Adobe 2006 Annual Report Download - page 35

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• difficulty integrating the acquired company's accounting, management information, human resources and
other administrative systems;
• inability to retain key technical and managerial personnel of the acquired business;
• inability to retain key customers, distributors, vendors and other business partners of the acquired
business;
• inability to achieve the financial and strategic goals for the acquired and combined businesses;
• incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact
our operating results;
• potential impairment of our relationships with employees, customers, partners, distributors or third-party
providers of technology or products;
• potential failure of the due diligence processes to identify significant issues with product quality,
architecture and development, or legal and financial contingencies, among other things;
• incurring significant exit charges if products acquired in business combinations are unsuccessful;
• potential inability to assert that internal controls over financial reporting are effective;
• potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities,
which could delay or prevent such acquisitions; and
• potential delay in customer and distributor purchasing decisions due to uncertainty about the direction of
our product offerings
Mergers and acquisitions of high technology companies are inherently risky, and ultimately, if we do not
complete the integration of acquired businesses successfully and in a timely manner, we may not realize the
anticipated benefits of the acquisitions to the extent anticipated, which could adversely affect our business,
financial condition or results of operations.
We rely on distributors to sell our products and any adverse change in our relationship with our distributors
could result in a loss of revenue and harm our business.
We distribute our application products primarily through distributors, resellers, retailers and increasingly
systems integrators, ISVs and VARs (collectively referred to as “distributors”). A significant amount of our
revenue for application products is from two distributors, Ingram Micro, Inc. and Tech Data Corporation. In
addition, our channel program focuses our efforts on larger distributors, which has resulted in our dependence on
a relatively small number of distributors licensing a large amount of our products. Our distributors also sell our
competitors’ products, and if they favor our competitors’ products for any reason, they may fail to market our
products as effectively or to devote resources necessary to provide effective sales, which would cause our results
to suffer. In addition, the financial health of these distributors and our continuing relationships with them are
important to our success. Some of these distributors may be unable to withstand adverse changes in business
conditions. Our business could be seriously harmed if the financial condition of some of these distributors
substantially weakens.
Catastrophic events may disrupt our business.
We are a highly automated business and rely on our network infrastructure and enterprise applications, internal
technology systems and our Website for our development, marketing, operational, support and sales activities. A
disruption or failure of these systems in the event of a major earthquake, fire, telecommunications failure, cyber-
attack, terrorist attack, or other catastrophic event could cause system interruptions, delays in our product
development and loss of critical data and could prevent us from fulfilling our customers’ orders. Our corporate
headquarters, a significant portion of our research and development activities, our data centers, and certain other
critical business operations are located in San Jose, California, which is near major earthquake faults. We believe
we have developed sufficient disaster recovery plans and backup systems to reduce the potentially adverse effect
of such events, but a catastrophic event that results in the destruction or disruption of any of our data centers or
our critical business or information technology systems could severely affect our ability to conduct normal
business operations and, as a result, our future operating results could be adversely affected.