Adobe 2009 Annual Report Download - page 41

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In addition, the financial health of our distributors and our continuing relationships with them are important to our
success. Some of these distributors may be unable to withstand adverse changes in current economic conditions, which could
result in insolvency of certain of our distributors and/or the inability of our distributors to obtain credit to finance purchases
of our products. In addition, weakness in the end-user market could further negatively affect the cash flow of our distributors
who could, in turn, delay paying their obligations to us, which would increase our credit risk exposure. Our business could be
harmed if the financial condition of some of these distributors substantially weakens and we were unable to timely secure
replacement distributors.
We also sell certain of our products and services through our direct sales force. Risks associated with this sales channel
include a longer sales cycle associated with direct sales efforts, difficulty in hiring, retaining and motivating our direct sales
force, and substantial amounts of training for sales representatives, including regular updates to cover new and upgraded
products and services. Moreover, our recent hires and sales personnel added through our recent business acquisitions may not
become as productive as we would like, as in most cases it takes a significant period of time before they achieve full
productivity. Our business could be seriously harmed if these expansion efforts do not generate a corresponding significant
increase in revenues and we are unable to achieve the efficiencies we anticipate.
We also provide products and services, directly and indirectly, to a variety of governmental entities, both domestically
and internationally. The licensing and sale of products and services to governmental entities may require adherence to
complex specific procurement regulations and other requirements. While we believe we have adequate controls in this area,
failure to effectively manage this complexity and satisfy these requirements could result in the potential assessment of
penalties and fines, harm to our reputation and lost sales opportunities to such governmental entities.
We outsource a substantial portion of our customer service and technical support activities to third-party service
providers. We rely heavily on these third-party customer service and technical support representatives working on our behalf
and we expect to continue to rely heavily on third parties in the future. This strategy provides us with lower operating costs
and greater flexibility, but also presents risks to our business, including the possibilities that we may not be able to impact the
quality of support that we provide as directly as we would be able to do in our own company-run call centers, and that our
customers may react negatively to providing information to, and receiving support from, third-party organizations, especially
if based overseas. If we encounter problems with our third-party customer service and technical support providers, our
reputation may be harmed and our revenue may be adversely affected.
Catastrophic events may disrupt our business.
We are a highly automated business and rely on our network infrastructure and enterprise applications, internal
technology systems and our Website for our development, marketing, operational, support, hosted services and sales
activities. In addition, some of our businesses rely on third-party hosted services and we do not control the operation of third-
party data center facilities serving our customers from around the world, which increases our vulnerability. A disruption,
infiltration or failure of these systems or third party hosted services in the event of a major earthquake, fire, power loss,
telecommunications failure, cyber attack, war, terrorist attack, or other catastrophic event could cause system interruptions,
reputational harm, loss of intellectual property, delays in our product development, lengthy interruptions in our services,
breaches of data security and loss of critical data and could prevent us from fulfilling our customers’ orders. Our corporate
headquarters, a significant portion of our research and development activities, certain of our data centers, and certain other
critical business operations are located in San Jose, California, which is near major earthquake faults. We have developed
certain disaster recovery plans and certain backup systems to reduce the potentially adverse effect of such events, but a
catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information
technology systems could severely affect our ability to conduct normal business operations and, as a result, our future
operating results could be adversely affected.
Net revenue, margin or earnings shortfalls or the volatility of the market generally may cause the market price of our stock to
decline.
The market price for our common stock has experienced significant fluctuations and may continue to fluctuate
significantly. The market price for our common stock may be affected by a number of factors, including shortfalls in our net
revenue, margins, earnings or key performance metrics, changes in estimates or recommendations by securities analysts; the
announcement of new products, product enhancements or service introductions by us or our competitors, seasonal variations