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Adobe Systems Incorporated: SWOT Analysis & Company Profile Reference code: BRSMPL001 Published: June 2010 Business Review John Carpenter House 7 Carmelite Street London EC4Y 0BS United Kingdom Tel: +44 (0) 20 7936 6400 Fax: +44 (0) 20 7336 6813 Adobe Systems Incorporated - SWOT Profile Page 1
Adobe Systems Incorporated - SWOT Profile
Table of Contents
Adobe Systems Incorporated - Company Overview ...............................................................................................................3
Adobe Systems Incorporated - Key Facts ...............................................................................................................................3
Adobe Systems Incorporated - Business Description .............................................................................................................4
Adobe Systems Incorporated - Major Products and Services .................................................................................................6
Adobe Systems Incorporated - History ....................................................................................................................................7
Adobe Systems Incorporated - SWOT Analysis ......................................................................................................................8
SWOT Analysis - Overview.............................................................................................................................................8
Adobe Systems Incorporated - Strengths .......................................................................................................................8
Adobe Systems Incorporated - Weaknesses................................................................................................................10
Adobe Systems Incorporated - Opportunities ...............................................................................................................11
Adobe Systems Incorporated - Threats ........................................................................................................................12
Adobe Systems Incorporated - Key Competitors ..................................................................................................................13
Adobe Systems Incorporated - Key Employee Biographies .................................................................................................15
Adobe Systems Incorporated - Company Statement ............................................................................................................16
Adobe Systems Incorporated - Locations And Subsidiaries .................................................................................................19
Head Office ...................................................................................................................................................................19
Other Locations & Subsidiaries ....................................................................................................................................19
Adobe Systems Incorporated - Financial Ratios ...................................................................................................................21
Financial Ratios - Capital Market Ratios .......................................................................................................................21
Financial Ratios - Annual Ratios ...................................................................................................................................21
Financial Ratios - Interim Ratios ...................................................................................................................................22
Financial Ratios - Ratio Charts .....................................................................................................................................23
Adobe Systems Incorporated - Share Data ...........................................................................................................................24
Appendix ................................................................................................................................................................................25
Methodology .................................................................................................................................................................25
Ratio Definitions ............................................................................................................................................................25
Disclaimer .....................................................................................................................................................................29
Adobe Systems Incorporated - SWOT Profile Page 2Adobe Systems Incorporated - SWOT Profile
Adobe Systems Incorporated - Company Overview
Adobe Systems Incorporated (Adobe) is into designing, developing, and offering software packages including business
and mobile software solutions, besides providing other related services. The company’s key technologies include Portable
Document Format (PDF), Adobe Reader, Adobe Flash Player, Adobe Air, Adobe PostScript, and Omniture Online
Marketing Suite. The company’s product portfolio consists of Acrobat 9 Pro extended, Creative Suite 3 design, Photoshop
CS3, Creative Suite 3 Web Premium, Fireworks CS3, Photoshop Light Room 2, Captivate 3, Contribute CS3, Cold Fusion
8, Dream Weaver CS3, Creative Suite 3 Production Premium, and Creative Suite 3 Master Collection. Its recent product
introductions include Adobe Photoshop lightroom 3, Creative Suite 5 design premium, and eLearning Suite 2, among
others. Its software runs on personal computers with Microsoft Windows, Apple OS, Linux, UNIX and various non-PC
platforms, depending on the product. It also is focused on developing and marketing its products to run on mobile phones.
Adobe distributes its products through a network of distributors and dealers, value-added resellers, systems integrators,
independent software vendors and OEMs, direct to end users and through its website. The company has presence in
various countries across the Americas, Europe, Middle East and Africa, and Asia. Adobe is headquartered in San Jose,
the US.
Financial Performance
The company reported revenues of (U.S. Dollars) USD 2,945.85 million during the fiscal year ended November 2009
(fiscal year 2009), a decrease of 17.71% from 2008. The operating profit of the company was USD 690.51 million during
the fiscal year 2009, a decrease of 32.85% from 2008. The net profit of the company was USD 386.51 million during the
fiscal year 2009, a decrease of 55.67% from 2008.
Adobe Systems Incorporated - Key Facts
Adobe Systems Incorporated, Key Facts
345 Park Avenue, San Jose, CA
Corporate Address – 95110, United States Ticker Symbol, Exchange ADBE [NASDAQ]
Telephone + 1 408 5366000 No. of Employees 8,660
Fax + 1 408 5376000 Fiscal Year End November
URL www.adobe.com Revenue (in USD Million) 2,945.85
Industry Technology
Australia, Belgium, Brazil, Canada, China, Denmark, France, Germany, India, Italy,
Locations
Japan, Malaysia, Norway, Poland, Republic of Korea, Russian Federation, Singapore, South
Africa, Spain, Sweden, Switzerland, Taiwan, Turkey, United Kingdom, United States.
