Adobe 2000 Annual Report Download - page 32

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in the second quarter of fiscal 1999, 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 new release of our GoLive product and increased licensing of our
Photoshop, After Effects, and Adobe Premiere products. In addition, this segment experi-
enced increased revenue from our Adobe Web Collection and Adobe Dynamic Media
Collection products. The increase in revenue from this segment in fiscal 1999 was partially
offset by a decline in revenue from our Adobe PhotoDeluxe product, due to reduced pricing,
and a decline in revenue from our PageMill product, 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 experienced a decline
in fiscal 1999 compared to fiscal 1998, primarily due to the ongoing weakness in the
monochrome laser printer market as a result of the following factors: loss of royalty revenue
from HP’s 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 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 categorize our geographic information into three major market regions: the Americas,
EMEA, and Asia. In fiscal 2000 and fiscal 1999, revenue generated in the Americas, EMEA,
and Asia represented 52%, 26%, and 22% of total revenue, respectively.
Overall, revenue from our application products on the Windows® platform increased 39%
in fiscal 2000 compared to fiscal 1999, and revenue from our application products on the
Macintosh platform increased by 15% in fiscal 2000 over fiscal 1999. In fiscal 1999 com-
pared to fiscal 1998, revenue from our application products on the Windows platform
increased 22%, and revenue from our application products on the Macintosh platform
increased 21% during the same period. In fiscal 2000, the Windows and Macintosh plat-
forms accounted for 63% and 37%, respectively, of application products revenue,
excluding platform-independent and UNIX® products, compared to 58% and 42%, respec-
tively, in both fiscal 1999 and fiscal 1998. We expect the trend towards the Windows
platform to continue in the foreseeable future.
DIRECT COSTS
2000 CHANGE 1999 CHANGE 1998
Direct costs $ 87.3 (8)% $ 94.5 (6)% $ 101.0
Percentage of total revenue 6.9% 9.3% 11.3%
Direct costs include product packaging, third-party royalties, excess and obsolete inventory,
and amortization related to localization costs and acquired technologies.
Direct costs decreased in absolute dollars and as a percentage of revenue in fiscal 2000
compared to fiscal 1999, primarily due to lower localization and royalty costs, as well as a
reduction in material costs as a result of our ongoing cost improvement program. Direct
costs also decreased in absolute dollars and as a percentage of revenue in fiscal 1999 com-
pared to fiscal 1998, primarily due to more effective inventory management, resulting in
lower excess and obsolete inventory and lower material costs.
For fiscal 2001, we anticipate that gross margin will be approximately 93% of revenue.
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