the issuance of common stock under our employee stock plans.
Financing activities provided cash of $11.2 million in the nine months ended
September 30, 1998 from the issuance of common stock under our employee stock
plans.

In October 1997, VERITAS issued $100.0 million of 5.25% convertible
subordinated notes due 2004 (the "5.25% notes"), for which VERITAS received net
proceeds of $97.5 million. VERITAS and its a wholly-owned subsidiary, VERITAS
Operating Corporation, are co-obligors on the 5.25% notes. The 5.25% notes
provide for semi-annual interest payments of $2.6 million each May 1 and
November 1. The 5.25% notes are convertible into shares of VERITAS' common stock
at any time prior to the close of business on the maturity date, unless
previously redeemed or repurchased, at a conversion price of $14.33 per share,
subject to adjustment in certain events. On or after November 5, 2002, the 5.25%
notes will be redeemable over the period of time until maturity at the option of
VERITAS at declining premiums to par. The debt issuance costs are being
amortized over the term of the 5.25% notes using the interest method.

In August 1999, VERITAS and its wholly-owned subsidiary, VERITAS Operating
Corporation, issued $465.8 million, aggregate principal amount at maturity, of
1.856% convertible subordinated notes due 2006 (the "1.856% notes") for which
VERITAS received net proceeds of approximately $334.1 million. The interest rate
of 1.856% together with the accrual of original issue discount represent a yield
to maturity of 6.5%. VERITAS and VERITAS Operating Corporation are co-obligors
on the 1.856% notes. The 1.856% notes provide for semi-annual interest payments
of $4.3 million each February 13 and August 13, commencing February 13, 2000.
The 1.856% notes are convertible into shares of VERITAS common stock at any time
prior to the close of business on the maturity date, unless previously redeemed
or repurchased, at a conversion price of $39.85 per share, subject to adjustment
in certain events, equivalent to an initial conversion rate of 18.623 shares of
common stock per $1,000 principal amount at maturity. On or after August 16,
2002, the 1.856% notes will be redeemable over the period of time until maturity
at the option of VERITAS at issuance price plus accrued original issue discount
and any accrued interest. If a fundamental change, as defined in the Amended and
Restated First Supplemental Indenture dated July 30, 1999, occurs prior to
August 13, 2006, each holder has the right to require VERITAS to redeem all or
part of the 1.856% notes at issuance price plus accrued original issue discount
and any accrued interest. The debt

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<PAGE> 23

issuance costs are being amortized over the term of the 1.856% notes using the
interest method. We expect to use the net proceeds from these 1.856% notes
issuance for general corporate purposes, including working capital expenditures
and possible acquisitions of companies or technology, although there are no
current agreements or negotiations with respect to any material acquisitions.
Pending these uses, we intend to invest the net proceeds in short-term
interest-bearing, investment grade securities.

Following the issuance of the 1.856% notes, we have a ratio of long-term
debt to total capitalization at September 30, 1999 of approximately 11%. As a
result of this additional indebtedness, our principal and interest payment
obligations will increase substantially. The degree we will be leveraged could
materially and adversely affect our ability to obtain financing for working
capital, acquisitions or other purposes and could make us more vulnerable to
industry downturns and competitive pressures. We will require substantial
amounts of cash to fund scheduled payments of principal and interest on our
indebtedness, including the 5.25% notes and the 1.856% notes, future capital
expenditures and any increased working capital requirements. If we are unable to
meet our cash requirements out of cash flow from operations, we cannot assure
you that we will be able to obtain alternative financing.

During the second quarter of 1999, VERITAS signed a lease for new corporate
campus facilities in Mountain View, California (see Note 10 "Commitments and
Contingencies" to Condensed Consolidated Financial Statements). The lease term
for the first phase facilities is five years beginning in April 1999, with an
option to extend the lease term for two successive periods of one year each. We
have an option to purchase the property (land and facilities) for $72.0 million
or, at the end of the lease, to arrange for the sale of the property to a third
party with VERITAS retaining an obligation to the owner for the difference
between the sale price and the $72.0 million if the sales price is less than
this amount, subject to certain provisions of the lease. Lease payments on the
first phase facilities will begin in the second quarter of 2001. The lease
requires VERITAS to maintain specified financial covenants such as leverage
ratio, quick ratio and earnings before interest, taxes, depreciation and
amortization, all of which we were in compliance with as of September 30, 1999.

