Adobe 2012 Annual Report Download - page 40

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revenue in future quarters. If we were to experience significant downturns in subscription sales and renewal rates, our reported
financial results might not reflect such downturns until future periods. A subscription model could also make it difficult for us to
rapidly increase our revenues from subscription- or SaaS-based services through additional sales in any period, as revenue from
new customers will be recognized over the applicable subscription term. Further, any increases in sales under our subscription
sales model could result in decreased revenues over the short term if they are offset by a decline in sales from perpetual license
customers.
Additionally, in connection with our sales efforts to enterprise customers and our introduction of enterprise term license
agreements, a number of factors could 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 or our
addition of a subscription-based model prove incorrect, our actual results may vary materially from those anticipated, estimated
or projected.
We may be unable to predict subscription renewal or upgrade rates and the impact these rates may have on our future revenue
and operating results.
The SaaS business model we utilize in our Adobe Marketing Cloud offerings typically involves selling services on a
subscription basis pursuant to service agreements that are generally one to three years in length, our Creative Cloud subscription
agreements are generally month to month or one year in length, and subscription agreements for other products and services may
provide for shorter or longer terms. Although many of our service and subscription agreements contain automatic renewal terms,
our customers have no obligation to renew their subscriptions for our services after the expiration of their initial subscription
period, and some customers elect not to renew. We cannot provide assurance that these subscriptions will be renewed at the same
or higher level of service, for the same number of seats or for the same duration of time, if at all. Moreover, under certain
circumstances, some of our customers have the right to cancel their service agreements prior to the expiration of the terms of their
agreements. We cannot be assured that we will be able to accurately predict future customer renewal rates. Our customers’ renewal
rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our services,
the prices of our services, the prices of services offered by our competitors, mergers and acquisitions affecting our customer base,
reductions in our customers’ spending levels, or declines in consumer activity as a result of economic downturns or uncertainty
in financial markets. If our customers do not renew their subscriptions for our services or if they renew on less favorable terms to
us, our revenues may decline.
Our future growth is also affected by our ability to sell additional features and services to our current customers, which
depends on a number of factors, including our customers’ satisfaction with our services, the prices of our services and general
economic conditions. If our efforts to cross-sell and upsell to our customers are unsuccessful, the rate at which our business grows
might decline.
Uncertainty about current and future economic conditions and other adverse changes in general political conditions in any of the
major countries in which we do business could adversely affect our operating results.
As our business has grown, we have become increasingly subject to the risks arising from adverse changes in economic
and political conditions, both domestically and globally. Uncertainty about current and future economic and political conditions
on us, our customers, suppliers and partners, makes it difficult for us to forecast operating results and to make decisions about
future investments. If economic growth in the U.S., Europe and other countries slows or does not improve, or if the U.S., Europe
or other countries in which we do business experience further economic recessions, many customers may delay or reduce technology
purchases, advertising spending or marketing spending. This could result in reductions in sales of our products and services, longer
sales cycles, slower adoption of new technologies and increased price competition. Deterioration in economic conditions in any
of the countries in which we do business could also cause slower or impaired collections on accounts receivable, which may
adversely impact our liquidity and financial condition.
There could be a number of effects from a financial institution credit crisis on our business, which could include impaired
credit availability and financial stability of our customers, including our distribution partners and channels. A disruption in the
financial markets may also have an effect on our derivative counterparties and could also impair our banking partners on which
we rely for operating cash management. Any of these events would likely harm our business, results of operations and financial
condition.
Political instability in any of the major countries in which we do business would also likely harm our business, results of
operations and financial condition.
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