Adobe 2010 Annual Report Download - page 40

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If we fail to successfully manage transitions to new business models and markets, our results of operations could be
negatively impacted.
We plan to release numerous new product and service offerings and employ new software delivery methods in
connection with our diversification into new business models and markets. It is uncertain whether these strategies will prove
successful or that we will be able to develop the infrastructure and business models as quickly as our competitors. Market
acceptance of these new product and service offerings will be dependent on our ability to include functionality and usability
in such releases that address certain customer requirements with which we have limited prior experience and operating
history. Some of these new product and service offerings could subject us to increased risk of legal liability related to the
provision of services as well as cause us to incur significant technical, legal or other costs. For example, with our introduction
of on-demand services and subscription-based licensing models, we are entering a market that is at an early stage of
development. Market acceptance of such services is affected by a variety of factors, including security, reliability,
performance, customer concerns with entrusting a third party to store and manage their data, public concerns regarding
privacy and the enactment of laws or regulations that restrict our ability to provide such services to customers in the U.S. or
internationally. As our business continues to transition to new business models that may be more highly regulated for privacy
and data security, and to countries outside the U.S. that have more stringent data protection laws, our liability exposure,
compliance requirements and costs may increase. In addition, laws in the areas of privacy and online advertising are likely to
be passed in the future, which could result in significant limitations on or changes to the ways in which we and our customers
can collect, process, use, store or transmit the information of customers or employees, communicate with customers, and
deliver products and services. Further, any perception of our practices as an invasion of privacy, whether or not illegal, may
subject us to public criticism and reputational harm. Existing and potential future privacy laws, increased risks related to
unauthorized data disclosures and increasing sensitivity of consumers to use of personal information may create negative
public relations related to our products and business practices.
Additionally, customer requirements for open standards or open source products could impact adoption or use of some of
our products or services. To the extent we incorrectly predict customer requirements for such products or services or if there
is a delay in market acceptance of such products or services, our business could be harmed.
From time to time we open source certain of our technology initiatives, provide broader open access to our technology,
license certain of our technology on a royalty-free basis, and release selected technology for industry standardization. These
changes may have negative revenue implications and make it easier for our competitors to produce products or services
similar to ours. If we are unable to respond to these competitive threats, our business could be harmed.
We are also devoting significant resources to the development of technologies and service offerings in markets where we
have a limited operating history, including the enterprise, government and mobile and non-pc device markets. In the
enterprise market, we intend to increase our focus on vertical markets such as education, financial services, and
manufacturing. These new offerings and markets require a considerable investment of technical, financial and sales
resources, and a scalable organization. Many of our competitors may have advantages over us due to their larger presence,
larger developer network, deeper experience in the enterprise, government and mobile and non-pc device markets, and
greater sales, consulting and marketing resources. In the mobile and non-pc device markets, our intent is to partner with
device makers, manufacturers and telecommunications carriers to embed our technology on their platforms, and in the
enterprise and government market our intent is to form strategic alliances with leading enterprise and government solutions
and service providers to provide additional resources to further enable penetration of such markets. If we are unable to
successfully enter into strategic alliances with device makers, manufacturers, telecommunication carriers and leading
enterprise and government solutions and service providers, or if they are not as productive as we anticipate, our market
penetration may not proceed as rapidly as we anticipate and our results of operations could be negatively impacted.
Revenue from our product and service offerings may be difficult to predict.
As previously discussed, we are devoting significant resources to the development of product and service offerings as
well as new distribution models where we have a limited operating history. For example, we intend to implement a
subscription licensing model to augment our traditional perpetual licensing model. This makes it difficult to predict revenue
and revenue may decline more quickly than anticipated. Additionally, we have a limited history of licensing products and
offering services in certain markets such as the government and enterprise market and may experience a number of factors
that will make our revenue less predictable, including longer than expected sales and implementation cycles, decisions to
open source certain of our technology initiatives, potential deferral of revenue due to multiple-element revenue arrangements
and alternate licensing arrangements. If any of our assumptions about revenue from our new businesses prove incorrect, our
actual results may vary materially from those anticipated, estimated or projected.