Source: Annual Report, Company Website, Primary and Secondary Research
Adobe Systems Incorporated - SWOT Profile Page 3Adobe Systems Incorporated - SWOT Profile Adobe Systems Incorporated - Business Description Adobe Systems Incorporated (Adobe) designs, and develops software packages and mobile software. Its offerings serve the requirements of professionals, designers, knowledge workers and original equipment manufacturer (OEM) partners. The company’s products are utilized by various developers and enterprises for creating, managing and delivering compelling content. Adobe’s products can be used with Microsoft Windows, Apple OS, Linux, UNIX, and various non-PC platforms. It distributes its products through a wide network of channels consisting of distributors and dealers, value- added resellers, systems integrators, independent software vendors and OEMs, and its website. It also sells these products directly to the end users. The company also offers various services and support activities to its customer base. For the fiscal year ended November 27, 2009, Products contributed USD 2,759.4 million while Services and Support activities contributed USD 186.5 million to the total revenue of the company. The company operated through five reportable segments, namely, Creative Solutions, Business Productivity Solutions, Mobile and Device Solutions, Platform, and Print and Publishing, until 2008. However in the fiscal year 2009, it changed its business segmentation into Creative Solutions, Business Productivity Solutions, Platform and Print and Publishing, with Business Productivity Solutions segment further classified into Knowledge Worker and Enterprise. The company’s Creative Solutions segment operates principally for focused creative professional customers, including graphic designers, production artists, web designers and developers, user interface designers, writers, photographers and prepress professionals in areas of web design and development, professional photography, video production, animation and motion graphic production, and printing visually rich information. Adobe Creative Solutions products provide real time rich media solutions that enable business users to upload, manage, enhance and publish dynamic rich content with minimal IT support. The product category also offers rich media content through streaming media and a flexible development environment for creating and delivering innovative, interactive media applications. The company has focused on the adoption of its own creative products, primarily Adobe Creative Suite family products. It launched its largest product through the release of Adobe Creative Suite version 3 based on Adobe technologies for creative professionals in six creative editions. Further, the company also adopted its stand-alone products by delivering new versions of 13 individual creative products. It delivered new versions of products such as Adobe After Effects, Adobe Contribute, Adobe DreamWeaver, Adobe Encore, Adobe Fireworks, Adobe Flash, Adobe InCopy, Adobe InDesign, Adobe Illustrator, Adobe Photoshop and Adobe Premiere Pro. With revenues of USD 1,702.1 million, the company’s Creative Solutions segment accounted for 58% of the company’s total revenues during the fiscal year 2009. The Business Productivity Solutions segment is further divided into Knowledge Worker and Enterprise. The Knowledge Worker shares information, which includes a variety of job functions such as administrative assistants, executives, accountants, attorneys, architects, graphic designers, insurance underwriters, educators, engineers, software developers and stock analysts. Its major products include Adobe Acrobat.com, Adobe Acrobat Connect Pro, Adobe Acrobat Standard and Adobe Acrobat Pro. The company offers its enterprise solutions to the customers in various fields such as financial services, manufacturing, government, telecommunications, and life sciences. Registering revenues of USD 858.5 million, Adobe’s Business Productivity Solutions segment accounted for 29% of the company’s total revenues during the fiscal year 2009. Its Knowledge Worker sub-segment accounted for 21% share of the total revenues and its Enterprise sector accounted for 8% of the total revenues during the fiscal year 2009. The Platform segment of the company develops products and solutions which dramatically improve the way web developers and businesses engage with customers. The Adobe Flash Platform includes client and developer technologies, such as Adobe Flash Player, Adobe AIR, Adobe Flex and Adobe Flex Builder, and Adobe Flash Lite. This segment also comprises Adobe’s mobile and device solutions that ensure rich content, user interfaces and data services on mobile and non-PC devices such as cellular phones, consumer devices and Internet connected hand-held devices. The Mobile and Device Solutions segment offers developer solutions and technologies, including Adobe Flash Player, Adobe AIR and Flex Builder, which are used to build rich applications. During the fiscal year 2009, this segment with revenues of USD 181 million, accounted for 6% of the company’s total revenues. The Print and Publishing business segment provides various products and services which address market opportunities. These opportunities and the products offered principally address the OEM PostScript and Print and Publishing categories. With revenues of USD 178 million, this segment accounted for 6% of the company’s total revenues during the fiscal year 2009. During the fiscal year 2009, the Omniture business, which was acquired in 2009, contributed revenues of USD 26.3 million, accounting for 1% of the company’s total revenues. The company distributes its application products through distributors, resellers, retailers and increasingly through systems integrators, ISVs and VARs. A significant amount of its revenue in application products is from two distributors, namely, Ingram Micro, Inc. and Tech Data Corporation. Adobe has a multiple non-exclusive, independently negotiated distribution agreements with Ingram Micro and Tech Data and their subsidiaries covering its arrangements in specified countries and regions. The company has a limited partnership interest in Adobe Ventures IV L.P. (Adobe Ventures) that invests in early stage companies with innovative technologies. Adobe operates its business across Asia, Americas, Europe, Middle East and Africa. The company’s major subsidiaries include Adobe Systems Brasil Limitada, Virtual Ubiquity, Inc, Adobe Systems Benelux BV, Adobe Systems Engineering GmbH, Adobe Systems Company Ltd, Adobe Systems India Pvt. Ltd, and Macromedia Asia Pacific Pty. Ltd. Adobe Systems Incorporated - SWOT Profile Page 4
Adobe Systems Incorporated - SWOT Profile Geographically, the company operates across three regions namely, Americas, Europe, Middle East and Africa (EMEA), and Asia. Recently, the company entered into a strategic alliance with Conviva, Inc., a provider of online video solutions, for integrating Conviva’s intelligent streaming technology with that of Adobe’s Flash Platform. This alliance will thus ensure content companies to provide improved online video experience to their global viewers. Its Omniture business too entered into similar alliances with companies such as Facebook (to explore possibilities of leveraging Facebook as a marketing channel for online marketers). Adobe Systems Incorporated - SWOT Profile Page 5
Adobe Systems Incorporated - SWOT Profile Adobe Systems Incorporated - Major Products and Services Adobe focuses on developing software packages, mobile software and services for professionals, designers, knowledge workers and original equipment manufacturer (OEM) partners. The company's key products and services include the following: Adobe Systems Incorporated, Major Products & Services Products: Acrobat 9 Pro Extended Omniture online marketing suite Creative Suite 3 Design Photoshop CS3 Creative Suite 3 Web Premium Fireworks CS3 Photoshop Light room 2 Captivate 3 Contribute CS3 Cold Fusion 8 Dream weaver CS3 Creative Suite 3 Production Premium and Creative Suite 3 Master Collection Adobe AIR Services: Consulting and Training Maintenance and Support Hosted Services Photo Backup Services Source: Annual Report, Company Website, Primary and Secondary Research Adobe Systems Incorporated - SWOT Profile Page 6
Adobe Systems Incorporated - SWOT Profile
Adobe Systems Incorporated - History
Adobe Systems Incorporated, History
2009 New Products/Services The company introduced Adobe AIR 2 and Flash Player 10.1 beta software.
The company expanded its partnership agreement with Research In Motion to
2009 Contracts/Agreements provide its present Adobe Creative Suite, content development and authoring
tools and Adobe Flash Platform technology for BlackBerry smartphones.
