Adobe 2003 Annual Report Download - page 42

42
• manufacturing costs and volumes
• the mix of application products and licensing revenue, full and upgrade products, distribution channels and
geographic areas
These and many other factors described in this report affect our financial performance and may cause our future
results to vary materially from these targets or from results from prior periods. Furthermore, if the economy worsens
or the economic slow-down spreads to other geographic areas where we do business, it would likely cause our future
results to vary materially from our targets. The slower economy may also adversely affect our ability to grow, and
political instability in any of the major countries in which we do business may adversely affect our business.
The end markets for our software products are intensely and increasingly competitive, and are significantly
affected by product introductions and market activities of industry competitors. In the markets served by our ePaper
business (which was renamed Intelligent Documents business beginning in fiscal 2004), Microsoft has recently
launched a new electronic form tool called InfoPath as part of the new version of their professional Office product.
We believe that Microsoft’s new InfoPath product competes with certain aspects of our Intelligent Documents
product line. Given Microsoft’s market dominance, InfoPath, or any new competitive Microsoft product or
technology that is bundled as part of their Office product or operating system, could harm our overall Intelligent
Documents market opportunity. In addition, Microsoft is working on the next generation of its Windows operating
system, codenamed Longhorn, which could be released as early as late 2005. It is anticipated that Microsoft will
add new electronic document capabilities to Longhorn, potentially providing additional competition to our
Intelligent Document products and solutions. Furthermore, Microsoft has increased its presence in the low-end and
mid-range consumer digital imaging markets. If competing Microsoft products achieve widespread acceptance, our
operating results could suffer. In addition, consolidation has occurred among some of the competitors in our
markets. Any further consolidations among our competitors may result in stronger competitors and may therefore
harm our results of operations.
Also, as we seek to further broaden our customer base in the enterprise, government, consumer and creative
professional markets, we may not successfully adapt our application software products, business models, or
licensing and distribution channels to these changes, which could cause our operating results to suffer. If we are
unable to successfully implement as planned any of our strategic alliances or develop the necessary relationships
with enough significant systems integrators to adapt to these changes, our business could be harmed. Additionally,
these new markets may result in higher costs and higher acceptance, warranty and indemnification risks than our
other markets.
We plan to recruit key talent for our future growth, especially to support our enterprise business. Competition
for such high-quality personnel, especially highly skilled engineers, is intense. Our ability to effectively manage this
growth will require us to continue to improve our operational and financial controls and information management
systems; otherwise our business could be seriously harmed. We rely on equity compensation in order to recruit and
retain highly skilled employees in a competitive environment. If we are unable to provide adequate equity
compensation incentives to effectively recruit and retain talented employees, our business may be harmed.
Any delays or failures in developing and marketing our products, including upgrades of current products, may
also have a harmful impact on our results of operations. Our ability to extend our core technologies into new
applications and new platforms and to anticipate or respond to technological changes could affect our ability to
develop these products. A portion of our future revenue will come from these new applications. Delays in product or
upgrade introductions could cause a decline in our revenue, earnings or stock price. We cannot determine the
ultimate effect these delays or the introduction of new products or upgrades will have on our revenue or results of
operations.
We offer our application-based products primarily on Windows and Macintosh platforms and on some UNIX
platforms. We generally offer our server-based products, but not desktop products, on the Linux platform as well as
the Windows and UNIX platforms. To the extent that there is a slowdown of customer purchases of personal
computers on either the Windows or Macintosh platform or in general, or to the extent that significant demand arises
for our products or competitive products on the Linux desktop platform before we choose and are able to offer our
products on this platform, our business could be harmed.