Adobe 2000 Annual Report Download - page 39

that we expect our share count to increase three to four million per quarter in fiscal 2001,
that interest income is expected to be approximately $5.0 million per quarter in fiscal
2001, and that we plan to hire 1,000 employees in fiscal 2001. However, our headcount
increases will not reach this initially planned level due to adjustments in light of the
recent slow-down in some geographic areas. Finally, we have stated an effective tax rate
target for fiscal 2001 of 34% and a days sales outstanding (“DSO”) target range of 40–45 days.
We use these targets to assist us in making decisions about our allocation of resources and
investments, not as predictions of future results. The targets reflect a number of assump-
tions, including assumptions about:
• product pricing and demand
• manufacturing costs and volumes
• the mix of application products and licensing revenue, full and upgrade products,
distribution channels, and geographic distribution
• substantial headcount increases
These and many other factors described in this report affect our financial performance and
may cause our future results, including results for the current quarter, to vary materially
from these targets. In particular, the recent slow-down in some geographic areas, primarily
in the U.S., has affected all of our product segments and may adversely affect our ability to
achieve our revenue target. The slow-down has also affected our hiring plans; we may hire
significantly fewer than 1,000 employees during fiscal 2001 in light of this factor.
Our ability to develop and market products, including upgrades of current products that
successfully adapt to changing customer needs, may also have an impact on our results of
operations. Our ability to extend our core technologies into new applications and to
anticipate or respond to technological changes could affect our ability to develop these
products. A portion of our future revenue will come from these new applications. Delays
in product or upgrade introductions could cause a decline in our revenue, earnings, or
stock price. We cannot determine the ultimate effect that these new products or upgrades
will have on our revenue or results of operations.
The market for our graphics applications, particularly our Web publishing and consumer
products, is intensely and increasingly competitive and is significantly affected by product
introductions and market activities of industry competitors. Additionally, Microsoft
Corporation (“Microsoft”) has increased its presence in the digital imaging/graphics
market; we believe that, due to Microsoft’s market dominance, any new Microsoft digital
imaging products will be highly competitive with our products. If competing new
products achieve widespread acceptance, our operating results would suffer.
We generally offer our application-based products on Macintosh, Windows, and UNIX
platforms, and we generally offer our server-based products on the Linux® platform as
well as these three platforms. To the extent that there is a slow-down of customer pur-
chases of personal computers on either the Windows or Macintosh platform or in general,
our business could be harmed.
We distribute our application products primarily through distributors, resellers, and
retailers (collectively referred to as “distributors”). A significant amount of our revenue
for application products is from two distributors. We have revised our channel program
to reduce the overall number of our distributors worldwide and focus our channel efforts
on larger distributors. This revision of the channel program has resulted in an increase in
our dependence on a smaller number of distributors selling through a larger amount of
our products. Additionally, our goal is to increase our direct distribution of our products
to end users through our online store located on our Web site at www.adobe.com. Any
such increase in our direct revenue efforts will place us in increased competition with our
channel distributors and with newer types of distribution of our products by online,
Internet-based resellers of our products. While we anticipate that the restructuring and
streamlining of our product distribution channels and the increase in the scope of our
direct sales efforts will eventually improve our business by decreasing discounts or rebate
programs provided to distributors, decreasing product returns, and shortening inventory
cycles, these changes could instead seriously harm our business.