VERITAS generally believes that its current cash, cash equivalents and
short-term investment balances and cash flow from operations will be sufficient
to meet VERITAS' working capital and capital expenditure requirements for at
least the next 12 months. Thereafter, VERITAS may require additional funds to
support its working capital requirements or for other purposes and may seek to
raise such additional funds through public or private equity financing or from
other sources. There can be no assurance that additional financing will be
available at all or that if available, such financing will be obtainable on
terms favorable to VERITAS.

YEAR 2000 COMPLIANCE

Background of Year 2000 Issues

We are aware of the issues associated with the programming code in existing
computer systems as the millennium approaches. Many currently installed computer
systems and software products are unable to distinguish between twentieth
century dates and twenty-first century dates because such systems may have been
developed using two digits rather than four to determine the applicable year.
For example, computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This error could
result in system failures, generation of erroneous data or miscalculations
causing disruption of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities. As a result, many companies' software and computer systems
may need to be upgraded or replaced to comply with such Year 2000 requirements.
The Year 2000 problem is pervasive and complex. Significant uncertainty exists
in the software industry concerning the potential impact of

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<PAGE> 24

Year 2000 problems. We are assessing the potential overall impact of the
impending century change on our business, financial condition and results of
operations.

State of Readiness

Based on our assessment to date, we believe the current versions of our
software products and services are "Year 2000 ready" -- that is, they are
capable of adequately distinguishing twenty-first century dates from twentieth
century dates. New products are being designed and tested to be Year 2000 ready.
Although our products have undergone, or will undergo, our normal quality
testing procedures, there can, however, be no assurance that our products will
contain all necessary date code changes. Furthermore, use of our products in
connection with other products which are not Year 2000 ready, including
non-compliant hardware, software and firmware, may result in the inaccurate
exchange of dates and result in performance problems or system failure. In
addition, original equipment manufacturer derivative versions of older VERITAS
products may not be Year 2000 ready. Any failure of our products to perform,
including system malfunctions associated with the onset of year 2000, could
result in claims against us. However, success of our Year 2000 compliance
efforts may depend on the success of our customers in dealing with the Year 2000
issue, as we have formally notified all customers of the Year 2000 readiness of
our products.

Although we have not been a party to any litigation or arbitration
proceeding to date that involves Year 2000 compliance issues with our products
or services, there can be no assurance that we will not in the future be
required to defend our products or services in such proceedings, or to negotiate
resolutions of claims based on Year 2000 issues. The costs of defending and
resolving Year 2000 related disputes, regardless of the merits of such disputes,
and any liability we have for Year 2000 related damages, including consequential
damages, could harm on our business.

In addition, we believe that purchasing patterns of customers and potential
customers may be affected by Year 2000 compliance issues as organizations expend
significant resources to correct their current software systems for Year 2000
compliance. These expenditures may result in reduced funding available to such
entities for other information technology purchases, such as those products and
services offered by us. Furthermore, customers and potential customers may defer
information technology purchases generally until early in the next millennium to
avoid Year 2000 compliance problems. Any such deferral of purchases by our
customers or potential customers could harm our business.

Our business depends on many systems that could be affected by Year 2000
related problems. Those systems include, among others: hardware and software
systems we use to deliver products and services to our customers, including
software supplied by third parties; communications networks such as the wide
area network and local area networks upon which we depend to develop products
and to communicate product orders to our manufacturing and distribution
operations; the internal systems of our customers and suppliers; software
products sold to customers; the hardware and software systems we use internally
in the management of our business; and non-information technology systems and
services we use in the management of our business, such as power, telephone
systems and building systems.

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<PAGE> 25

We have conducted an extensive review of our products and services and of
our internal business systems and infrastructure to identify potential Year 2000
problems and are implementing remedial action to address those problems. Based
on our analysis of the systems potentially affected, we are applying a phased
approach to making such systems and our operations ready for the year 2000.
Beyond awareness of the issues and scope of systems involved, the phases of
activities in process include: an assessment of specific underlying computer
systems, programs and hardware; renovation or replacement of Year 2000
non-compliant technology; validation and testing of critical systems certified
by third-party suppliers to be Year 2000 ready; and implementation of Year 2000
ready systems. The table below describes the status and timing of such phased
activities.

