Adobe 2003 Annual Report Download - page 36

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36
30%, respectively, in fiscal 2001. We expect the trend towards the Windows platform to continue in the foreseeable
future as a significant majority of our ePaper revenues are on the Windows platform.
In Adobe’s experience, the actual amount of product backlog at any particular time is not a meaningful indicator
of our future business prospects. Prior to major product releases, we tend to have significant levels of backlog, but at
other times backlog is minimal and we normally ship products within a few days of receiving an order, subject to
credit verification and our global channel inventory policy. Backlog is also subject to variability beyond our global
channel inventory policy at the end of a reporting period, in amounts typically less than 5% of reported revenue.
Our global channel inventory position continues to be within company policy.
Cost of Revenue
Year Ended
November 28, 2003
% Change
2002 to 2003
Year Ended
November 29, 2002
% Change
2001 to 2002
Year Ended
November 30, 2001
Product....................................... $ 79.9 (18)% $ 96.9 19% $ 81.5
Percentage of total revenues .. 6% 8% 7%
Services and support.................. 13.1 76 % 7.4 *% ―
Percentage of total revenues .. 1% 1% ―
Total cost of revenues ............ $ 93.0
(
11
)
% $ 104.3 28% $ 81.5
* Percentage is not meaningful.
Product
Cost of product revenue includes product packaging, third-party royalties, excess and obsolete inventory,
amortization related to localization costs and acquired technologies, and the costs associated with the manufacturing
of our products. In fiscal 2001 and fiscal 2002, cost of product revenue also included hosted server costs associated
with the Adobe DesignTeam.
Cost of product revenue decreased during fiscal 2003 as compared to fiscal 2002 primarily due to product mix.
During fiscal 2003, we received higher licensing revenue versus shrink-wrapped product revenue, compared to
fiscal 2002, which resulted in lower material costs. Additionally, cost of product revenue for fiscal 2002 included
the amortization and impairment costs associated with the Adobe DesignTeam, which was discontinued during the
third quarter of fiscal 2002. An impairment charge of $5.5 million for capitalized hosted server costs associated with
Adobe DesignTeam was recorded during fiscal 2002.
Cost of product revenue increased in fiscal 2002 compared to fiscal 2001 primarily due to increased
amortization of Web site development costs related to Adobe DesignTeam which was launched in the fourth quarter
of fiscal 2001 and the subsequent impairment charge for the remaining development costs.
Services and Support
Cost of services and support revenue is composed primarily of employee-related costs and the related costs
incurred to provide consulting services, training and product support.
Cost of services and support revenue increased during fiscal 2003 as compared to fiscal 2002, and from fiscal
2002 as compared to fiscal 2001, primarily due to the acquisition of Accelio during the second quarter of fiscal
2002.