Adobe 2009 Annual Report Download - page 44

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as part of our Platform segment in fiscal 2009, is in an emerging market with high growth potential. In May 2008, we
announced the OSP. As part of the project, we will be removing the license fees on the next major releases of Adobe Flash
Player and Adobe AIR for devices. Revenue from this segment has begun to decrease. Although we would expect this
decrease to be offset in time by an increased demand for tooling products, server technologies, hosted services and
applications, if future revenue or revenue forecasts for our Platform segment do not meet our expectations, we may be
required to record a charge to earnings reflecting an impairment of recorded goodwill or intangible assets.
Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.
We are a U.S. based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Unanticipated
changes in our tax rates could affect our future results of operations. Our future effective tax rates could be unfavorably
affected by changes in, or interpretation of, tax rules and regulations in the jurisdictions in which we do business, by
unanticipated decreases in the amount of revenue or earnings in countries with low statutory tax rates, by lapses of the
availability of the U.S. research and development tax credit, or by changes in the valuation of our deferred tax assets and
liabilities.
In addition, we are subject to the continual examination of our income tax returns by the IRS and other domestic and
foreign tax authorities, including a current examination by the IRS of our fiscal 2005, 2006 and 2007 tax returns. These
examinations are expected to focus on our intercompany transfer pricing practices as well as other matters. We regularly
assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income
taxes and have reserved for potential adjustments that may result from the current examination. We believe such estimates to
be reasonable; however, there can be no assurance that the final determination of any of these examinations will not have an
adverse effect on our operating results and financial position.
If we are unable to recruit and retain key personnel our business may be harmed.
Much of our future success depends on the continued service and availability of our senior management. These
individuals have acquired specialized knowledge and skills with respect to Adobe. The loss of any of these individuals could
harm our business. Our business is also dependent on our ability to retain, hire and motivate talented, highly skilled
personnel. Experienced personnel in the information technology industry are in high demand and competition for their talents
is intense, especially in the Bay Area, where many of our employees are located. We have relied on our ability to grant equity
compensation as one mechanism for recruiting and retaining such highly skilled personnel. Accounting regulations requiring
the expensing of equity compensation may impair our ability to provide these incentives without incurring significant
compensation costs. Additionally, the recent significant adverse volatility in our stock price has resulted in many employees’
stock option exercise prices exceeding the underlying stock’s market value as well as deterioration in the value of employees’
restricted stock units granted, thus lessening the effectiveness of retaining employees through stock-based awards. If we are
unable to continue to successfully attract and retain key personnel, our business may be harmed. Effective succession
planning is also a key factor for our long-term success. Our failure to enable the effective transfer of knowledge and facilitate
smooth transitions with regards to our key employees could adversely affect our long-term strategic planning and execution.
We believe that a critical contributor to our success to date has been our corporate culture, which we believe fosters
innovation and teamwork. As we grow, including from the integration of employees and businesses acquired in connection
with our previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture which
could negatively affect our ability to retain and recruit personnel and otherwise adversely affect our future success.
Our investment portfolio may become impaired by deterioration of the capital markets.
Our cash equivalent and short-term investment portfolio as of November 27, 2009 consisted of US treasury securities,
bonds of government agencies, obligations of foreign governments, corporate bonds and taxable money market mutual funds.
We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate
and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our
maximum exposure to various asset classes.
As a result of current adverse financial market conditions, investments in some financial instruments may pose risks
arising from recent market liquidity and credit concerns. As of November 27, 2009, we had no material impairment charges
associated with our short-term investment portfolio relating to such adverse financial market conditions. Although we believe