<TABLE>
<CAPTION>
TARGETED
IMPACTED SYSTEMS STATUS COMPLETION
---------------- ------ ----------
<S> <C> <C>
Software products sold to customers Software products tested and available Completed
for customers
Communication networks used to carry Assessment inventory completed Completed
products and provide services
Hardware and software systems used to Assessment inventory completed Completed
manage our business
Hardware and software systems used to Assessment completed Completed
deliver products and services
Hardware and software systems used to Validation, testing and remediation in Q4 1999
deliver products and provide services process
(including desktops)
Communication networks used to carry Validation, testing and remediation in Q4 1999
products and provide services process
Non-information technology systems and Systems upgraded or replaced as Q4 1999
services appropriate, testing and
implementation
Hardware and software systems used to Validation, testing and remediation Q4 1999
manage our business
</TABLE>

We have conducted extensive Year 2000 testing on all systems we consider
critical. To date, we have not encountered any material problems in this regard
with our computer systems or any other equipment that might be subject to such
problems. In the event that any of our significant suppliers or customers does
not successfully and timely achieve Year 2000 compliance, our business or
operations could be adversely affected. This could cause system failures or
generation of erroneous information and could cause significant disruption to
business activities. We are reviewing what further actions are required to make
all software systems used internally Year 2000 ready as well as actions needed
to mitigate vulnerability to problems with suppliers and other third parties'
systems.

Costs to Address Year 2000 issues

The total cost of our Year 2000 compliance activities has not been, and is
not anticipated to be, material to our business, results of operations and
financial condition. We estimate specific Year 2000 expenses to date to be not
more than $1.0 million and do not expect total costs of the compliance
activities to exceed $2.0 million. These costs and the timing in which we plan
to complete our Year 2000 modification and testing processes are based on our
estimates. However, there can be no assurance that we will timely identify and
remedy all significant Year 2000 problems, that remediation efforts will not
involve significant time and expense, or that such problems will not harm our
business.

Contingency Plans

We have prepared contingency plans for handling Year 2000 problems that we
fail to detect and correct before they occur. Our contingency plans include
increasing support personnel from late

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<PAGE> 26

December 1999 to early January 2000, obtaining access to alternative third party
suppliers for products and services, planning manual workarounds for software
and hardware failures, replacing software and hardware systems and establishing
alternative procedures in case of power and phone systems failure. If we do not
identify and remedy Year 2000 problems in a timely and efficient manner, we
could experience substantial disruptions to our operations, which could lead to
loss of existing and potential customers and result in costly litigation claims
against us.

FACTORS THAT MAY AFFECT FUTURE RESULTS

In addition to other information in this prospectus supplement, and those
discussed in the Prospectus to which this prospectus supplement is attached
under the heading "Risk Factors," the following factors should be considered
carefully in evaluating VERITAS and its business.

Sales of a small number of product lines make up a substantial portion of our
revenue

For the foreseeable future, we expect to derive a substantial majority of
our revenue from a limited number of software products. If many customers do not
purchase these products as a result of competition, technological change or
other factors, our revenue would decrease and our business and quarterly and
annual results of operations would be substantially harmed. In 1998, VERITAS
derived 87.6% of its license revenue from storage management products, and the
NSMG business derived 87.9% of its revenue from its Backup Exec product. In the
nine months ended September 30, 1999, VERITAS derived 85.6% of its user license
revenue from storage management products, including Backup Exec product from May
29, 1999. Also, VERITAS' NetBackup product and NSMG's Backup Exec product
perform some overlapping functions. Customers may select one product over the
other, resulting in reduced revenue for the product not selected. Therefore, we
may not receive the same aggregate level of revenue from these products as we
have received in the past.