2009 New Products/Services The company introduced the Photoshop.com Mobile for Android software.
The company expanded its strategic media technology alliance with Turner
2009 Contracts/Agreements Broadcasting System, Inc. to take advantage of the extensibility of Adobe’s
video production toolset. The alliance was first formed in March 2009.
The company acquired Omniture, Inc., a leading provider of online business
2009 Acquisitions/Mergers/Takeovers
optimization software.
The company expanded its partnership with Research In Motion to provide its
2009 Contracts/Agreements Adobe Creative Suite, content development and authoring tools and Adobe
Flash Platform technology for BlackBerry smartphones.
The company signed an agreement with InterCall, a leading provider of
2009 Contracts/Agreements conferencing and collaboration services, to sell fully-integrated Adobe Acrobat
Connect Pro web conferencing solution worldwide.
The company unveiled advancements to the Adobe Flash Platform, which
2009 New Products/Services
included the introduction of Adobe AIR on mobile devices.
The company launched Adobe Director11, Adobe Flash Media Rights
2008 New Products/Services
Management Server Software and Adobe Photoshop Express.
The company launched Adobe AIR, a desktop runtime, which delivers Internet
2008 New Products/Services
applications.
2007 Acquisitions/Mergers/Takeovers The company acquired Scene7 and Virtual Ubiquity.
The company introduced Adobe Technical Communication Software Suite and
2007 New Products/Services
Adobe Flash Media Server3.
The company launched new software application Adobe Digital Editions 1.0 for
purchasing, managing and reading eBooks, digital newspapers, and other
2007 New Products/Services
digital publications, transforming the digital reading experience and offering new
creative possibilities for publishers.
2007 Contracts/Agreements The company entered into a partnership with Telenor.
The company acquired TTF, Serious Magic and the technology assets of
2006 Acquisitions/Mergers/Takeovers
Pixmantec.
2005 Acquisitions/Mergers/Takeovers Adobe Systems Inc. acquired Macromedia, Inc.
The company launched a family of server products for the enterprise that
automates and simplifies the flow of information and securely extends business
2004 New Products/Services
processes beyond the firewall Adobe Live Cycle, Adobe Reader LE and Adobe
Flash Cast.
The company launched Familiar, standards-based programming framework and
2003 New Products/Services powerful set of building blocks for creating a richer, more responsive
presentation tier for enterprise applications Adobe Flex.
The company launched Flash profile specifically developed for mobile phones,
2002 New Products/Services
Adobe Flash Lite.
2002 Acquisitions/Mergers/Takeovers Adobe Systems acquired Accelio.
1999 Acquisitions/Mergers/Takeovers Adobe Systems acquired GoLive.
The company launched Professional layout and design software that delivers
1999 New Products/Services swift production workflows, a fluid creative environment, and sophisticated
graphics and typography Adobe in Design.
The company launched Industry-leading web development tool Adobe Dream
1997 New Products/Services weaver, enabling users to efficiently design, develop, and maintain standards-
based websites and applications.
The company launched the world’s most ubiquitous client runtime for playing
1996 New Products/Services rich experiences across major operating systems, browsers, and mobile devices
Adobe Flash and Adobe Flash Player.
1995 Acquisitions/Mergers/Takeovers Adobe Systems acquired Frame Technology.
1994 Acquisitions/Mergers/Takeovers Adobe Systems acquired Aldus.
The company launched Essential motion graphics and visual effects tool for
1993 New Products/Services
digital video production work; Adobe After Effects and Adobe Acrobat.
The company launched Powerful, frame-accurate, real-time digital video and
1991 New Products/Services
audio editing software Adobe Premiere Pro.
The company launched Professional industry standard for digital image editing
1990 New Products/Services and creation, and leader of the Photoshop digital imaging line Adobe
Photoshop.
