Adobe 2002 Annual Report Download - page 47

16
OEM PostScript and Other
We believe that the principal competitive factors for OEMs in selecting a page description language or a
printing technology are product capabilities, market leadership, reliability, price, support, and engineering
development assistance. We believe that our competitive advantages include our technology competency, OEM
customer relationships, and intellectual property portfolio. Adobe PostScript faces competition from
Hewlett-Packard’s proprietary PCL page description language, and from developers of other page description
languages based on the PostScript language standard, including Global Graphics and Xionics.
Although Adobe has numerous OEM customer relationships that license Adobe PostScript technologies,
revenues from a small number of the OEMs make up a majority of the revenue in this market segment.
OPERATIONS
Marketing and Sales
We market and distribute our products through sales channels, which include distributors, retailers, software
developers, and, increasingly, systems integrators and value-added resellers (“VARs”), as well as through OEM and
hardware bundle customers. We also market and license our products directly using our sales force and through our
own website at www.adobe.com.
We support our worldwide distribution network and end-user customers with international offices around the
world, including locations in Australia, Belgium, Brazil, Canada, China, Denmark, England, Finland, France,
Germany, Hong Kong, India, Ireland, Italy, Japan, Korea, Mexico, the Netherlands, Norway, Portugal, Scotland,
Singapore, Spain, Sweden, Switzerland, and Taiwan.
We license our Adobe PostScript software and other printing systems technology to computer and printer
manufacturers, who in turn distribute their products worldwide. We derive a significant portion of Adobe PostScript
royalties from international sales of printers, imagesetters, and other output devices by our OEMs.
We also license software with post-contract customer support (“PCS”). An amount equal to the fair value of the
PCS is deferred and recognized as revenue ratably over the PCS period. Fair value of the undelivered PCS is
determined by the rate charged to customers to renew their PCS arrangement. PCS includes rights to upgrades, when
and if available, a limited period of telephone support, updates, and enhancements.
For information regarding our market segments and segment revenue, geographic areas and significant
customers, please refer to Note 17 of our Notes to Consolidated Financial Statements.
Order Fulfillment
The procurement of the various components of packaged products, including CDs and printed materials, and
the assembly of packages for retail and other applications products is controlled by Order Fulfillment operations. We
outsource our order fulfillment activities to third parties in the United States, Europe, and Asia.
To date, we have not experienced significant difficulties in obtaining raw materials for the manufacture of our
products or in the replication of CDs, printing, and assembly of components, although an interruption in production
by a supplier could result in a delay in shipment of our products. The backlog of orders as of January 24, 2003 was
approximately $16.1 million. The backlog of orders as of January 25, 2002 was approximately $15.7 million.
Services and Support
Adobe provides Professional Services, Technical Support and Customer Service to a wide variety of customers
including consumers, creative professionals and those in the enterprise market. Our service and support revenue
consists primarily of consulting fees, software maintenance and support fees, and training fees.
Services
Adobe has a global Professional Services team dedicated to developing and implementing solutions for
enterprise customers in key vertical markets and to transfer technical expertise to our Solution Partners. The
Professional Services team uses a comprehensive, customer-focused methodology to develop high quality solutions,