Adobe's Q3 2002 Earnings Call reveals August upturn, new server-based Acrobat PDF products
Top management reports 'rebound in U. S. business' since July 31

13 September 2002

By Kurt Foss, Planet PDF Editor

Adobe Q3 2002

During its quarterly Earnings Conference Call on Sept. 12, Adobe Systems President and CEO Bruce Chizen and others on his executive management team shared financial results for the third quarter of the 2002 fiscal year (ending August 30). "I am pleased that Adobe is reporting revenue and earnings at the high-end of our revised third quarter targets," Chizen told analysts and technology press participating in the call, which was also webcast live on the Internet. Chizen also said the company is "planning for growth in Q4."

"Since July 31 we've seen a rebound in our U.S. business," Chizen said, primarily in the education market and in part tied to the release of several newly updated software products. Murray Demo, Adobe's Sr. VP and CFO, later noted in response to an analyst's question that the company typically experiences a bump in educational use of its products in the third quarter, the season when most students and teachers return to the classroom.

As to Acrobat, Chizen said that Adobe continues to invest in its ePaper Solutions group products, which he called "our largest growth opportunity." This group also now includes the suite of products absorbed -- and in the process of being integrated with Adobe's Acrobat family -- as part of the acquisition of Accelio Corp. earlier this year, a move designed to expand Adobe's offerings for enterprise-wide adoption, especially in the area of electronic forms and presentations.

Chizen said Adobe has in the past quarter "made progress with the Accelio integration" and hinted at several related product launches "beginning later this year." Pressed for details, Chizen and Shantanu Narayan, Adobe's Executive VP for Worldwide Products, indicated the new releases would likely be server-based solutions that incorporate features Adobe has been previewing in recent technology demonstrations. The next batch of ePaper products won't include Acrobat 6.0, the next expected full version of Adobe's commercial PDF-based software, according to Narayan, although one could "do the math" based on Acrobat's release history and project that a new version might well arrive in Q2 of 2003 -- two years since Acrobat 5.0 was released.

In fact, at least one analyst recently predicted Acrobat 6.0 will likely arrive in February or March of 2003, advising potential shareholders on the best investment strategy timed to take advantage of such a release.

Chizen explained during a Q&A session with participating analysts that although there was actually a slight decline in Acrobat sales for Q3, overall ePaper business was "up sequentially," noting that volume licensing for Acrobat actually increased worldwide, particularly within corporations and government agencies. In addition, Adobe cited $8.8 M in revenue from Accelio products during Q3, a significant increase from the 1.7 M reported in the previous (partial) quarter. Based on those results and on "conversations with customers," Chizen said he's "more convinced than ever" that the Accelio acquisition represents a strategic opportunity for Adobe. Based on the forthcoming releases, Chizen said he expects a "strong Q4 for our ePaper business."

One analyst asked for an update on the low-cost PDF authoring tool Adobe reportedly has been testing this summer in a European market, and which had first been mentioned in a previous analyst conference call. Narayan offered no new details during last week's earnings call, but said Adobe would provide more information during a meeting with analysts in New York on October 28. Adobe presumably is looking to compete directly with third-party products such as JAWS PDF Creator from Global Graphics Software that offer authoring capabilities at a significantly lower price than Adobe's commercial Acrobat product. Yet the company's primary push remains getting more people using (and purchasing) Acrobat.

"Our biggest opportunity for Acrobat is to obtain broader penetration into the enterprise," said Narayan, adding that a key focus for Adobe will be to "increase awareness of general business users of the benefits of the full version."

Narayan, who introduced Adobe's new Graphics Server during a keynote presentation at the Seybold Seminars in San Francisco last week, was asked by one analyst about possible issues or concerns related to some of the emerging "variants" of PDF being shown and discussed at the Seybold PDF Conference. The question was a reference to PDF/X, a subset of PDF that has been adopted as a standard for delivery of digital advertising, and to PDF/A, a more recently mentioned potential standard for digital archiving.

Narayan answered that both PDF/X and PDF/A are simply minor variants from Adobe's PDF specification "with a little more standardization" based on needs of the specific industries, and thus are no reason for concern -- but rather initiatives Adobe wholeheartedly supports and attempts to further. Adobe works closely with organizations driving such standards, according to Chizen, and in turn can incorporate suggestions in updates of its specification.

A related topic that generates serious discussion at Adobe on possible future extensions of PDF, Narayan says, is: "How do we make it more of a live document -- a live container of information -- with the addition of XML?" The goal would be a PDF file that "could now really be an intelligent document within an enterprise ... that can not only carry the presentation information, but also how that document might be routed ... and how it can directly get information from databases."

Narayan also mentioned that PDF is also well suited to serve as a standard for the exchange of digital images, mirroring a comment made elsewhere at the Seybold PDF Conference last week by Adobe's Harry Vitelli. Despite the lack of any official news about a future upgrade to Acrobat, PDF was the focus of three days of sessions and discussions, including a variety of case studies highlighting particular applications of Acrobat and PDF.

"One of the most gratifying things about being part of the Seybold show," said Narayan, "is seeing the impact of PDF. All of us at Adobe continue to be really pleased with what we see there."

Barring serious delays or setbacks, there should be a lot more to talk about by the next Seybold Seminars event in 2003 when Acrobat reaches version 6.0, and both Acrobat and PDF celebrate a decade since they were launched in 1993 -- at Seybold.


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