We derive significant revenues from only a few customers

Sales to a small number of customers generate a disproportionate amount of
our revenue. For example, in 1998, VERITAS derived 12% of its revenue from sales
to Sun Microsystems and the former NSMG business derived 28% of its revenue from
sales to Ingram Micro Inc. In the nine months ended September 30, 1999, VERITAS
derived 11% of its revenue from sales to Sun Microsystems. If Sun Microsystems,
Ingram Micro, or any other significant customer, were to reduce its purchases
from us, our revenues and therefore our business would be harmed unless we were
to increase sales to other customers substantially. We do not have a contract
with Sun Microsystems, Ingram Micro or any other customer that requires the
customer to purchase any specified number of software licenses from us.
Therefore, we cannot be sure that these customers will continue to purchase our
products at current levels.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN EXCHANGE RATE SENSITIVITY

VERITAS does not use derivative financial instruments for speculative
purposes. VERITAS may engage in exchange rate hedging from time to time but such
activity has been insignificant to date and VERITAS does not hold or issue
foreign exchange contracts for trading purposes. VERITAS' international sales
are generated primarily through its international sales subsidiaries. Most
international revenue outside the United States and Canada is collectible in
foreign currencies. Since much of our international operating expenses are also
incurred in local currencies, the impact of exchange rates on net income or loss
is relatively less than the impact on revenues. Although VERITAS' operating and
pricing strategies take into account changes in exchange rates over time,

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<PAGE> 27

VERITAS' operating results may be significantly affected in the short term by
fluctuations in foreign currency exchange rates. VERITAS' international
subsidiaries purchase licenses from the parent company resulting in intercompany
receivables and payables. These receivables and payables are carried on each
company's books at the historical local currency that existed at the time of the
transaction. Such receivables and payables are eliminated for financial
statement reporting purposes. Prior to elimination, the amounts carried in
foreign currencies are converted to U.S. Dollars at the then current rate or
"marked to market." The marked to market process may give rise to currency gains
and losses. Such gains or losses are recognized on VERITAS' statement of
operations as a component of other income, net. To date, any such gains or
losses have not been material. VERITAS does not believe its total exposure to be
significant.

INTEREST RATE SENSITIVITY

VERITAS' exposure to market risk for changes in interest rates relates
primarily to our investment portfolio and long-term debt obligations. The
primary objective of VERITAS' investment activities is to preserve principal
while at the same time maximizing yields without significantly increasing risk.
VERITAS' portfolio includes money markets funds, commercial paper, medium-term
notes, corporate notes, government securities and market auction preferred
securities. The diversity of the portfolio helps VERITAS to achieve its
investment objective. As of September 30, 1999, approximately 98% of VERITAS'
entire portfolio will mature in one year or less and approximately 19% of our
investment portfolio matures less than 90 days from the date of purchase.

Long-term debt of $447.5 million consists of 5.25% Convertible Subordinated
Notes due 2004 of $100.0 million (the 5.25% Notes) and 1.856% Convertible
Subordinated Notes due 2006 of $347.5 million (the 1.856% Notes). The interest
rate of 1.856% on the 1.856% notes together with the accrual of original issue
discount represent a yield to maturity of 6.5%. The nominal interest rate on
these notes is fixed and the notes provide for semi-annual interest payments of
approximately $2.6 million each May 1 and November 1 and approximately $4.3
million each February 13 and August 13, respectively. The notes are convertible
into VERITAS' common stock at any time prior to the close of business on the
maturity date, unless previously redeemed or repurchased, subject to adjustment
in certain events.

The following table presents the amounts of VERITAS' cash equivalents,
investments and long-term debt that may be subject to interest rate risk and the
average and fixed interest rates as of September 30, 1999 by year of maturity
(dollars in thousands):

<TABLE>
<CAPTION>
2000 AND FAIR VALUE
1999 THEREAFTER TOTAL TOTAL
-------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash equivalents and short-term
investments............................. $213,958 $390,037 $603,995 $603,995
Average interest rate..................... 5.24% 5.77% 5.58% 5.58%
Long-term investments..................... $ -- $ 65,036 $ 65,036 $ 65,036
Average interest rate..................... -- 5.33% 5.33% 5.33%
Long-term debt............................ $ -- $447,531 $447,531 $792,290
Fixed interest rate....................... -- 6.22% 6.22% 6.22%
</TABLE>

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