1986 Stock Listings/IPO The company went public and it shares got listed on NASDAQ.
1984 New Products/Services The company launched its Adobe PostScript.
1983 Incorporation/Establishment Adobe Systems was incorporated in California.
Source: Annual Report, Company Website, Primary and Secondary Research
Adobe Systems Incorporated - SWOT Profile Page 7Adobe Systems Incorporated - SWOT Profile Adobe Systems Incorporated - SWOT Analysis SWOT Analysis - Overview Adobe, a software company, offers a line of creative, business and mobile software and services. Its customer base includes professionals, designers, knowledge workers, high-end consumers, original equipment manufacturer partners, developers and enterprises. The company’s strong market position, product innovation and global presence are its key strengths, even as its dependence on few distributors and weak financial performance in 2009 remain areas of concern. The company faces immense competition in the market and piracy risks, which may adversely affect its performance. However, Adobe may benefit from the increasing demand for Internet-enabled hand-held phones and consumer electronic devices coupled with the acquisition of Omniture may offer growth opportunities to the company. Adobe Systems Incorporated - Strengths Strength - Product Innovation The company's strong focus on product innovation provides it a competitive advantage, besides enabling it to maintain its market leadership position in different business segments. Adobe focuses on developing new technologies and solutions using its core capabilities and through partnerships with world's leading companies as well as through major acquisitions to maintain its position in the market. The company has been developing various products and solutions, since its inception in 1983. The company launched Adobe PostScrip, a device independent page description language used in printer and presses, in 1984. In 1990, it launched Adobe Photoshop, which is extensively used in creating and editing digital images. In 1991, it developed Adobe Premiere Pro, audio and video editing software. The company developed Portable Document Format (PDF), Adobe Reader, Adobe After Effect, a motion graphic and visual effect tool, and Adobe Acrobat in 1993. In addition, the company launched Adobe Flash, used to create interactive websites, and Adobe Flash Player in 1996. In 1997, it introduced Adobe Dream Viewer, a web development tool. Further, the company introduced Adobe InDesign, a professional layout and design software in 1999. Furthermore, in 2003, it developed Adobe Creative Suite, a design and development tool, Adobe Acrobat Connect, web communications solution, and Adobe Flex, programming framework. The company launched Adobe LiveCycle Enterprise Suite, Adobe FlashCast, end-to-end mobile data solutions, and Adobe Reader LE, universal client software. Moreover, it developed Adobe Digital Editions, Adobe AIR, and Omniture Online Marketing Suite, on-demand software in 2007, 2008, and 2009, respectively. Recently, the company introduced Adobe Photoshop Lightroom 3, Creative Suite 5 design premium, and eLearning Suite 2. Product innovations and introductions such as these enhance the company's market position further. Strength - Dominant Market Position Strong market position helps the company to acquire strong customer base, which in turn improves its top-line performance. The company's Adobe Reader software such as PDF, PDF/Archive, PDF/X, and PDF/E are distributed in over 32 languages worldwide. The company is a leader in Adobe Flash software, which is used by over two million developers and designers. Also, the company is a leader in Adobe Flash software with over 55% of computers worldwide having been installed with Adobe Flash Player 10 in first two months of its release, over 98% of the Internet enabled desktops having been installed with Adobe Flash Player, and over 75% of the online videos having been viewed using the company's Adobe Flash technology. In addition, over 1.2 billion mobile devices were shipped with the company's flash technology. Further, the company is a leader in Adobe Dream Viewer software with over five million customers. Over 90% of the creative professionals use Adobe Photoshop software. Moreover, the company has seen over 200 installations of its Adobe AIR software since its release in 2008. The company, through its Omniture subsidiary, is a leader in software- as-a-service (SaaS) with one trillion users measured per quarter. Thus, the strong position in each of its offerings provides Adobe a competitive edge over its peers. Strength - Diverse Customer Base The diverse customer base of the company mitigates the risk associated with depending upon single or select customers for a major share of revenue. Adobe provides various products and applications to a wide range of industries including publishing, government, financial services, telecommunications, and education. It has a strong customer base, which includes Hearst Magazines, the United States Internal Revenue Service, Deutsche Bank, Nokia, Yahoo! Inc., University of California, Los Angeles (UCLA), SAP, Wal-Mart, and thousands of other leading organizations worldwide. It markets its products and services to knowledge workers and enterprises such as businesses and government organizations; to designers, publishers, photographers, videographers; and to systems integrators and software developers. The wide range of consumer markets and industries being served by the company provides it a strong position and brand image in the market. Strength - Worldwide Presence The company has a diversified geographic presence, which could mitigate the risks associated with concentrated business presence, besides enabling it to execute its expansion plans in its operating regions as well as in nearby regions. Besides North America, the company has its operations across major countries of Asia-Pacific, Europe, South America, North Middle East, Mediterranean, Africa, and Indian Ocean Islands. The company has established offices in several locations worldwide to distribute its products efficiently and to reach out to a large customer base. In addition, the Adobe Systems Incorporated - SWOT Profile Page 8
Adobe Systems Incorporated - SWOT Profile company generates more than half of its total revenue from outside the US. Strong presence across various regions mitigates the risk of the company from economical, political and social imbalances. Thus, adverse economic and political conditions in any particular region will not have a huge impact on the total revenue of the company, as it has successfully diversified its operations into various geographical locations. Strength - Strong Growth Prospects The company was trading at a price/earnings (P/E) ratio of 42.64 at the end of fiscal year 2009. This was above the Software sector average* of 25.17. A higher than sector average P/E may indicate that the company may have high growth prospects which are reflected in its stock's premium pricing. Investors may be expecting higher earnings growth in the future compared to other companies in the sector. Strength - Strong Operating Margin The company's operating margin was 23.44% for the fiscal year 2009. This was above the Software sector average* of 4.65%. A higher than sector average* operating margin may indicate efficient cost management or a strong pricing strategy by the company. Adobe Systems Incorporated - SWOT Profile Page 9
