Report says firings upcoming at Adobe Systems
Analyst speculates up to 250 jobs will be cut to preserve profit margins
16 October 2002 | Updated
By Kurt Foss, Planet PDF Editor
A report on Bloomberg.com today says that Adobe Systems "will fire workers this quarter to cut costs after sales decline."
The article headlined "Adobe to Fire Workers in 4th-Qtr, Spend Up to $14 Mln" includes a quote from a Merrill Lynch analyst who speculates the workforce reduction to be "in the neighborhood of 250 jobs." However, the Wall Street Journal cites a Prudential Securities analyst saying that "Adobe's total employment won't drop that sharply since the company will also be hiring staffers as part of its plan to focus on the Accelio business and sell to enterprise customers."
The action is necessary, according to the Bloomberg report, because Adobe "wants to protect profit levels after sales of its Photoshop picture-editing software declined" -- $118.2 million in the quarter ending Aug. 30, from $125.5 million a year ago.
In its quarterly Form I0-Q report filed yesterday with the Securities and Exchange Commission (SEC), Adobe referenced last year's job eliminations, part of a restructuring plan:
"In the fourth quarter of fiscal 2001, we implemented a restructuring plan to realign our workforce to our future strategic goals and to align our resources with our fiscal 2002 revenue targets. This restructuring enabled us to increase our investment in digital imaging, digital video, and ePaper-based businesses in fiscal 2002. As part of the restructuring program, we implemented a reduction in force of 247 positions, affecting organizations throughout the company. The reductions came predominantly from sales and marketing and in our North American operations, and as of November 30, 2001, the majority of these terminations were completed."
Until Q4 2001, Adobe's ePaper Solutions products -- including Acrobat 5 -- were setting new highwater sales marks, steadily increasing the percentage of Adobe profits built around PDF. But even Acrobat-related sales have gone stagnant in recent quarters, adding to Adobe's fiscal challenges. Adobe notes in its SEC report the increasing competition in the electronic document field, including a recent Microsoft announcement that some analysts view as a direct threat to Adobe's ePaper technologies:
"The market for our ePaper and graphics applications is intensely and increasingly competitive and is significantly affected by product introductions and market activities of industry competitors. In the ePaper applications market, a number of competitors have developed and brought to market Acrobat-clone applications that create and enhance PDF files. Through lower pricing and aggressive marketing to existing or potential Adobe customers, these competitors could impact Adobe Acrobat average seat pricing, and our overall ePaper revenue. Additionally, Microsoft has increased its presence in the low-end and mid-range consumer digital imaging/graphics markets and in electronic document sharing, including announcing a new electronic forms tool that will ship in mid-2003. We believe that, due to Microsoft's market dominance, any new Microsoft products in these markets will be highly competitive with our products. If competing graphics and ePaper products achieve widespread acceptance, our operating results would suffer."
An article in The Register today titled "Adobe moves into document management" reports that Adobe will announce on Monday a series of new ePaper products aimed at enterprise customers.
Ironically, the news of the job eliminations comes on the same day that current Adobe CEO and President Bruce Chizen is joining co-founders John Warnock and Charles Geschke, both still active as chairs of the Adobe board, for a special commemorative event as the company marks "20 Years of Technology Innovation."