Adobe Systems Inc

views updated

ADOBE SYSTEMS INC.

EARLY HISTORY: WARNOCK AND GESCHKE

Adobe Systems Inc. was founded in 1982 by research John Warnock and Charles Geschke. Less than two decades later, with annual sales exceeding $1 billion, Adobe held the third-place spot among the largest PC software companies in the United States. The firm emerged in the mid-1980s as a major force in desktop publishing and in the late-1990s as a leader in Web authoring tools and other Internet publishing technology.

Adobe's founders met at Xerox Corp. While earning his doctorate degree in electrical engineering at the University of Utah, Warnock—who would be named one of the "Ten Revolutionaries of Computing" in 1998 by Computer Reseller News —had worked for IBM Corp., as well as a handful of other technology companies. In 1980, he accepted a graphics research position at Xerox's new graphics and imaging lab, which was headed up by Geschke. Together, Warnock and Geschke created the Post-Script computer language, which conveyed to printers how electronic characters, lines, and digital images appear on paper. Dissatisfied with Xerox's limited interest in the new product, Warnock and Geschke decided to resign and establish a new company, Adobe Systems, as a vehicle for selling PostScript. Their printer language would soon fuel the desktop publishing industry's explosive growth, as well as the surging popularity of laser printers.

Adobe's first big break came when Geschke and Warnock convinced Apple Computer Inc. to use Post-Script with its LaserWriter printer. As part of the deal, Apple purchased a 19-percent stake in Adobe. The first printer using the PostScript language was made available for sale in 1985. Texas Instruments Inc. began using PostScript in its IBM-compatible PCs in 1986. That year, Adobe conducted its initial public offering (IPO).

In 1987, Adobe launched its Illustrator design software program and expanded overseas by establishing Adobe Systems Europe. Soon thereafter, the company increased its international operations by founding a sales unit in the Pacific Rim. The acquisition of BluePoint Technologies, Nonlinear Technologies, and OCR Systems in the early 1990s marked the beginning of an expansion period. Along with seeking growth through acquisition, Adobe had already started licensing its PostScript software to printer manufacturers. In 1993, the firm also unveiled Acrobat, a software program that allowed users to create and view documents that included text, graphics, and even photos, regardless of whether they worked on a Macintosh or PC. Acrobat's portable document format (PDF) not only allowed for the transfer of files between incompatible systems, it also greatly simplified the electronic distribution of all sorts of documents.

MAJOR ACQUISITIONS

Adobe wanted to secure a desktop publishing application for its PostScript printing language. In 1994, it approached Aldus Corp., maker of PageMaker, the leading desktop publishing program for both Macintosh and Windows operating systems. A $450 million merger completed later that year secured Adobe's position as a leading PC software manufacturer among giants like Microsoft, Novell, and Lotus. The deal also positioned Adobe as a market leader in design and illustration software, image editing, and electronic document technology—areas that would prove essential to its emergence as a leader in Web publishing.

Adobe's second major acquisition—the $31.5 million purchase of Frame Technology Corp., maker of the Unix-based FrameMaker desktop publishing program—proved ill fated. Adobe was unfamiliar with Frame's enterprise market, and the unit began to lose money soon after the transaction was completed in 1995. Consequently, Adobe's stock price plunged more than 50 percent to $33 per share in July of 1996, compared to a high of approximately $74 per share earlier that year.

FOCUS ON INTERNET PUBLISHING

Depending on its recent acquisition of Web tools manufacturer Ceneca Communications to prove fruitful, Adobe shifted focus in 1996 to Internet publishing and converted the popular PDF into a Web format. Sales neared the $1 billion mark in 1997. Recession-ary economic conditions in Japan undercut earnings in 1998, spurring Adobe to lay off roughly 10 percent of its management staff and place more of an emphasis on creating new products, particularly those that would help secure the firm's position as a key player in Web authoring tools. More than $207 million—roughly one-quarter of sales—was earmarked for research and development. The firm also hunted for strategic acquisitions like GoLive Systems Inc., a maker of Web development and design tools that it purchased early in 1999. The GoLive technology allowed Adobe to later launch its award-winning Live-Motion program, a graphics and animation manipulation software package for both novice and expert Web page designers.

Believing that electronic books, particularly educational and professional publications, would become a key online market, Adobe began developing software for displaying such books. It also sought ways to protect authors, publishers, and other parties from the illegal distribution of copyrighted material—a major issue for book vendors considering a move into electronic commerce. In 1999, the firm unveiled PDF Merchant, which allows publishers to prevent individuals from downloading PDF files until they have purchased the right to do so. Once payment has been received, the document in question is sent directly to the recipient's hard drive. Web Buy, an Acrobat "plug-in" program, is attached to the document to thwart unauthorized distribution by prompting the recipient of such a file for payment prior to allowing access.

Adding to its e-books holdings, Adobe purchased display software manufacturer Glassbook Inc. in August of 2000. Adobe Content Server, a program that allows book merchants to sell e-books in a secure format online, was launched the following year in conjunction with the Adobe Acrobat e-Book Reader, a product based upon the Glassbook Reader. Along with granting users electronic access to books, with both text and graphics in PDF, the new software also offers searching, marking, annotating, and other interactive capabilities.

By 2001, Internet publishing products accounted for more than 50 percent of Adobe's revenues. More importantly, Adobe's presence on the Internet was prolific. In the October 2000 issue of Forbes Elizabeth Corcoran wrote, "Pull up the Bridgestone/Firestone Web site to learn about defective tires and it tells you to use Adobe's free Acrobat Reader to see a graphical interpretation of the hieroglyphics on your tires' sidewalls. On ESPN's extreme sports site teeth-gritting images have been tweaked with Adobe tools. At Barnes & Noble on the Web you will find e-books viewable with readers from Microsoft and Adobe." In fact, says Corcoran, more than 90 percent of all Web sites make use of Adobe's Photoshop software, while nearly three-fourths of all Web pages are designed with Adobe Illustrator.

Seeing the development of strategic alliances as essential to remaining at the forefront of Internet publishing technology, Adobe continually seeks to establish relationships with other key players. For example, in the second half of 2000 Adobe integrated its Go-Live software with WebTrends Corp.'s Web tracking technology. This allowed clients creating Web sites with GoLive the ability to monitor things like site traffic. At roughly the same time, the firm reached a similar technology integration agreement with e-commerce software and services provider Allaire Corp. Future plans include the creation of Adobe Studio—a Web site that allows Adobe software users to share technology and ideas, as well as to post and find jobs—and the development of technology that allows electronic documents to be published on cell phones, palm pilots, and other mobile devices.