Adobe 1999 Annual Report Download - page 31

have recently been revised or are under review by one or more groups. Changes to these rules or the
questioning of current practices may have a significant adverse effect on our reported financial results or in
the way in which we conduct our business.
Due to the factors noted earlier, as well as the Year 2000 issues noted later, our future earnings and
stock price may be subject to significant volatility, particularly on a quarterly basis. Any shortfall in revenue
or earnings compared to analysts’ or investors’ expectations could cause, and has caused in the past, an
immediate and significant decline in the trading price of our common stock. Additionally, we may not learn
of such shortfalls until late in the fiscal quarter, which could result in an even more immediate and greater
decline in the trading price of our common stock. Finally, we participate in a highly dynamic industry. In
addition to factors specific to us, changes in analysts’ earnings estimates for us or our industry, and factors
affecting the corporate environment, our industry, or the securities markets in general will often result in
significant volatility of our common stock price.
Year 2000 Issues
We have been addressing a broad range of issues associated with the programming code in existing
computer systems as the year 2000 approached. The Year 2000 problem is complex, as many computer
systems have been affected in some way by the rollover of the two-digit year value to 00. Systems that do
not properly recognize such information could generate erroneous data or cause a system to fail. The Year
2000 issue creates risk for us from unforeseen problems in our products or our own computer and
embedded systems and from third parties with whom we deal on financial and other transactions
worldwide. Failure of our and/or third parties’ computer systems or Year 2000 defects in our products
could harm our ability to conduct our business.
We commenced a phased program to inventory, assess, remediate, test, implement, and develop
contingency plans for all mission-critical applications and products potentially affected by the Year 2000
issue (the ‘‘Y2K Program’’). All phases have been substantially completed, including proactive testing and
monitoring in the early part of the Year 2000. All of our business groups were involved in the Y2K
Program efforts.
We identified three potential areas of impact for review: (1) the software and systems, including
embedded systems, used in our internal business processes; (2) third-party vendors, manufacturers and
suppliers; and (3) our software products offered to customers. We estimate that the aggregate cost
incurred for the Y2K Program was less than $3.0 million, which we funded from operating cash flows.
Internal business processes. We have substantially completed all phases of our Y2K Program related
to our internal business processes, including proactive monitoring and testing of these processes during the
early part of Year 2000. In addition, in order to protect against the acquisition of additional products that
may not be Year 2000 ready, we implemented a policy requiring Year 2000 review of products or upgrades
sold or licensed to us prior to their acquisition. Through January 2000, we have not discovered any material
issues. However, as it is still early in the Year 2000, such failures, or the failure of any contingency plan,
remain a possibility, and it could seriously harm our business if significant new noncompliance issues are
identified.
Third-party vendors, manufacturers, and suppliers. Both before and after the Year 2000 date change,
we contacted our critical suppliers, manufacturers, distributors, and other vendors to determine whether
their operations and the products and services that they provide to us are Year 2000 compliant. Through
January 2000, we have not discovered any material issues. However, as it is still early in the Year 2000, such
failures or the failure of any contingency plan remain a possibility and could seriously harm our business.
Products. In addition, the Year 2000 issue could affect the products that we license. We are currently
continuing to test our products and gather information about our technologies and products affected by
the Year 2000 transition. Current information about our products is available on our Year 2000 Web site
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