26 February 2003

By Kurt Foss, Planet PDF Editor

As noted in today's Planet PDF Weblog entry, the U.S. Securities and Exchange Commission (SEC) accepts only plain text or HTML for official filings of the varied documents that companies are required by law to submit. However -- and thankfully for anyone who has tried loading and navigating a 3 MB, single-Web page company annual report in either of the official formats -- the SEC notes that "supplementary PDF versions may also be submitted." That experience alone should make a positive impression on investors about the virtues of Adobe Acrobat and PDF.

For those seeking a more detailed understanding of the prospects for the software and format developed by Adobe Systems, the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system collects and makes available for downloading the company's financial documents, including its Form 10-K (annual report) filed today.

We had a look to see what Adobe is revealing to the investor community about its plans, particularly as related to Acrobat and PDF. Selected excerpts from the 116-page document follow:

INDEX:
• New Adobe Acrobat for Creative Professionals
• Future ePaper Market Opportunity
• Current ePaper Product Overview
• Competition and Product Differentiation
• Disclaimers

New Adobe Acrobat for Creative Professionals

• "In fiscal 2003, the creative professional business unit will focus on two key strategies:
  1. increasing the number of Adobe products they use
  2. enabling more efficient collaboration and workflow through improved product integration and by offering a professional version of Acrobat to assist in digitizing their publishing workflow."

• "To accomplish these two strategies, Adobe plans to execute against a number of key imperatives. They include:
  1. continue to provide best-of-class products
  2. grow usage of Adobe products such as professional page layout and illustration
  3. introduce a new version of Adobe Acrobat which will have specific features creative professionals can use to increase their productivity
  4. focus on the licensing of collections of Adobe software applications that provide a more complete integrated solution for various types of creative professionals"

• "In addition, the Company plans to continue to focus on enhancing support for eXtensible Markup Language ("XML") in its products, and to enhance the use of Adobe Portable Document Format ("PDF") creation and workflow capabilities in its products -- both of which we expect to result in fast, reliable multi-device output."

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Future ePaper Market Opportunity

In its annual report submitted to the SEC, Adobe describes its "ePaper Market Opportunity" as follows:

"A significant opportunity exists to enable intelligent integration of paper and digital document communications with fidelity and reliability in businesses and governments around the world. Adobe Acrobat software, the cornerstone of our ePaper family of products, at its most basic level enables users to create PDF files -- the worldwide standard for secure and reliable electronic document distribution.

With more than 500 million distributed copies of our Acrobat Reader --- the free multi-platform Adobe PDF viewing software --- Adobe has created a ubiquitous platform for the reliable distribution of electronic documents. The Acrobat Reader is available on the most common operating system platforms, including Microsoft Windows, Apple Macintosh, Linux, various Unix-based platforms, and portable device systems such as Palm OS, Pocket PC, and the Symbian operating system for cellular phones. Together, Acrobat, Adobe PDF, and the Acrobat Reader assure creators of electronic documents that their content will display and print the way they are intended, and that the documents are protected, if they choose, from unauthorized access and alterations.

With additional capabilities in Acrobat that allow users to annotate, collaborate, secure, digitally sign, and archive PDF documents, we believe our ePaper product line delivers unique functionality in many markets. Governments working to deploy eGovernment initiatives, and companies in regulated industries such as aerospace, financial services, insurance, legal, and pharmaceutical --- those with paper-intensive processes --- use Adobe ePaper solutions to ensure that their electronic documents are delivered reliably and securely, and can be viewed by the recipient in the exact form that the originator intended. Enterprises and governments that deploy Adobe ePaper solutions reduce paper and storage costs, improve customer satisfaction, and realize productivity and time-to-market gains.

Based on the growth in the use of electronic document content, the increasing focus on eGovernment initiatives, and the desire of enterprise customers to utilize XML and extend their businesses beyond the confines of their internal back-end systems, we have increased our investment in our ePaper business during fiscal 2002. These investments include enhancing our research and development strategy and our solutions-based go-to-market capabilities. In marketing and engineering, we have teams that focus on ePaper desktop-based software opportunities and on end-to-end server-based ePaper solution opportunities. To supplement our solution offerings, we acquired Accelio, a supplier of electronic forms and business process automation software solutions, in the second quarter of fiscal 2002.

In our field organization, we realigned our resources throughout fiscal 2002 to focus more heavily on ePaper opportunities. Our goal is to have a majority of our field-based resources focused on ePaper desktop and server-based solutions targeting corporate and government accounts.

