Adobe 2007 Annual Report Download - page 38

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38
and other domestic and foreign tax authorities, including a current examination by the Internal Revenue Service for our fiscal
2001, 2002 and 2003 tax returns, primarily related to our intercompany transfer pricing. We regularly assess the likelihood of
outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved
for potential adjustments that may result from the current examination.
We believe such estimates to be reasonable; however, there can be no assurance that the final determination of any of these
examinations will not have an adverse effect on our operating results and financial position.
If we are unable to recruit and retain key personnel our business may be harmed.
Much of our future success depends on the continued service and availability of our senior management, including our
Chief Executive Officer and other members of our executive team. These individuals have acquired specialized knowledge
and skills with respect to Adobe. The loss of any of these individuals could harm our business. Our business is also
dependent on our ability to retain, hire and motivate talented, highly skilled personnel. Experienced personnel in the
information technology industry are in high demand and competition for their talents is intense, especially in the Bay Area,
where many of our employees are located. We have relied on our ability to grant equity compensation as one mechanism for
recruiting and retaining such highly skilled personnel. Recently enacted accounting regulations requiring the expensing of
equity compensation may impair our ability to provide these incentives without incurring significant compensation costs. If
we are unable to continue to successfully attract and retain key personnel, our business may be harmed.
We may suffer losses from our equity investments which could harm our business.
We have investments and plan to continue to make future investments in privately-held companies, many of which are
considered in the start-up or development stages. These investments are inherently risky, as the market for the technologies or
products these companies have under development is typically in the early stages and may never materialize. Our investment
activities can impact our net income. Future price fluctuations in these securities and any significant long-term declines in
value of any of our investments could reduce our net income in future periods.
We rely on turnkey assemblers and any adverse change in our relationship with our turnkey assemblers could result in a loss
of revenue and harm our business.
We currently rely on six turnkey assemblers of our products, with at least two turnkeys located in each major region we
serve. If any significant turnkey assembler terminates its relationship with us, or if our supply from any significant turnkey
assembler is interrupted or terminated for any other reason, we may not have enough time or be able to replace the supply of
products replicated by that turnkey assembler to avoid serious harm to our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.