8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (date of earliest event reported): March 4, 2009

Adobe Systems Incorporated
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
 incorporation) 0-15175
(Commission File Number) 77-0019522
(I.R.S. Employer Identification No.)

345 Park Avenue
San Jose, California 95110-2704
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (408) 536-6000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 — Financial Information

Item 2.02. Results of Operations and Financial Condition.

On March 4, 2009, Adobe issued a press release related to its first fiscal quarter ended February 27, 2009. A copy of this press release is furnished and attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this report and the exhibit attached hereto are being furnished and shall not be deemed filed for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly stated by specific reference in such filing.

The attached press release includes non-GAAP operating margin and non-GAAP diluted earnings per share, and forecasted non-GAAP operating margin.

These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

For our internal budgeting and resource allocation process, we use non-GAAP financial measures, net of the related tax impacts, that exclude: (A) stock-based and deferred compensation expenses; (B) restructuring charges; (C) amortization of purchased intangibles; (D) investment gains and losses; and (E) the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes.  We use these non-GAAP financial measures in making operating decisions because we believe the measures provide meaningful supplemental information regarding our operational performance and give us a better understanding of how we should invest in research and development and fund infrastructure and go-to-market strategies.  We use these measures to help us make budgeting decisions, for example, as between product development expenses and research and development, sales and marketing and general and administrative expenses. In addition, these non-GAAP financial measures facilitate our internal comparisons to our historical operating results and comparisons to competitors’ operating results.

As described above, we exclude the following items from one or more of our non-GAAP measures:

A.            Stock-based and deferred compensation expenses and related tax impact.  Stock-based compensation expense consists of charges for employee stock options, restricted stock units and performance shares and employee stock purchases under Statement of Financial Accounting Standards No. 123 — revised 2004 (“SFAS 123R”) including the amortization of stock-based compensation related to unvested options assumed in connection with our acquisition of Macromedia in December 2005. Prior to the adoption of SFAS 123R in fiscal 2006, we did not include stock-based compensation expense directly in our financial statements, but elected, as permitted by SFAS 123, to disclose such expense in the footnotes to our financial statements.  As we apply SFAS 123R, we believe that it is useful to investors to understand the impact of the application of SFAS 123R to our operational performance, liquidity and our ability to invest in research and development and fund acquisitions and capital expenditures.  Although stock-based compensation expense is calculated in accordance with SFAS 123R and constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires or will require cash settlement by us and because such expense is not used by us to assess the core profitability of our business operations. Deferred compensation expense consists of charges associated with movements in our liability related to our deferred compensation plan. Although deferred compensation expense constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires current cash settlement by us and because such expense is not used by us to assess the core profitability of our business operations. We further believe these measures are useful to investors in that they allow for greater transparency to certain line items in our financial statements.  In addition, excluding these items from various non-GAAP measures facilitate comparisons to our competitors’ operating results.

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B.            Restructuring charges and related tax impact.  In November 2008, we initiated restructuring actions associated with realigning our business strategies based on current economic conditions. In connection with these restructuring actions, we recognized costs related to termination benefits for former Adobe employees whose positions were eliminated and the consolidation of leased facilities. We also incurred restructuring charges associated with realigning our business upon the acquisition of Macromedia in December 2005 (the “Macromedia Restructuring”). The actions in the Macromedia Restructuring were taken to eliminate certain duplicative activities, focus our resources on future growth opportunities and reduce our cost structure.  In connection with the Macromedia Restructuring, we recognized costs related to termination benefits for former Adobe employees whose positions were eliminated, the closure of Adobe facilities and the cancellation of certain contracts held by us.  We exclude these charges because these expenses are not reflective of ongoing operating results in the current period.

C.            Amortization of purchased intangibles and related tax impact.  We incur amortization of purchased intangible assets primarily in connection with our acquisition of Macromedia in December 2005. Purchased intangibles include (i) developed technology and (ii) core technology and patents. Developed technology relates primarily to Macromedia products across all of Macromedia product lines that had reached technological feasibility as of December 2005. Core technology and patents represent primarily a combination of Macromedia’s processes, patents and trade secrets developed through years of experience in design and development of its products. We expect to amortize for accounting purposes the fair value of the purchased intangibles based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated.  Although the intangible assets generate revenue for us, we exclude this item because this expense is non-cash in nature and because we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding our operational performance, liquidity and our ability to invest in research and development and fund acquisitions and capital expenditures.  In addition, excluding this item from various non-GAAP measures facilitates our internal comparisons to our historical operating results and comparisons to our competitors’ operating results. We also incurred on-going charges related to amortization of purchased intangible assets in connection with certain small acquisitions. We exclude these items because these expenses are not reflective of ongoing operating results in the current period.

