Adobe 2002 Annual Report Download - page 137

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106
country risk or credit risk, we will not recognize the revenue. We will revert to recognizing the revenue on a cash
basis, assuming all other criteria for revenue recognition has been met. For discussion of significant customers as of
November 29, 2002, see Note 17.
We distribute our application products primarily through distributors, resellers, retailers, and, increasingly,
systems integrators and VARs (collectively referred to as “distributors”). A significant amount of our revenue for
application products is from two distributors. In addition, our channel program now focuses our efforts on larger
distributors, which has resulted in our dependence on a relatively small number of distributors selling through a
large amount of our products. Sales through the distribution channel result in unstable pricing and significant
product returns. Our distributors sell our competitors’ products; if our distributors favor our competiors’ products for
any reason, they may fail to market our products as effectively or to devote resources necessary to provide effective
sales and in that case our results would suffer. Additionally, one of our goals is to increase our direct distribution of
our products to end users through our online store located on our website 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.
We derive a significant portion of our OEM PostScript and Other licensing revenue from a small number of
OEM partners. Our OEM partners on occasion seek to renegotiate their royalty arrangements. We evaluate these
requests on a case-by-case basis. If an agreement is not reached, a customer may decide to pursue other options,
which could result in lower licensing revenue for us.
Note 17. Industry Segment, Geographic Information, and Significant Customers
In the first quarter of fiscal year 2002, we realigned our business segments to reflect the way we manage our
business. The former Web Publishing segment was renamed to the Graphics segment and included our Adobe
Illustrator product in fiscal 2002. Our Adobe GoLive and Web Collection products, which were formerly being
reported in the Web Publishing segment, were reported in the Cross-media Publishing segment in fiscal 2002. Our
fiscal 2001 and 2000 segment disclosures have been restated for consistent presentation with our fiscal
2002 disclosure.
During fiscal 2002, 2001, and 2000, we have four reportable segments that offer different product lines:
Graphics, Cross-media Publishing, ePaper Solutions, and OEM PostScript and Other. The Graphics segment
provides users with software for creating, editing and enhancing digital images and photographs, digital video,
animations, graphics, and illustrations. The Cross-media Publishing segment provides software for professional page
layout, professional Web page layout, technical document publishing, and business publishing. The ePaper Solutions
segment provides electronic document distribution software that allows users to create, enhance, annotate, and
securely send Adobe PDF files that can be shared, viewed, navigated, and printed exactly as intended by anyone on
a broad range of hardware and software platforms. In addition, the recently acquired Accelio business focusing on
electronic form solutions is included in our ePaper segment. The OEM PostScript and Other segment includes
printing technology to create and print simple or visually rich documents with precision.
During and prior to fiscal 2000, we evaluated our business based on the contribution margins of each of our
four segments. During fiscal year 2001, our executive management team changed the way it evaluates the
performance of our business and revised their focus on evaluating the gross margins of each of our segments. Our
fiscal 2000 segment disclosures have been revised here to reflect that change. The accounting policies of the
operating segments are the same as those described in the summary of significant accounting policies. We do not
identify or allocate our assets by operating segments. As such, segment asset information is not disclosed.