For Immediate Release
Adobe Systems Reports Record Quarterly and Annual Revenue

Q4 Results Include 40 Percent Year-Over-Year Growth in ePaper Business

SAN JOSE, Calif. December 11, 2003 Adobe Systems Incorporated (Nasdaq: ADBE) today reported strong financial results for its fourth quarter and fiscal year ended November 28, 2003.

In the fourth quarter of fiscal 2003, Adobe achieved record revenue of $358.6 million, compared to $294.7 million reported for the fourth quarter of fiscal 2002 and $319.1 million reported in the third quarter of fiscal 2003. On a year-over-year basis, this represents 22 percent growth. Adobe's fourth quarter revenue target range was $330 to $350 million.

"Adobe's record Q4 revenue is the result of outstanding performance, as well as Adobe's increasing relevance as a platform provider across our customer segments," said Bruce R. Chizen, president and chief executive officer of Adobe. "During fiscal 2003, we expanded our commitment to the creative professional, extended our reach into the digital imaging and video markets, and clearly defined our vision for intelligent document solutions for our growing base of enterprise customers. Given the positive momentum we established during the year, we're optimistic about our opportunities for continued growth in fiscal 2004 and we are reaffirming our annual financial targets."

GAAP diluted earnings per share for the fourth quarter of fiscal 2003 were $0.34. Pro forma diluted earnings per share, which does not include a partial reversal of a prior restructuring charge and an investment gain from the Company's venture program, also were $0.34. Adobe's GAAP and pro forma fourth quarter earnings target range was $0.30 to $0.32 per share.

GAAP net income was $83.3 million for the fourth quarter of fiscal 2003, compared to $40.1 million reported in the fourth quarter of fiscal 2002, and $64.5 million in the third quarter of fiscal 2003. On a year-over-year basis, GAAP net income grew 108 percent.

Pro forma net income, which does not, as applicable, include amortization and impairment of goodwill, restructuring and other charges, and investment gains and losses, was $83.0 million for the fourth quarter of fiscal 2003, compared to $59.1 million in the fourth quarter of fiscal 2002, and $66.3 million in the third quarter of fiscal 2003. On a year-over-year basis, pro forma net income grew 41 percent.

GAAP diluted earnings per share for the fourth quarter of fiscal 2003 were $0.34 based on 245.5 million weighted average shares. This compares with GAAP diluted earnings per share of $0.17 reported in the fourth quarter of fiscal 2002, based on 238.4 million weighted average shares, and GAAP diluted earnings per share of $0.27 reported in the third quarter of fiscal 2003, based on 240.5 million weighted average shares.

Adobe's GAAP operating income was $115.3 million in the fourth quarter of fiscal 2003, compared to $62.9 million in the fourth quarter of fiscal 2002 and $92.2 million in the third quarter of fiscal 2003. As a percent of revenue, GAAP operating income in the fourth quarter of fiscal 2003 was 32.1 percent, compared to 21.4 percent in the fourth quarter of fiscal 2002 and 28.9 percent in the third quarter of fiscal 2003.

Adobe's pro forma operating income, which does not, as applicable, include the amortization and impairment of goodwill, and restructuring and other charges, was $115.2 million in the fourth quarter of fiscal 2003, compared to $83.8 million in the fourth quarter of fiscal 2002 and $91.8 million in the third quarter of fiscal 2003. As a percent of revenue, pro forma operating income for the fourth quarter was 32.1 percent, compared to 28.4 percent in the fourth quarter of fiscal 2002 and 28.8 percent in the third quarter of fiscal 2003.

Adobe Reports Record Annual Revenue in Fiscal Year 2003
In fiscal 2003, Adobe achieved record revenue of $1.295 billion, compared to $1.165 billion in fiscal 2002. On a year-over-year basis, annual revenue grew 11 percent.

The Company's annual GAAP net income was $266.3 million in fiscal 2003, compared to $191.4 million in fiscal 2002. On a year-over-year basis, annual GAAP net income grew 39 percent. The Company's annual pro forma net income, which does not, as applicable, include restructuring and other charges, acquired in-process research and development, amortization and impairment of goodwill, and investment gains and losses, was $275.0 million in fiscal 2003, compared to $231.7 million in fiscal 2002. On a year-over-year basis, annual pro forma net income grew 19 percent.

GAAP diluted earnings per share for fiscal 2003 were $1.10. Pro forma diluted earnings per share, which does not include a partial reversal of prior restructuring charges, and investment gains and losses from the Company's venture program, were $1.14 in fiscal 2003.

Adobe achieved $444.1 million in revenue in its ePaper business in fiscal 2003. This represents 42 percent year-over-year growth for this business, and accounts for more than one third of the Company's overall revenue. In its fourth quarter of fiscal 2003, Adobe achieved $118.1 million in revenue in its ePaper business, representing 40 percent year-over-year growth.

Company Provides First Quarter Targets and Reaffirms Fiscal 2004 Targets
For the first quarter of fiscal 2004, the Company announced that it is targeting revenue of $360 to $380 million, a gross margin of approximately 93 percent, and GAAP and pro forma operating margin ranges of 31 to 32 percent.

As a percent of revenue, Adobe is targeting first quarter expenses as follows:

Research & Development - approximately 21 percent
Sales & Marketing - approximately 31 to 32 percent
General & Administrative - approximately 9 percent

In addition, Adobe is targeting its Q1 share count range to be between 249 and 251 million shares in the first quarter of fiscal 2004. The Company also is targeting other income in its first quarter to be approximately $3 to $4 million, and a tax rate of 28 percent. These targets lead to first quarter GAAP and pro forma earnings per share target ranges of $0.33 to $0.36 in the quarter.

The Company currently believes targeted pro forma earnings per share and pro forma operating margin results will not differ materially from targeted GAAP results in the quarter.

For fiscal 2004, the Company reaffirmed its full year target of $1.425 billion in revenue, and an operating margin of approximately 30 percent.

The Adobe Board of Directors declared this quarter's cash dividend of $0.0125 per share, payable on January 23, 2004 to stockholders of record as of January 9, 2004.

Forward Looking Statements Disclosure
This press release contains forward looking statements, including those related to revenue, gross margin, operating margin, earnings per share, and product releases, 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: general economic or political conditions in any of the major countries in which we do business, introduction of new products by existing and new competitors, delays in development or shipment of our new products or major new versions of existing products, difficulties in implementing strategic alliances, difficulties in transitions to new business models or markets, including the enterprise, government, consumer and creative professional markets, changes to our distribution channel, inability to attract and retain key personnel, lack of market acceptance of new products, upgrades and services, changes in demand for application software, computers and printers, sales price adjustments, intellectual property disputes and litigation, industry transitions to new business models, renegotiation or termination of royalty or intellectual property licensing arrangements, changes in accounting rules, and market risks associated with our equity investments. For further discussion of these and other risks and uncertainties, individuals should refer to the Company's SEC filings, including the 2002 annual report on Form 10-K and quarterly reports on Form 10-Q filed in 2003. The Company does not undertake an obligation to update forward looking statements.

About Adobe Systems Incorporated
Adobe helps people and businesses communicate better through its world-leading digital imaging, design and document technology platforms for consumers, creative professionals and enterprises. Adobe's revenue in the last fiscal year exceeded $1 billion. For more information about Adobe, visit www.adobe.com.

Condensed Consolidated Statements of Income
(PDF: 173K)

Condensed Consolidated Balance Sheets
(PDF: 113K)

Condensed Consolidated Statements Of Cash Flows
(PDF: 159K)

Pro Forma Results
(PDF: 141K)

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