D.            Investment gains and losses and related tax impact.  We incur investment gains and losses principally from realized gains or losses from the sale and exchange of marketable equity investments, other-than-temporary declines in the value of marketable and non-marketable equity securities, unrealized holding gains and losses associated with our deferred compensation plan assets (classified as trading securities) and gains and losses on the sale of equity securities held indirectly through investment partnerships. We do not actively trade publicly-held securities nor do we rely on these securities positions for funding our ongoing operations.  We exclude gains and losses and the related tax impact on these equity securities because these items are unrelated to our ongoing business and operating results.

E.             Income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes. Excluding the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes assists investors in understanding the tax provision associated with those adjustments and the effective tax rate related to our ongoing operations.

We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP and that these measures should only be used to evaluate our financial results in conjunction with the corresponding GAAP measures and that is why we qualify the use of non-GAAP financial information in a statement when non-GAAP information is presented.

Section 9 — Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d)Exhibits

99.1    Press release issued on March 4, 2009 entitled “Adobe Provides Preliminary Q1 Fiscal 2009 Results.”

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ADOBE SYSTEMS INCORPORATED
Date: March 4, 2009	By:	/s/ MARK GARRETT
		Mark Garrett
		Executive Vice President and Chief
		Financial Officer

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EXHIBIT INDEX

Exhibit  No.	Description
99.1	Press release issued on March 4, 2009 entitled “Adobe Provides Preliminary Q1 Fiscal 2009 Results.”

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EX-99.1

Exhibit 99.1

	Investor Relations Contact
	Mike Saviage
	Adobe Systems Incorporated
	408-536-4416
	ir@adobe.com
	Public Relations Contact
	Holly Campbell
	Adobe Systems Incorporated
	408-536-6401
	campbell@adobe.com

FOR IMMEDIATE RELEASE

Adobe Provides Preliminary Q1 Fiscal 2009 Results

Company Expects to Achieve Q1 Profit and Earnings Targets Despite Revenue Shortfall

SAN JOSE, Calif. — Mar. 4, 2009 — Adobe Systems Incorporated (Nasdaq:ADBE) today provided preliminary financial results for its first quarter ended February 27, 2009.

Based on preliminary Q1 financial information, Adobe believes it will achieve revenue in the range of $783 million to $786 million.  In addition, the Company believes it will achieve diluted earnings per share of approximately $0.30 on a GAAP basis, and $0.44 to $0.45 on a non-GAAP basis.   The Company also estimates it will achieve a Q1 operating margin of 26.0 percent to 26.5 percent on a GAAP basis, and 37.0 percent to 37.5 percent on a non-GAAP basis.

Adobe’s first quarter revenue target range was $800 million to $850 million, with a diluted earnings per share target range of $0.30 to $0.35 on a GAAP basis, and $0.43 to $0.47 on a non-GAAP basis.  The Company’s operating margin target range was 26 percent to 28 percent on a GAAP basis, and 37 percent to 38 percent on a non-GAAP basis.  A reconciliation of GAAP and non-GAAP targets and preliminary financial results is available later in this press release.

The Company cited weakness in its creative and knowledge worker businesses as the primary reason for the revenue shortfall.  Seasonal strength in Japan, as well as continued success with its LiveCycle enterprise business, helped to offset some of the weakness in the quarter.

“Despite worsening market conditions, we were able to manage expenses to deliver earnings and margin results within the target ranges we provided at the outset of the quarter,” said Shantanu Narayen, president and chief executive officer.

Adobe also provided financial targets for its second quarter of fiscal year 2009.   The Company stated it is targeting Q2 revenue of $675 million to $725 million.   In addition, the Company said it is targeting a Q2 operating margin range of 21 percent to 26 percent on a GAAP basis, and 32 percent to 36 percent on a non-GAAP basis.

The Company will discuss its quarterly results and financial targets on its Q1 fiscal year 2009 earnings conference call that is scheduled for March 17, 2009.