With the previously described emerging market trends, and with the addition of Accelio-derived solutions, Adobe has refined its strategy to focus on three distinct ePaper business opportunities in fiscal 2003. They are:

1. Document Generation
2. Document Collaboration
3. Document Process Management

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Document Generation

There is a significant Document Generation market opportunity for transforming raw business data into visually rich, dynamic, customer-focused documents for delivery anytime, anywhere, on any device. In many cases, documents are the main source of interaction governments and businesses have with their constituents, partners, vendors, and customers. Documents are used to generate revenue (such as catalogs, brochures, mailers), conduct transactions (such as tax forms, invoices, loan documents and account statements), and transfer knowledge (such as user manuals, product specifications and financial reports).

We believe the key to producing documents that drive business is an enterprise-strength document generation solution that takes content from multiple sources, dynamically generates documents, and securely and reliably delivers those documents over a variety of systems and devices. Adobe's solutions for Document Generation are intended to: improve customer satisfaction by enabling "self-serve" dynamic document generation, anytime, anywhere, on any device; ensure that documents appear exactly as intended and are protected from unauthorized changes; and reduce costs by automating document and image production processes.

We provide both desktop and server-based solutions for the Document Generation market. On the desktop, Adobe Acrobat generates electronic documents from everyday office applications, such as Microsoft Office. On servers, Adobe offers a combination of products to generate documents, including Adobe Output Server and Adobe Document Server. These server products merge output, including XML-based data, from enterprise applications such as Customer Relationship Management ("CRM"), Enterprise Resource Planning ("ERP"), content management, and legacy systems with highly formatted document templates to generate personalized, reliable documents for print or electronic output.

We believe our key advantages in the Document Generation market include the standardization of PDF usage in many government agencies and regulated industries as a format for distributing, viewing, printing, and archiving electronic documents. In addition, Adobe's electronic document viewing solution, the Acrobat Reader, is available on many platforms, assuring our customers who generate PDF files that their content will be viewable and printable when it is distributed. Finally, from a technology standpoint, integration capabilities between XML-based data and Adobe PDF have made the PDF format a rich, intelligent document container --- one that allows electronic documents to be used on-line and off-line. For example, Adobe PDF-based electronic forms can be filled in off-line (i.e., when a user is not connected to the Internet). Later, when the user reconnects to the Internet, the data entered earlier can be automatically submitted electronically and integrated directly into back-end IS systems such as a corporate database.

Document Collaboration

The desire by governments and enterprises to have more effective and timely collaboration solutions has created a significant Document Collaboration market opportunity. Our solutions for Document Collaboration enable more secure and reliable distribution of documents to streamline document exchange, review, commenting, and approval, while protecting content from unauthorized access and alterations. Adobe PDF documents can also be automatically routed, tracked, and integrated into core applications such as document management systems to manage the full collaboration process.

Benefits to customers using Adobe solutions for Document Collaboration include the protection of business information and process integrity, the reduction of costs by automating collaborative processes and reducing paper, and the simplification of document sharing with employees, customers, partners, and other constituents. Governments can shorten the time it takes to approve applications. Enterprise customers can replace paper mailings to customers and suppliers with electronic document distribution, accelerate product and engineering documentation reviews, and streamline contract review and preparation.

In addition to the use of Adobe Acrobat Reader and Adobe Acrobat as desktop software that is used as part of Adobe's Document Collaboration solutions, Adobe also provides server-based solution software called Adobe Document Server for Reader Extensions. This new server product allows publishers of Adobe PDF-based forms and documents to embed usage rights in them that enable features in the free Acrobat Reader that normally are not available, such as form fill-in and save, and digital signatures.

For example, governments can use this server solution to create on-line forms that constituents can fill out and digitally sign in Acrobat Reader; or financial institutions can create electronic forms that are integrated with their back-end systems to provide personalized on-line applications. In both examples, users can fill out such forms in the free Acrobat Reader, which later can be directly integrated with their processing systems, so that manual re-keying of data is not necessary. The cost-saving advantages with such a solution for publishers of documents such as tax forms and on-line applications are significant.

Document Process Management

Enterprises have invested significantly in their infrastructure over the last ten years, resulting in the deployment of complex business systems such as CRM, ERP, and Document Content Management ("DCM").

Yet many of these back-end systems are not fully connected with each other, or with how business users work with documents on their desktops on a daily basis. This disconnected workflow has created a market opportunity called Document Process Management, and we have created solutions that enable customers to integrate how they use electronic documents with their internal and external business processes.

