Adobe 1999 Annual Report Download - page 20

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For further information regarding our operating segments, see Note 16 of the Notes to Consolidated
Financial Statements.
During fiscal 1999, overall revenue increased 13% compared to fiscal 1998, due to increased licensing
of products in the Print Publishing, ePaper Solutions, and Web Publishing segments. Excluding revenue
from businesses divested in the third quarter of fiscal 1998, revenue increased 16%. The Print Publishing
segment provided the majority of the fiscal 1999 revenue growth, with a 30% increase from $272.2 million
in fiscal 1998 to $353.9 million in fiscal 1999. The increase in revenue from this segment was primarily due
to increased licensing of our Publishing Collection product and the introduction of InDesign, a new
page layout application software product, in the second half of fiscal 1999. The increase in revenue from
these products was partially offset by a decline in revenue from PageMaker, Illustrator, and FrameMaker,
primarily due to product lifecycle timing.
Additional revenue growth was achieved through our ePaper Solutions segment, as revenue more than
doubled compared to the prior year, from $58.0 million in fiscal 1998 to $129.3 million in fiscal 1999. This
increase was due to the release of Acrobat 4.0 in the second quarter of the year, with a higher number of
units licensed as a result of growing customer adoption of Adobe Acrobat and Adobe Portable Document
Format (‘‘PDF’’) technology.
The Web Publishing segment also contributed to the revenue growth as it grew 11% in fiscal 1999 to
$394.1 million compared to $354.2 million in fiscal 1998. The increase was primarily due to the release of
GoLive, our new Internet application software product introduced in the first half of fiscal 1999. In
addition, this segment experienced continued strength in the licensing of our digital imaging and dynamic
media products, with the release of Photoshop 5.5, After Effects 4.1, and Adobe Premiere 5.1 in the first
half of fiscal 1999, as well as increased revenue from our Adobe Web Collection and Dynamic Media
Collection products. The increase in revenue from this segment was partially offset by a decline in revenue
from Adobe PhotoDeluxe, due to reduced pricing, and a decline in revenue from PageMill, due to product
lifecycle timing.
The increase in revenue in fiscal 1999 in the above operating segments was partially offset by a decline
in revenue from the OEM PostScript and Other segment of $72.2 million, or 34%, compared to fiscal 1998.
OEM PostScript licensing revenue has experienced a decline over the past three years, primarily due to the
ongoing weakness in the monochrome laser printer market as a result of the following factors: loss of
royalty revenue from Hewlett-Packard Company’s (‘‘HP’’) desktop monochrome laser printer division,
which has been incorporating a clone version of Adobe PostScript software into its products since the fall
of 1997; a decline in the average selling price of monochrome laser printers; and an increase in the use of
inkjet printers, resulting in the weakness in the monochrome laser printer market. In addition, in fiscal
1998, we received $20.2 million in revenue in this segment from businesses we divested in the third quarter
of fiscal 1998, resulting in a decline of revenue in fiscal 1999 from the absence of these businesses.
We continue to be cautious about revenue from our OEM PostScript and Other segment because of
the continuing weakness in the monochrome laser printer market and the uncertain timing of OEM
customer introductions of products incorporating Adobe’s latest technologies. Excluding our investments
in our high-end color printing technologies, we anticipate that revenue from our OEM PostScript and
Other segment will continue to decline in fiscal 2000.
Total revenue decreased $17.1 million, or 2%, in fiscal 1998 compared to fiscal 1997, primarily due to
adverse economic conditions in Japan and a decline in revenue from our Print Publishing and OEM
19
PostScript and Other segments. The Print Publishing segment decreased 15% in fiscal 1998 compared to
fiscal 1997, due to a decline in revenue from our PageMaker, FrameMaker, and Adobe Type Manager
products, none of which had upgrades released during the year, and a decline in revenue from our
Illustrator product as its latest upgrade was not released until late in the fourth quarter. The decrease in
this segment from the above products was partially offset by an increase in our Adobe Publishing
Collection product, which was introduced in the U.S. and Asia in fiscal 1998. Additionally, the OEM