Adobe 2002 Annual Report Download - page 67

36
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 or from results for prior
periods. In particular, the slow-down in some geographic areas, primarily in the U.S., Europe, and Japan, has
adversely affected all of our product segments and may adversely affect our ability to achieve our targets. We
attribute this slow-down, which is affecting all of our product segments, to continued economic weakness. These
adverse economic conditions in the U.S., Europe, Japan, and potentially other geographic markets may continue in
the short term, and they may continue to adversely affect our revenue and earnings. Although there are also adverse
conditions in other countries, these other countries represent a much smaller portion of our revenue and thus have
less impact on our operational results. Furthermore, if the economic slow-down worsens or spreads to other
geographic areas where we do business, it would likely cause our future results, including results for the current
quarter, to vary materially from our targets. In addition, political conditions in any of the major countries in which
we do business may adversely affect our business.
The end markets for our software products are intensely and increasingly competitive and are significantly
affected by product introductions and market activities of industry competitors. In the ePaper applications market, a
number of competitors have developed and brought to market clones of our Acrobat application to create and
enhance PDF files. Through lower pricing and aggressive marketing to existing or potential Adobe customers, these
competitors could impact Adobe Acrobat average seat pricing, and our overall ePaper revenue. Additionally, any
incorporation into an operating system of software for the creation of PDF files, or other software that competes
with our ePaper or graphics applications, could seriously harm our business. Furthermore, Microsoft has increased
its presence in the low-end and mid-range consumer digital imaging/graphics markets, as well as indicating that it
may include new electronic form, electronic document distribution, eBook and related functionality like that in
Adobe Acrobat and our server-based ePaper software, including announcing a new electronic forms tool that is
planned to ship in mid-2003. We believe that, due to Microsoft’s market dominance, any new Microsoft products in
these markets will be highly competitive with our products. If competing graphics or ePaper products achieve
widespread acceptance, our operating results would suffer. In addition, consolidation has occurred among some of
the competitors in our markets. Any further consolidations among competitors of ours may result in stronger
competitors and may therefore harm our results of operations.
Also, as we seek to further broaden our customer base in the enterprise, government, corporate business and
consumer markets, we may not successfully adapt our application software licensing and distribution channels,
which could cause our operating results to suffer. As we currently have limited experience in these markets, we
believe we will need to recruit, train, and retain personnel with experience in these markets, and our failure to do so
may harm our ability to penetrate these markets. We could also experience decreases in average selling prices and
some transitions in our distribution channels that could seriously harm our business. In connection with the Accelio
acquisition, we may not be successful in integrating Accelio or developing, marketing or licensing products,
particularly products for the enterprise, government, corporate business and consumer markets, based on Accelio’s
technology or expertise. We also may not be successful in integrating its distribution channels with ours, or in
developing the necessary relationships with enough significant systems integrators to succeed with these new
customer bases. Additionally, we may face unanticipated expenses relating to the integration of Accelio personnel
and its products, distribution channels, and administrative functions. All of these factors may affect our realizability
of Accelio’s assets, including goodwill.
We plan to recruit key talent for our future growth, especially to support our enterprise business. These plans to
continue to invest in certain areas will require us to continue to hire additional employees. Competition for
high-quality personnel, especially highly skilled engineers, is extremely intense. Our ability to effectively manage
this growth will require us to continue to improve our operational and financial controls and information
management systems, and to attract, retain, motivate, and manage employees effectively; otherwise our business
could be seriously harmed. We rely on our ability to grant stock options in order to recruit and retain highly skilled
employees in a competitive environment. The proposed requirement that stockholder approval would be required for
the adoption of all stock option plans and for any material modifications to such plans, as well as the potential
requirement to recognize an expense for stock options in our financial statements, may result in our inability to
provide adequate incentives to effectively recruit and retain talented employees.
Any delays or failures in developing and marketing our products, including upgrades of current products that
successfully adapt to changing customer needs, may also have a harmful impact on our results of operations. Our
ability to extend our core technologies into new applications and new platforms and to anticipate or respond to