With our solutions for Document Process Management, an enterprise's customers, employees, and partners can submit information through intelligent, secure electronic forms via their preferred computer platform or device. The captured information triggers rules-and rolesbased workflow, automatically integrating data into core business systems such as CRM, ERP, and DCM. For example, an employee could enter data on-line into an expense report that is submitted electronically; the data could then be automatically integrated into the Company's accounting system. Process tracking and reporting capabilities offer business managers insight into the status of their workflows, and allow them ways to further streamline their processes for better business performance.

Customers using Adobe's Document Process Management solutions can reduce costs and improve responsiveness by eliminating inefficient manual, paper-based processes. They can extend the reach of their business processes to customers, partners, and mobile workers with self-service applications via multiple devices. The end result is often an increase in an enterprise's return on investment made on their back-office solutions.

Adobe's Document Process Management solutions involve several components of its ePaper software, including Adobe Acrobat Reader and Adobe Acrobat on the desktop, and Adobe Document Server for Reader Extensions on the server. In addition, Adobe provides Adobe Form Client, Adobe Form Server and Adobe Workflow Server to complete its solution offering. Based on XML standards, Adobe Form Client is a data capture product that deploys electronic forms to a wide variety of environments such as the Web, Microsoft Outlook, and Microsoft Office. Adobe Form Server enables governments and corporations to post and manage their forms on-line, and Adobe Workflow Server provides the ability to graphically design, implement, and monitor workflows for document processing."

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Current ePaper Product Overview

Adobe's Form 10-K also inclues an overview of its current ePaper products, based on Acrobat v.5.x:

• Adobe Acrobat: Software that allows users to publish and distribute business documents using corporate e-mail and intranets, the Internet, or CD-ROM; enables users to easily convert files from almost any application to Adobe PDF, a compact cross-platform electronic format that generally preserves layout, fonts, colors, and images; helps users complete timely and efficient document review and approval processes; includes everything needed to create and distribute rich electronic documents that can be viewed easily within leading Web browsers.

• Adobe Acrobat Approval: Software that enables business workgroup users to quickly fill in, save, and approve electronic forms, marketing materials, and other documents that have been created as interactive PDF files.

• Adobe Acrobat Capture: Enables conversion of legacy paper-based documents into indexable, searchable, platform-independent electronic PDF files for archiving and distribution purposes.

• Adobe Acrobat Distiller Server: Server-based software that provides workgroups with a centralized solution for converting PostScript files to Adobe PDF; gives IT and creative professionals the power of increased productivity and the assurance of consistent, high-quality output.

• Adobe Acrobat Messenger: Software that works with a scanner or digital copier and is designed for workgroups and departments to transform paper documents into electronic Adobe PDF files and deliver them via e-mail, Web, or fax; allows users to preview their documents on-screen, crop or rotate pages, and add electronic annotations.

• Adobe Acrobat Reader: Free software for reliably viewing and printing Adobe PDF files on all major computer platforms, including Microsoft Windows, Apple Macintosh, Linux, UNIX, Palm OS and Pocket PC-based devices.

• Adobe Capture Handheld: An advanced, intelligent data capture solution available for handheld devices running Microsoft Pocket PC and Handheld PC; allows mobile workers to capture data through intelligent forms, validate the records entered, and submit the data to back-office systems; biometric signatures can be initiated from the device to ensure validity and to complete a business transaction.

• Adobe Central Pro Output Server: Server-based software for document generation that allows organizations to create personalized, customer-facing documents from any data source -- including legacy, line-of-business, ERP, or CRM applications; merges data with an electronic document template using a powerful processing engine to dynamically generate electronic documents such as purchase orders, invoices, statements, and checks for delivery via Adobe PDF, the Web, e-mail, fax, or print; works with Adobe Output Designer, which is a companion tool used to create sophisticated document templates.

• Adobe Document Server: Server-based software for the creation, manipulation and assembly of customized Adobe PDF documents; XML-based data can be inserted into templates to create complex, content-rich documents for more targeted and effective customer communications; integrates with leading enterprise applications as well as custom systems.

• Adobe Document Server for Reader Extensions: Server-based software which allows enterprises and government agencies to assign additional rights to an Adobe PDF document, enabling users of the free Adobe Acrobat Reader to save and submit electronic form data, add digital signatures, and attach comments, thereby lowering processing costs and virtually eliminating the need for paper-based forms; businesses can leverage their existing paper and Adobe PDF based forms, distribute forms electronically in a format that resembles the paper form, and integrate data that is entered securely into the electronic forms via Acrobat Reader with their current IT structure.