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including those related to revenue, earnings per share and operating margin, which involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: adverse changes in general economic or political conditions in any of the major countries in which Adobe does business, failure to develop, market and distribute new products or upgrades to existing products that meet customer requirements, introduction of new products and business models by existing and new competitors, failure to successfully manage transitions to new business models and markets, difficulty in predicting revenue from new businesses, costs related to intellectual property acquisitions, disputes and litigation, inability to protect Adobe’s intellectual property from third-party infringers, use, disclosure or malicious attack, failure to realize the anticipated benefits of past or future acquisitions and difficulty in integrating such acquisitions, failure to manage Adobe’s sales and distribution channels effectively, disruption of Adobe’s business due to catastrophic events, risks associated with international operations, fluctuations in foreign currency exchange rates, changes in, or interpretations of, accounting principles, impairment of Adobe’s goodwill or intangible assets, unanticipated changes in, or interpretations of, tax rules and regulations, Adobe’s inability to attract and retain key personnel, impairment of Adobe’s investment portfolio due to deterioration of the capital markets, market risks associated with Adobe’s equity investments, and interruptions or terminations in Adobe’s relationships with turnkey assemblers. For further discussion of these and other risks and uncertainties, individuals should refer to Adobe’s SEC filings.

The financial information set forth in this press release reflects estimates based on information available at this time.  These amounts could differ from actual reported amounts stated in Adobe’s first quarter fiscal year 2009 earnings report on March 17, 2009, and in our Quarterly Report on Form 10-Q for our quarter ended February 27, 2009, which the Company expects to file in April 2009. Adobe does not undertake an obligation to update forward-looking statements.

About Adobe Systems Incorporated

Adobe revolutionizes how the world engages with ideas and information — anytime, anywhere and through any medium. For more information, visit www.adobe.com.

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© 2009 Adobe Systems Incorporated. All rights reserved. Adobe, LiveCycle and the Adobe logo are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners.

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Non-GAAP Results and Targets

(Shares in millions)

The following tables reconcile Adobe’s preliminary first quarter fiscal year 2009 non-GAAP results with preliminary GAAP results included in this release.

	Three Months Ended February 27, 2009
	Low		High
Operating margin:
GAAP operating margin	26.0	%	26.5	%
Stock-based and deferred compensation expense	5.7		5.6
Restructuring charges	1.6		1.6
Amortization of purchased intangibles	3.7		3.8
Non-GAAP operating margin	37.0	%	37.5	%

	Three Months Ended February 27, 2009
	Low			High
Diluted earnings per share:
GAAP diluted earnings per share	$	0.30		$	0.30
Stock-based and deferred compensation expense, net of tax	0.09			0.09
Restructuring charges, net of tax	0.02			0.02
Amortization of purchased intangibles, net of tax	0.06			0.06
Investment loss, net of tax	0.02			0.03
Income tax adjustments	(0.05		)	(0.05		)
Non-GAAP diluted earnings per share	$	0.44		$	0.45
Shares used in computing diluted earnings per share	532.0			528.0

The following tables show the Company’s first quarter fiscal year 2009 non-GAAP financial targets reconciled to GAAP financial targets included in this release.

	First Quarter Fiscal 2009
	Low		High
Operating margin:
GAAP operating margin	26.0	%	28.0	%
Stock-based and deferred compensation expense	5.7		5.4
Restructuring charges	1.6		1.2
Amortization of purchased intangibles	3.7		3.4
Non-GAAP operating margin	37.0	%	38.0	%

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	First Quarter Fiscal 2009
	Low			High
Diluted earnings per share:
GAAP diluted earnings per share	$	0.30		$	0.35
Stock-based and deferred compensation expense, net of tax	0.08			0.08
Restructuring charges, net of tax	0.02			0.01
Amortization of purchased intangibles, net of tax	0.05			0.05
Income tax adjustments	(0.02		)	(0.02		)
Non-GAAP diluted earnings per share	$	0.43		$	0.47
Shares used in computing diluted earnings per share	534.0			530.0

The following table shows the Company’s second quarter 2009 non-GAAP financial targets reconciled to GAAP financial targets included in this release.

	Second Quarter Fiscal 2009
	Low		High
Operating margin:
GAAP operating margin	21.0	%	26.0	%
Stock-based and deferred compensation expense	6.3		5.5
Restructuring charges	0.5		0.5
Amortization of purchased intangibles	4.2		4.0
Non-GAAP operating margin	32.0	%	36.0	%

Adobe continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures.  Accordingly, Adobe uses non-GAAP financial information to evaluate its ongoing operations and for internal planning and forecasting purposes.  Adobe’s management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.  Adobe presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Adobe’s operating results in a manner that focuses on what Adobe believes to be its ongoing business operations.  Adobe’s management believes it is useful for itself and investors to review, as applicable,  both GAAP information that includes stock-based and deferred compensation expense, restructuring charges, amortization of purchased intangibles, investment gains and losses and the related tax impact of these items, the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes, and the non-GAAP measures that exclude such information in order to assess the performance of Adobe’s business and for planning and forecasting in subsequent periods.  Whenever Adobe uses such a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure.  Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above.

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