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Adobe Issues Q4 Update: Lowers Revenue Target, Will Reduce Staff by 5%

Press release from the issuing company

SAN JOSE, Calif.--Oct. 30, 2001--Adobe Systems Incorporated today announced that based on lower than anticipated revenue achieved thus far in its fourth quarter of fiscal 2001, it is lowering its revenue and earnings per share targets for the quarter. The Company now expects Q4 revenue to be between $275 and $285 million, with pro forma earnings per share between $0.20 and $0.22. Prior targets, which did not factor in the potential economic impact of the events on September 11, were revenue of $310 to $320 million, and pro forma earnings per share of $0.27 to $0.28. "At this point in the quarter, it is clear that the economic impact from events of the past two months is having an adverse effect on Adobe's business,'' said Bruce R. Chizen, president and chief executive officer of Adobe. "In particular, we have seen greater weakening in our business in October, especially in the U.S. and Japan.'' Adobe also announced that, based on current economic trends and in preparation for fiscal 2002, it will realign its workforce this quarter. This will result in a staff reduction of approximately 150 people, or 5 percent of its worldwide employees. The restructuring will include a charge of approximately $8 to $10 million in the fourth quarter. "We will continue to balance the need for short-term profitability with the necessary investment for long-term growth,'' added Chizen. "Although we will reduce our total headcount, we will continue to selectively hire in critical areas such as research and development to fuel future growth opportunities.'' Company Provides FY2002 Targets Adobe also announced its targets for fiscal 2002, which begins December 1, 2001. The Company is targeting revenue of $1.3 billion in fiscal 2002, or approximately 4 to 5 percent year-over-year growth. The Company said that it would modify its business reporting segments beginning in fiscal 2002 to reflect the way it will manage its business. A newly named Graphics segment replaces the former Web Publishing segment and includes Adobe Illustrator. Adobe GoLive and the Web Collection will be reported in the Cross-media Publishing segment. Based on its new segment definitions, the Company stated it is targeting the following for revenue in fiscal 2002: ePaper Solutions segment: 15 percent year-over-year growth Graphics segment: 5 percent year-over-year growth Cross-media Publishing segment: 5 percent year-over-year decline OEM PostScript and Other segment: 15 percent year-over-year decline As a percent of revenue, the Company is targeting FY2002 expenses as follows: Research and development: 20 to 21 percent Sales and marketing: 34 to 35 percent General and administrative: 9 to 10 percent In addition, the Company is targeting gross margin of 93 percent, other income of $4 million per quarter, a tax rate of 32 percent, and a share count increase of 2 million shares per quarter in fiscal 2002 based on the final share count at the end of fiscal 2001. These targets yield a pre-tax operating profit margin of 28 percent and a pro forma earnings per share target of approximately $1.03 in fiscal 2002.

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