• Adobe Form Client: Data capture software that enables companies to replace inefficient, paper-based forms processes with intelligent, accessible, and secure electronic data capture solutions to improve organizational agility and productivity; offers flexible desktop deployment options, an XML-based architecture for integration with core business applications, and support for digital signatures; captured information can be routed via industry-standard e-mail and groupware technologies; integrates with Adobe's solution for Document Generation to extend and accelerate business processes within and beyond the organization, and is a key component of Adobe's solution for Document Process Management; works with Adobe Form Server and Adobe Workflow Server.

• Adobe Form Designer: WYSIWYG ("What You See is What You Get") design tool for creating intelligent XML templates, providing users with a simple way to develop and maintain sophisticated data capture solutions without involving third-party tools; creates both HTML and Adobe PDF forms.

• Adobe Form Server: Server-based software for document process management; enables governments and corporations to post electronic forms on the Web; creates and publishes Adobe PDF or Web-based forms which allow for the verification of the accuracy of data entered in a form, as well as other validations, calculations, and confirmations; forms can be used on-line, or saved and used off-line and later reconnected so that data entered in the forms can be submitted electronically and integrated with core business processes; has the ability to enable secure transactions involving confidential or sensitive information; works together with Adobe Form Designer and Adobe Workflow Server to deliver a complete business process automation solution.

• Adobe Output Designer: WYSIWYG design tool that allows users to create electronic document templates for use with Adobe solutions for document generation; aids in the creation of electronic documents that exactly replicate existing paper documents.

• Adobe Output Pak for mySAP.com: SAP certified server-based software for document generation that enables organizations to optimize their investment in their SAP solution by creating personalized, professional-looking, customer-facing documents; provides an easy, fast, and cost-effective way to create and maintain documents for the SAP environment; integrates directly with an SAP system to extract information which is merged with a document template that defines the layout and formatting of the document; output can be in a variety of formats, including Adobe PDF, print, fax, e-mail, and the Web, to multiple devices.

• Adobe Output Pak for Oracle E-Business Suite: Server-based software for document generation which is an Oracle EBSI-approved integration; expands the scope of the Oracle E-Business Suite by allowing customers to easily create, maintain, and integrate high-quality, professional-looking electronic documents with their Oracle business processes in an easy, fast, and cost-effective way; integrates directly with Oracle Reports to extract XML data from other applications which is then merged with a document template that defines the layout and formatting of the document output; used to dynamically generate documents such as purchase orders, invoices, statements, and checks which can then be delivered via Adobe PDF, print, fax, e-mail, and the Web.

• Adobe Web Output Pak: Server-based software for document generation; creates documents in Adobe PDF and HTML for presentation on the Web, and in Wireless Markup Language ("WML") for presentation to a wireless device; allows users to personalize and control the look and feel of documents based on the data the documents contain.

• Adobe Workflow Server: A server-based workflow application that allows for the design, deployment and management of forms-based business processes by integrating people, processes, and applications to improve organizational agility and productivity; uses a rules-and roles-based design tool that defines business rules a process must follow, as well as the roles of each individual involved in the process; works with Adobe Form Server, Adobe Form Client and Adobe Central Output Server.

• Create Adobe PDF Online: A Web-hosted fee-based service that allows users to convert documents from a wide variety of applications into Adobe PDF files.

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Competition and Product Differentiation

Perhaps the most revealing is the section outlining Adobe's perceived competition for its ePaper products and solutions, including references to future Acrobat procucts:

"As we broaden the scope of our ePaper products and solutions, we face increased competition from entrenched office applications, PDF-based clones of our Acrobat product, electronic forms solution providers, emerging products/technologies, and potentially, enterprise collaboration system providers. Additionally, current office applications and content creation/management tools that use HTML, Macromedia Flash, Microsoft Word, Tagged Information File Format ("TIFF"), and various XML-based formats for electronic document distribution provide alternate solutions to customers, and indirectly compete with Adobe's ePaper products and the use of Adobe PDF.

For Document Generation solutions --- specifically, the desktop and server-based PDF file creation markets --- Adobe Acrobat and our server solutions such as Adobe Distiller Server and Adobe Document Server face competition from Acrobat clone products such as those from Ansyr Technology, Global Graphics, and other smaller PDF creation solutions that can be found at a low cost, or for free, on the Internet. Additional competitors in the Document Generation market include StreamServer, Optio, and Formscape. However, many PDF creation solutions in the market today use technology from us, licensed as Adobe PDF Libraries, to implement the PDF creation capabilities of their products or solutions.

We have recently announced our intent to provide different versions of our Acrobat desktop product in 2003 to meet the needs of different types of users. Providing a PDF creation-only version of Acrobat may allow us to achieve our goal of broader proliferation of paid-for Acrobat software, as well as compete more effectively with low-end PDF-creation product companies such as Global Graphics. The creation of a new high-end professional version of Acrobat could directly or indirectly position Adobe against other creative professional PDF tool providers, such as Enfocus, Lantana, TeamPDF, and Zinio.

