Adobe 2006 Annual Report Download - page 6

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6
such as hardware and software, and the staffing levels within their company. Due to this correlation, our Creative
Solutions opportunity is closely linked to the performance of the economy in each of the countries in which we do
business.
With the increasing use of the Web as a means for marketing and advertising, we believe a key driver of our
Creative Solutions business will also be the growing amount of Web site and mobile device content created by
our customers to deliver impactful and compelling Web-based experiences for their constituents.
Another driver of our Creative Solutions business is the growth in the use of digital devices such as digital
cameras, digital video cameras, multimedia-enabled computers, DVD players, scanners, Web-capable image and
video-enabled handheld devices, cellular phones, and other non-PC Internet-connected devices. In addition,
Internet broadband adoption makes the Web a viable platform for the delivery of rich media, especially digital
video. In turn, the growth in the use of high definition (“HD”) televisions and video is driving the need for HD-
enhanced video tools to produce HD content for movies, and cable and commercial television.
As the use of digital photography and digital videography grows, we believe creative professionals and
professional photographers throughout the world will continue to require software solutions to edit, enhance and
manage their digital photographs and digital videos. In addition, we believe creative professionals and Web
developers are increasing their use of digital video streams over the Web to create more compelling Web sites that
leverage the adoption of broadband. We believe professional videographers are upgrading their systems to support
HD video content creation, enhancement and delivery. We also believe hobbyists will use, with more frequency,
digital imaging and digital video software as they purchase more affordable digital SLR cameras and digital video
cameras.
Creative Solutions Business Summary
In fiscal 2006, we maintained our focus on driving adoption of our creative products, particularly our Adobe
Creative Suite products, our Macromedia Studio product, and software bundles containing variations of both.
Available in two options (Standard and Premium), the Adobe Creative Suite incorporates several of our
technologies used by creative professionals into one product and is a complete design solution that provides
efficiency through improved product integration and integrated workflow capabilities.
After achieving combined record revenue for our Adobe Creative Suite and Macromedia Studio products in
the first quarter of fiscal 2006, we began to experience a decline in revenue with these products starting in our
second quarter of the fiscal year. We attributed this decline to awareness by our creative professional customers of
new versions of the products that are expected to ship in fiscal 2007. We also attributed customer deferral of
purchase of Creative Suite products to our customers’ desire to have new support in Adobe applications for the
Apple hardware platform which includes Intel-based processors – something we publicly stated would not be
available until the next release of the Creative Suite family of products.
In fiscal 2006, we also continued to focus on driving adoption of our dynamic media and digital video-based
technologies. In the first quarter of fiscal 2006, we released new versions of our digital video products, including
Adobe Premiere Pro version 2.0 software for video editing, Adobe After Effects version 7.0 software for adding
special effects to video, Adobe Audition version 2.0 software for audio editing and Adobe Encore version 2.0
software for DVD creation. Along with these individual digital video products, we also delivered a new suite
containing these technologies called Adobe Production Studio.
In addition to various new features and ease-of-use improvements found in each of the new releases, we
added enhanced support for Flash Video output to our family of digital video products to leverage the broad,
increased adoption of Flash Video on the Web as a means to deliver compelling video content. These new
features combined with the enhanced Flash Video support helped drive record revenue and more than 45 percent
year-over-year growth for our digital video business in fiscal 2006. Adobe also won a prestigious Technical and
Engineering Emmy Award from the National Academy of Television Arts and Sciences for its Flash Video
technology, in recognition of the software’s pivotal role in bringing television content to the Internet.