Adobe Systems Incorporated - SWOT Profile Adobe Systems Incorporated - Weaknesses Weakness - Weak Financial Performance The company registered weak financial performance during the fiscal year 2009, which may affect its business operations. During the fiscal year 2009 (year ended November 27), it recorded weak financials. During the fiscal 2009, the company posted revenue of USD 2,945.85 million, down 17.7% over the fiscal year 2008. The company’s operating income too decreased to USD 690.51 million in 2009 from USD 1,028.27 million in 2008, down 32.8% on a Year-on-Year (Y-o-Y) basis. The company’s net profit was USD 386.51 million during the fiscal year 2009, down 55.7% over the fiscal year 2008. The decline in financial performance was due to the weak demand for its products at the back of the economic slowdown, which also impacted its product introductions, with the company having few product releases during the year. The decline in financial performance, however, may limit the company's ability to pursue its expansion plans. Weakness - Dependence on Few Distributors The company distributes its products primarily through distributors, resellers, retailers and increasingly through systems integrators, ISVs and VARs. Major part of the revenue for application products of the company comes from two distributors namely, Ingram Micro, Inc. and Tech Data Corporation. These two distributors have been representing a significant amount of revenues for the company for last few fiscal years. A small number of distributors license a large amount of company’s products; hence its dependence on distributors has increased. Thus, smooth running of the company’s business is dependent on the uninterrupted and constant supply of products from the distributors. If the company fails to maintain healthy relationships with distributors, its operations may be adversely affected. Weakness - Declining Market Share in Sector The company's compounded annual growth rate (CAGR) for revenue was 10.63% during 2005-2009. This was below the Software sector average* of 18.55%. A lower than sector average* revenue CAGR may indicate that the company has underperformed the average sector growth and lost market share over the last four years. The company's underperformance could be attributed to a weak competitive position or inferior products and services offering or lack of innovative products and services. Weakness - Dependence on Creative Solutions Segment The company’s overdependence on Creative Solutions segment for a major share of its revenue is a concern area. During the fiscal year 2009, the company’s Creative Solutions segment accounted for 58% of total revenues. The company’s top- line may be impacted if the demand for Creative Suite family of products decreases, or its peers introduce products with advanced features. Adobe Systems Incorporated - SWOT Profile Page 10
Adobe Systems Incorporated - SWOT Profile Adobe Systems Incorporated - Opportunities Opportunity - Adobe’s Acquisition of Omniture The company’s acquisition of Omniture in October 2009 in a USD 1.8 billion deal will enable Adobe to realize emerging opportunities in the global SaaS market. With this acquisition, Adobe can combine the content creation tools and its clients with Omniture's web analytics, measurement, and optimization technologies. This acquisition could enable the company to gain from the growing demand for software as a service (SaaS) solutions. Gartner expects that over 25% of the new business software will be delivered by SaaS by 2011. Gartner estimates that the global SaaS market revenue could touch about USD 16 billion by the end of 2013. These figures indicate the huge growth potential in the SaaS market, which Adobe can tap with its acquisition of Omniture. Opportunity - Increasing Demand for Adobe Products Strong demand for the company's products may drive its top-line performance. The demand for various products, which run the applications and software developed by Adobe, has been increasing tremendously. The demand for products such as Internet-connected hand-held phones, consumer electronic devices such as digital cameras, game consoles, music players and electronic educational toys has been rising. The US spending on mobile application was USD 3.8 billion in the year 2008, while that number is expected to reach USD 9 billion by 2011. Adobe can target the Mobile and Device Solutions market by licensing Adobe mobile solutions, including Adobe Flash Player, Adobe Reader LE and Adobe Flash Cast, to device manufacturers and telecommunications carriers that embed the company’s technology on their platforms. The rising demand for such products increases the demand for Adobe applications and promotes the growth and revenues of the company. Recently, the company introduced Photoshop.com Mobile for iPhone, and Photoshop.com Mobile for Android software, digital imaging technology to users of the Google Mobile operating system. Opportunity - Enhancement of OEM PostScript Adobe specializes in providing high-end printing technology, which has the advanced functionality to meet the sophisticated requirements of graphics professionals and professional publishers. The printing systems have evolved and transformed into fully digital, composite work flows. Adobe has the expertise to provide software and technology based on the Adobe PostScript and Adobe PDF standards for use in this industry. The company licenses its technology to Original Equipment Manufacturers (OEMs) that manufacture workflow software, printers and other output devices. The company would establish PDF as the standard for variable data publishing and printing work flows in future. Thus, by developing new and advanced products demanded by publishers and graphic designers, the company can enhance its sales and its revenues. Opportunity - Strategic Agreements The company is focused on signing strategic agreements, which may further improve its business performance. Towards this, in April 2010, Adobe entered into a strategic alliance with Conviva, Inc., a provider of online video solutions. As part of this strategic alliance, the company is planning to integrate Conviva’s intelligent streaming technology into Adobe’s Flash Platform. This alliance will thus ensure content companies to provide improved online video experience to their global viewers. Earlier, in November 2009, the company and Research In Motion expanded their collaboration in Adobe Creative Suite, content development and authoring tools and Adobe Flash Platform technology to easily create rich content for BlackBerry smartphones. This initiative accelerates the content development and mobile application workflow of content developers and creative professionals. During the same month, the company a;sp signed an agreement with Salesforce to provide high quality Internet experience platform for the latter’s customers using Adobe Flash. Further, in December 2009, the company signed an agreement with InterCall, a leading provider of conferencing and collaboration services, to sell fully-integrated Adobe Acrobat Connect Pro web conferencing solution in North America as well as other countries globally. The company has entered into many similar agreements. Strategic agreements such as these lead to integration of the company's complementary technologies by various customers, driving its revenue generation capabilities. Adobe Systems Incorporated - SWOT Profile Page 11