For Document Collaboration and Document Process Management solutions, where electronic document delivery, exchange, collaboration, and archival needs exist, our Adobe ePaper product family faces competition from entrenched office applications such as Microsoft Office. In addition, some content management vendors provide collaboration and business process management capabilities that could directly or indirectly compete with our offerings, although we view our solutions in these areas as an extension of those supplied by such vendors.

In many of the ePaper market opportunities that Adobe is targeting, Microsoft has, over the past few years, attempted to improve its products and their capabilities. These areas include the collaborative document review, document security, and electronic document distribution capabilities of its Office suite. In addition, Microsoft has recently announced new XML and .NET-based product initiatives codenamed XDocs, ePeriodicals, and Jupiter that are positioned to be part of the launch of the next version of Microsoft Office. These initiatives, targeted for 2003 availability, indicate Microsoft may be planning to have new electronic form, electronic document distribution, eBook, and related functionality like that in Adobe Acrobat that could directly or indirectly compete with our ePaper products that provide similar capabilities.

In addition to Microsoft's XDocs initiative, we also face competition from Cardiff, Shana, and PureEdge for electronic forms solutions. Similarly, we face competition for Document Process Management solutions from workflow solutions vendors such as MetaStorm, Staffware, and Ultimus.

We believe the Adobe ePaper product family competes favorably against these companies and formats in terms of the combined benefits of superior functionality, file compression, visual page fidelity/reliability, multi-platform capability, printing and security of documents expressed using Adobe PDF.

Looking to the future, electronic document systems targeting enterprises that use emerging standards such as XML and Microsoft's .NET initiative are being developed and will likely be adopted. We are working to ensure that compatibility exists between these formats/platforms and the Adobe PDF format, as well as our Acrobat software products and other Adobe ePaper applications."

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Disclaimers

Typical of such financial documents, Adobe includes disclaimers, noting that certain changes of fortune -- or competitive developments -- could have an adverse impact on the company's recent strategy to focus on the enterprise market with its ePaper products and solutions. That section includes:

"The end markets for our software products are intensely and increasingly competitive and are 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 clones of our Acrobat application to 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, any incorporation into an operating system of software for the creation of PDF files, or other software that competes with our ePaper or graphics applications, could seriously harm our business. Furthermore, Microsoft has increased its presence in the low-end and mid-range consumer digital imaging/graphics markets, as well as indicating that it may include new electronic form, electronic document distribution, eBook and related functionality like that in Adobe Acrobat and our server-based ePaper software, including announcing a new electronic forms tool that is planned to 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 or ePaper products achieve widespread acceptance, our operating results would suffer. In addition, consolidation has occurred among some of the competitors in our markets. Any further consolidations among competitors of ours may result in stronger competitors and may therefore harm our results of operations.

Also, as we seek to further broaden our customer base in the enterprise, government, corporate business and consumer markets, we may not successfully adapt our application software licensing and distribution channels, which could cause our operating results to suffer. As we currently have limited experience in these markets, we believe we will need to recruit, train, and retain personnel with experience in these markets, and our failure to do so may harm our ability to penetrate these markets. We could also experience decreases in average selling prices and some transitions in our distribution channels that could seriously harm our business. In connection with the Accelio acquisition, we may not be successful in integrating Accelio or developing, marketing or licensing products, particularly products for the enterprise, government, corporate business and consumer markets, based on Accelio's technology or expertise. We also may not be successful in integrating its distribution channels with ours, or in developing the necessary relationships with enough significant systems integrators to succeed with these new customer bases. Additionally, we may face unanticipated expenses relating to the integration of Accelio personnel and its products, distribution channels, and administrative functions. All of these factors may affect our realizability of Accelio's assets, including goodwill.

While the annual report includes a wealth of numbers, one thing relative to the referenced future products not disclosed in the disclosure documents: shipping dates. That hasn't kept some analysts from speculating on the arrival of Acrobat 6, as we reported earlier.

MORE INFO

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• Planet PDF Forum (forum.planetpdf.com)

• PDF Store (www.pdfstore.com)

• Adobe Acrobat Reader - free downloads from the PDF Store

• Adobe: Meeting Government Requirements

• Adobe and Government

• Adobe Systems, Inc. filings with SEC - filed 26 February 2003

• Adobe Systems, Inc annual report (Form 10-K) filed with SEC - filed 26 February 2003

• Adobe Systems, Inc annual report (Form 10-K) filed with SEC [PDF: 865kb] - filed 26 February 2003