Adobe 2007 Annual Report Download - page 46

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46
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion (presented in millions, except where indicated) should be read in conjunction with our
consolidated financial statements and notes thereto. The share and per share data below have been adjusted to give effect to
our stock split as of May 23, 2005.
In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements, including
statements regarding product plans, future growth and market opportunities which involve risks and uncertainties that could
cause actual results to differ materially from these forward-looking statements. Factors that might cause or contribute to
such differences include, but are not limited to, those discussed in the section titled “Risk Factors” in Part 1, Item 1A of this
report. You should carefully review the risks described herein and in other documents we file from time to time with the SEC,
including the Quarterly Reports on Form 10-Q to be filed in fiscal 2008. When used in this report, the words “expects,”
“could,” “would,” “may,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “looks for,”
“looks to,” and similar expressions, as well as statements regarding our focus for the future, are generally intended to
identify forward-looking statements. You should not place undue reliance on these forward-looking statements which speak
only as of the date of this Annual Report on Form 10-K. We undertake no obligation to publicly release any revisions to the
forward-looking statements or reflect events or circumstances after the date of this document.
ACQUISITION OF MACROMEDIA
On December 3, 2005, we completed the acquisition of Macromedia for approximately $3.5 billion. The discussions in
this section of this Report for fiscal 2007, as well as the financial statements contained herein, reflect the impact of the
acquisition.
BUSINESS OVERVIEW
Founded in 1982, Adobe Systems Incorporated is one of the largest and most diversified software companies in the
world. We offer a line of creative, business and mobile software and services used by creative professionals, designers,
knowledge workers, high-end consumers, OEM partners, developers and enterprises for creating, managing, delivering and
engaging with compelling content and experiences across multiple operating systems, devices and media. We distribute our
products through a network of distributors and dealers, VARs, systems integrators, ISVs and OEMs, direct to end users and
through our own Web site at www.adobe.com. We also license our technology to hardware manufacturers, software
developers and service providers, and we offer integrated software solutions to businesses of all sizes. We have operations in
the Americas, EMEA and Asia. Our software runs on personal computers with Microsoft Windows, Apple OS, Linux, UNIX
and various non-PC platforms, depending on the product.
CRITICAL ACCOUNTING ESTIMATES
In preparing our consolidated financial statements in accordance with accounting principles generally accepted in the
United States of America and pursuant to the rules and regulations of the SEC, we make assumptions, judgments and
estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent
assets and liabilities. We base our assumptions, judgments and estimates on historical experience and various other factors
that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under
different assumptions or conditions. On a regular basis we evaluate our assumptions, judgments and estimates. We also
discuss our critical accounting estimates with the Audit Committee of the Board of Directors. These accounting estimates,
critical to understanding our results of operations, are as follows:
Revenue Recognition
We recognize revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement
exists, we have delivered the product or performed the service, the fee is fixed or determinable and collection is probable.
Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can
have a significant impact on the timing and amount of revenue we report. For example, for multiple element arrangements,
we must: (1) determine whether and when each element has been delivered; (2) determine whether undelivered products or