Adobe Systems Incorporated - SWOT Profile Adobe Systems Incorporated - Threats Threat - Competition The various markets in which Adobe operates are characterized by intense competition, evolving industry standards and business models, rapid software and hardware technology developments and new product introductions. Various products of the company face competition from new and innovative products of its competitors. For instance, Microsoft’s Windows Vista operating system, which contains a new fixed document format, XPS, which competes with Adobe PDF, and its introduction of advanced versions of OFFICE, which offer a feature to save Microsoft Office documents as PDF files through a freely distributed plug-in, competes with Adobe PDF creation. Microsoft also has an Expression line of products targeted at designers and recently introduced Silverlight, a web development tool for RIAs, which competes with Adobe Flash and Adobe Flex. The other companies with which the company competes include ACDsee, Autodesk, Corel, Deneba, Mediascape, Xara, Bare Bones Software, ACD Systems, AI Soft (Japan), Apple, ArcSoft, Corel, i4 (Japan), Google, Kodak, Nova Development, Magix, Microsoft, Paessler GmbH (Germany), Pegasus Imaging Company, Phase One, Photodex Corporation, Sonic Pinnacle, Sony and Yahoo. Unless the company enhances its existing products, introduces new products on a timely and cost-effective basis, and meets changing customer needs, it will not be able to survive in the market. Threat - Piracy The company's business is affected due to the increase in piracy. Piracy remains an increasing threat for the software industry. Piracy is increasing and is expected to increase in countries such as India, which has an adverse impact on the company's business in emerging markets. Despite strong demand in India, Adobe’s Indian business contributes less than a percent of the company's overall business. The company loses over 80% of its business in the country because of piracy. It could generate over 5% of its business from India, if there was no piracy. In addition, the piracy software holds over 90% of the software market, presently. Towards bringing down the piracy level in India, the company is offering its products at 30-40% discount, which also affects its overall profitability. The increase in piracy in emerging markets may adversely impact the company's business operations. Threat - Rapid Changes in Technology Being in the software industry, the company’s business may suffer if it fails to adapt to the changing requirements in terms of product development and offering innovative solutions. The growing competition and focus on cost efficiency give various innovative technological advancements in the industry. These changes have been occurring at a rapid pace and at unpredictable intervals. This ongoing rapid technological change and consumer preferences also shorten the useful life of some of the company’s products, thereby forcing the customers to replace them quite often. As a result, customers may begin search for other solutions from other software developers that meet their requirements, thereby making the company’s future revenues less predictable. If the company fails to successfully update/upgrade its products or integrate with the latest technology needed by the customers, its business and financial results may suffer. Adobe Systems Incorporated - SWOT Profile Page 12
Adobe Systems Incorporated - SWOT Profile Adobe Systems Incorporated - Key Competitors The following companies are the major competitors of Adobe Systems Incorporated: ACD Systems Apple Computer, Inc. Google Inc. Hewlett-Packard Company Microsoft Corporation Sonic Solutions Avid Technology, Inc. Sony Corporation Dell Inc. Corel Corporation Nova Development Corporation MAGIX AG Photodex Corporation ArcSoft, Inc. Borland Software Corporation CyberLink Corp. Adobe Systems Incorporated - SWOT Profile Page 13
Adobe Systems Incorporated - SWOT Profile
Adobe Systems Incorporated - Key Employees
Adobe Systems Incorporated, Key Employees
Name Job Title Board Level Age Since
Dr. Charles M. Geschke Chairman and Co-Founder Executive Board 70 2000
John E. Warnock Chairman and Co-Founder Executive Board 68 2001
Chief Executive Officer, President and 46 2007
Shantanu Narayen Executive Board
Director
Chief Financial Officer and Senior Vice 52 2007
Mark Garrett Senior Management
President
Senior Vice President - Print and Classic
Publishing Solutions Business Unit and
Naresh Gupta Senior Management NA NA
Managing Director - India Research and
Development
Kevin Lynch Chief Technology Officer Senior Management 43 2008
Ann Lewnes Senior Vice President - Global Marketing Senior Management NA NA
Senior Vice President and General Manager 48 NA
John Loiacono Senior Management
– Creative Solutions Business Unit
Senior Vice President and Chief Software
Tom Malloy Senior Management NA NA
Architect
Senior Vice President and the Chief
Gerri Martin-Flickinger Senior Management NA NA
Information Officer
Mike Saviage Vice President - Investor Relations Senior Management NA NA
Edward W. Barnholt Director Non Executive Board 66 2005
Robert K. Burgess Director Non Executive Board 51 2005
Michael R. Cannon Director Non Executive Board 55 2003
James E. Daley Director Non Executive Board 67 2001
Carol Mills Director Non Executive Board 56 1998
Robert Sedgewick Director Non Executive Board 62 1990
Karen Cottle Director Non Executive Board 60 NA
Dan Rosensweig Director Non Executive Board 48 2009
Donna Morris Senior Vice President – Human Resources Senior Management NA NA
Senior Vice President – Worldwide Field
Matt Thompson Senior Management 51 NA
Operations
Senior Vice President - Corporate
Paul Weiskopf Senior Management NA NA
Development
Senior Vice President - Engineering
Digby Horner Senior Management NA 2005
Technologies Group
Senior Vice President & General Manager –
Rob Tarkoff Senior Management 41 NA
Business Productivity Business Unit
Senior Vice President & General Manager –
Josh James Senior Management 36 NA
Omniture Business Unit
Source: Annual Report, Company Website, Primary and Secondary Research
Adobe Systems Incorporated - SWOT Profile Page 14Adobe Systems Incorporated - SWOT Profile
Adobe Systems Incorporated - Key Employee Biographies
Adobe Systems Incorporated, Key Employee Biographies
Dr. Geschke is a Co-Founder of Adobe Systems Incorporated (Adobe) and has
Dr. Charles M. Geschke been sharing the position of the Chairman with John Warnock. He served as the
Chairman & Co-Founder President of the company till 2000. Geschke is a member of the National
Board Level: Executive Board Academy of Engineering and he is part of boards of various arts and non-profit
Age: 70 organizations. He also worked as the company’s Chief Operating Officer
Since: 2000 between December 1986 and July 1994 and its President during 1989-2000.
Dr. Warnock is one of the co-founders and has been sharing the position of the
Chairman of the company with Charles M. Geschke, since 2001. Earlier, he
served as the President of the company for first two years and became the Chief
John E. Warnock
Executive Officer, thereafter, a position he held until 2000. He was also the
Chairman & Co-Founder
company’s Chief Technology Officer from late 2000, until his retirement in 2001.
Board Level: Executive Board
He is also the Chairman of the board of the Salon Media Group, Inc. Before co-
Age: 68
founding Adobe, he served as a principal Scientist at Xerox Palo Alto Research
Since: 2001
Center. Prior to joining Xerox, he held various positions at Evans & Sutherland
Computer Corporation, Computer Sciences Corporation, IBM and the University
of Utah. As a director, Dr, Warnock is active in the boards of various companies.
Mr. Narayen has been a director, the President and the Chief Executive Officer
of the company since December 2007. He joined Adobe in January 1998 as a
Shantanu Narayen Vice President and the General Manager of Adobe’s Engineering Technology
Job Title: Chief Executive Officer, Director, President Group. In January 1999, he was promoted as the Senior Vice President of
Board Level: Executive Board Worldwide Products and as the Executive Vice President of Worldwide Product
Since: 2007 Marketing and Development in March 2001. He was promoted as the President
Age: 46 and the Chief Operating Officer in January 2005. Prior to joining Adobe, he co-
founded Pictra Inc., a digital photo sharing software company, in 1996. He was
the Director of Desktop and Collaboration products at Silicon Graphics Inc.
Mark Garrett Mr. Garrett has been an Executive Vice President and the Chief Financial Officer
Job Title: Chief Financial Officer, Executive Vice of the company, since 2007. Before joining Adobe in 2007, he served as a
President Senior Vice President and the Chief Financial Officer for EMC’s Software Group.
Board Level: Senior Management Prior to EMC, he was an Executive Vice President and the Chief Financial
Since: 2007 Officer of Documentum. Mr. Garrett currently serves as a director on the Board
Age: 52 of Directors for Model N, Inc.
Mr. Lynch has been the Chief Technology Officer of the company since 2008.
Kevin Lynch
Prior to this, he served as the Senior Vice President and the Chief Software
Job Title: Chief Technology Officer
Architect for Adobe’s Platform Business Unit. Mr. Lynch joined Adobe following
Board Level: Senior Management
the company’s acquisition of Macromedia, Inc. in 2005, where he served as the
Since: 2008
Chief Software Architect and the President of product development. Before
Age: 43
joining Macromedia in 1996, he worked for General Magic.
Tom Malloy
Mr. Malloy is a Senior Vice President and Chief Software Architect, Advanced
Job Title: Chief Software Architect - Advanced
Technology Labs of the company. Prior to joining the company in 1986, Mr.
Technology Labs, Senior Vice President
Malloy worked for Apple.
Board Level: Senior Management
Ms. Flickinger is a Senior Vice President and the Chief Information Officer of the
Gerri Martin-Flickinger company. Before joining the company, she worked as the Chief Information
Job Title: Chief Information Officer, Senior Vice Officer of VeriSign. Prior to VeriSign, she served as the Chief Information Officer
President of Network Associates, Inc. and McAfee Associates, Inc. Prior to this, she held
Board Level: Senior Management several senior system-related roles at Chevron Corporation, including serving as
process consultant to Chevron’s executive staff.
Source: Annual Report, Company Website, Primary and Secondary Research
Adobe Systems Incorporated - SWOT Profile Page 15Adobe Systems Incorporated - SWOT Profile Adobe Systems Incorporated - Company Statement A statement by Mr. Shantanu Narayen, the President and the Chief Executive Officer, Dr. John E. Warnock, and Dr. Charles M. Geschke, the co-Chairman of Adobe Systems Incorporated is given below. The statement has been taken from the company’s website. Like many companies in 2009, Adobe faced the challenges of a global economy in recession. Although our revenue declined, we managed our expenses well and delivered solid profit margins and earnings, even as other companies struggled to maintain profitability. We also invested in Adobe’s future and are prepared to resume our growth as the macroeconomic environment improves. During fiscal year 2009, we achieved exciting progress with the Adobe Flash Platform, our integrated set of technologies for creating and delivering compelling applications, content, and video to the widest possible audience. In the last year, we expanded the capabilities of the platform, while also forging new partnerships with industry leaders through the Open Screen Project. Another highlight of fiscal 2009 was the release of Adobe LiveCycle ES2, which helps enterprises and government agencies improve how they interface with their customers and constituents. Finally, we extended our product portfolio by acquiring Omniture, Inc., a leading provider of Software as a Service (SaaS) products and services that help customers analyze and optimize their websites. Financial snapshot: Fiscal year 2009 Revenue in fiscal 2009 was $2.95 billion, an 18% decrease from the revenue we achieved in fiscal 2008. Given this decline in revenue, primarily due to the global macroeconomic environment, we proactively decreased our operating expenses to deliver a 23.4% operating margin during the year. We also delivered annual net income of $386.5 million in fiscal 2009, with diluted earnings per share of $0.73. In addition, we remained focused on maintaining a healthy balance sheet, and ended the fiscal year with cash, cash equivalents, and short-term investments position of $1.9 billion. Results from our operations once again generated strong cash flow, which we used to invest in Adobe’s future. We also repurchased approximately 15.2 million shares of common stock. This action returned approximately $425 million to our stockholders, underscoring Adobe’s commitment to delivering long-term value to investors. Our world is changing Throughout Adobe’s history, we have driven and capitalized on paradigm shifts in our industry—from print to web publishing, from paper to electronic documents, and from static content to dynamic and interactive experiences. As we look forward, one thing is certain: Technology trends continue to change the business landscape. These trends create challenges for our customers, and they create opportunities for Adobe. Over the past year, we have worked to position the company to take advantage of the following industry shifts: How people use software is changing — using software is no longer a solitary experience. People are collaborating on projects, using not only traditional desktop software, but also online tools and social services. This collaboration is occurring on personal computers, mobile devices, and other Internet-connected devices. How software is developed is changing—Customers of software products and services increasingly expect more frequent updates and enhancements, and they want them delivered both traditionally to their desktop and as services in new SaaS models. In addition, as the line between designers and developers blurs, demand is growing for a new generation of tools and services to make it easier for the two roles to work together. Finally, users are playing a far more active role in the development of the products they use. Their feedback is revolutionizing the development process by actually driving the innovation they want and need. How companies engage with customers is changing—The web and software infrastructure have evolved to support richer, more engaging experiences. For example, retailers and financial institutions are now providing customers with online experiences that enable them to customize products and analyze data in vibrant, interactive applications. Furthermore, new technologies offer businesses an unprecedented opportunity to analyze users’ web activity and optimize content based on that activity. The result is more personalized experiences that improve online marketing performance. Adobe’s opportunities ahead These trends present significant opportunities for Adobe. More than any other company, Adobe offers a comprehensive set of tools, services, and technologies that enable businesses to create sophisticated online experiences, deploy them consistently across screens, and continually optimize them to meet customer needs. Adobe Flash Platform At the core of our strategy is the Flash Platform, which offers broad client reach and cross-platform consistency: Over 98% of Internet-connected PCs run Adobe Flash Player, and more than one billion mobile devices worldwide include a Flash Player client. In 2009, Adobe announced new partnerships with leading mobile device manufacturers that will further increase deployment of the Flash Platform. Adobe Systems Incorporated - SWOT Profile Page 16
Adobe Systems Incorporated - SWOT Profile In fiscal 2010, we expect our newest version of Flash Player to be delivered on leading smartphone platforms, as well as other non-PC devices such as Internet-connected TVs. New partners in the Open Screen Project, including Google and Research In Motion, share our vision to deliver innovative experiences on smartphones and have committed to using our latest Flash Platform technology to accelerate adoption of their devices. Meanwhile, Flash continues to be the preferred video format on the web, largely due to the widespread presence of Flash Player and the advancements we have made with content protection and streaming technology. It is estimated that approximately 75% of all video watched online is viewed using Adobe products and solutions. In the coming year, we will continue to invest in the Flash Platform and its video capabilities to optimize the user experience and create additional revenue opportunities. Designers and developers increasingly choose the Flash Platform to deliver engaging experiences that work across PCs and non-PC devices. They also wish to deliver those experiences both inside the web browser and on the desktop. Adobe AIR, a runtime that lets developers build applications that run outside the browser on multiple operating systems, has helped enable the delivery of these next-generation experiences. Adobe AIR has now been downloaded more than 250 million times. In fiscal 2009, we delivered a beta version of Adobe Flash Catalyst, a new tool that empowers designers to create expressive web interfaces and interactive content without having to write programming code. Customer feedback on the software has been enthusiastic. Additionally, we revamped Adobe Flash Builder (formerly Flex Builder) to improve how developers create cutting-edge applications built on Flex, our open source framework for delivering engaging and interactive experiences. As we move into fiscal 2010, we are excited to deliver new products and solutions that leverage the reach and capabilities of the Flash Platform. Adobe Creative Suite In fiscal 2010, we will be releasing a new version of our flagship product family, Adobe Creative Suite. With new and updated products, many wow features, improved product integration to increase user productivity, and support for the latest operating systems and platforms, we expect the next version of Creative Suite to have a significant impact on the industry. We believe that customers who face the everyday challenge of delivering consistent, engaging experiences across all media (print, web, video) and across screens of all sizes (PC, mobile, TV) will view it as a must-have release. Omniture We are equally excited about our opportunity to integrate and deliver technologies we acquired with Omniture. This was our largest and most strategic acquisition since we acquired Macromedia in 2005. By combining our industry-leading content creation and delivery technologies with Omniture web analytics and site optimization technologies, Adobe will now be better able to provide transformative e-commerce solutions accessible across all digital content, platforms, and devices. Enterprise software In fiscal 2009, we gained more Adobe Acrobat customers, as large enterprises and government agencies employed Acrobat to deliver and collaborate on information inside and outside their organizations. Adobe PDF remains the global standard for delivering reliable and secure information exactly as intended, and in fiscal 2010, we will unveil a new version of Acrobat that builds upon this success. The next version of Acrobat will focus on users’ ongoing transition from paper to digital media, as well as capitalize on the growing customer need to improve how people collaborate on paper-based information. Another significant opportunity is customer interaction solutions. Enterprises are seeing an increasing need for rich, interactive, web-based applications that make it easier for users to access and interact with their systems. By combining the document service capabilities of our Adobe LiveCycle solutions with the intuitive user interfaces and applications that developers can create using the Flash Platform, Adobe is uniquely positioned to provide solutions for this expanding opportunity. Adobe Acrobat Connect Pro, our cross-platform web conferencing solution, is also integral to our enterprise software strategy. Acrobat Connect Pro provides the rich, secure, collaboration-enabled business processes that users desire, delivered through the ubiquitous Flash Player. Our customers Adobe is one of the most diverse software companies in the world. Our customers span the globe and range from enterprises to individual consumers, large media companies to small design agencies, and CIOs to students. Every day, they use Adobe products with household names such as Adobe Photoshop, Adobe Acrobat, and Adobe Flash. The Omniture acquisition augments our established product line with a new set of SaaS solutions that broadens the scope and size of our addressable market. With this distinguished portfolio of products, our large and loyal customer base, and new versions of many of our technologies coming in fiscal 2010, Adobe is ready to lead the next wave of industry innovation. An honor for our past, an eye to the future In October 2009, Adobe was recognized at a White House ceremony in Washington, where President Barack Obama awarded Adobe cofounders John Warnock and Chuck Geschke the National Medal of Technology and Innovation. We Adobe Systems Incorporated - SWOT Profile Page 17
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