A better version of the transcript here.

One more evening compiling the Adobe conference call. It's already customary and I hope that JD will appreciate. At least until the breeze is released (last time I've seen only a couple of days delay).

I'm interested to listen to what they're gonna say, especially with all the Microsoft/PDF issues.

Old phone conference technology, telephone based. Everything will be available as Breeze.

Welcome

• Mike Savage: meet the team
• We'll discuss the Q2 finacial results
  

Bruce

• challenging quarter, below our target
• we achieved 31 cents per share
• we're doing progress in Macromedia acquisition. Integration of our sales organizations to maximize the enterprise sales
  
• Steven Elop will leave Adobe to pursue other interests. Alex: That's sad, I've seen Steven at some conferences and he was really charismatic ... A big loss for Adobe.
  

Murray

• the results will not be compared with the Macromedia+Adobe previous year results
• we'll compare Q2 to our Q1 and with Q2_2005 (Adobe only)
• only $639M this quarter compared to $655M last quarter. Other financial stuff continues, read more details here :)
• More employees - especially in R&D. Alex: I've missed the number, but the rough increase is 200 people.
• Creative Suite products went down $20M. Creative Suite premium was lower.
• Most of the business areas went down - usually $1-5M. Only the Other  business area increased with $13M
• US and Europe went down because of the Spring Break.

Shantanu

• Highlight major business
• Creative solutions. Declined demand as we've entered the new cycle.
• Demand for upgrades for Suite and Studio are falling off sooner than anticipated
• Several large publishing companies uses Creative Suite and InDesign. Also some book publishers.
  
• Regarding the digital video stuff, the products launched in Q1 were selling very good. Increase use of video on the web because of Flash.
• Numerous awards at the NAB conference for content creation for Production Studio.
• Our Flash tech is going well with various companies. Flash encoded video with Flash Streaming. Flash based ads. MySpace, Google, YouTube use Flash video to enhance their brands.
• Photoshop remained steady, one year after release.
• We're on track to deliver the next version of Creative Suite in Q2 next year.
• Acrobat is ok
  
• Breeze is an exciting oportunity for Adobe, even it's a small part of our business.
• LifeCycle continues to do well in the government agency that is responsible with making the government digital. LiveCycle is being used in governments around the world - with great success. Banks use Flex for greater performance, better communications and better user experience.
  
• Our server products sales over $50K was 97.
• Regarding PDF forms and LiveCycle, we've made some alliances with large companies doing digital workflows (Rico, Accord).
• For mobile and device - Verizon wireless alliance for Flash content. $2M subscribers in Japan for the FlashCast emitted content.
• Other - platform business unit, print and publishing business unit. Distribution of the Yahoo Toolbar with the Adobe reader, Flash and Shockwave players. Alex: Now I understand:)
  

Randy Furr

• I'll present the Q3 strategy, and I'm glad to have joined the Adobe team. Murray - thanks for helping me with the transition.
• Q3 - $580-$630M. Q3 GAP operating margin 16-19%. 606-608M shares. 25-27 cents per share forcast.
  
• $2.4-2.6B - nongap E/S range of ~$1.3
  
• We expert normal Q3 seasonal weaknees in Europe and Japan. Tipycal Q3 seasonal strenght of educational in America.
  

Bruce

• Issue regarding the split between Adobe and Microsoft. It's normal for Adobe to clarify negotiations with partners.
• We've been in discussion for what we believe it's an abuse in using PDF in office/vista
• We think Microsoft could use its position to undermine our technology.
• We haven't decided if we'll sue.
• We're confident in our ability to succeed with Microsoft in the long term.
• Final words on our outlook - market oportunities for us are greater, with the need to access rich content increasing. With key strategic partnership and talented employees, we believe that we'll be able to have a bright future

Mike

• "Breeze will be available later today". Alex: My quest in writing down these conferences is over :)
  

Questions:

• Are you assuming any help from Acrobat/LiveCycle in Q3? Bruce: the creative was slowing down. there are issues because of MacTel. We're expecting seasonality in Q3, business will be down from Q2, and will get back in Q4. Acrobat is coming in Q4, and Q4 should be a very good quarter for Acrobat.
• Historically, you've been more exposed to the economical cycle, because of the graphic artists that sell to the print and advertising segments. Do you expect seasonality in your customers orders? Bruce: customers are moving to Apple's new platform, and our products don't work on mactel. We think (reader/player distribution) that we have a good balance, with Acrobat in Q4, that we have enough. Japan was very strong in Q2. Seasonality is not an economic issue, but people are holding for an upgrade.
  
• CS3 question - still planeed for spring release. Answer: Yes.
• Anything that you could tell us about the CS3 upgrade? Shentanu: we're listning to the customers, and in this cycle it's important for our customers to see better integration. Our focus is to deliver great products that integrate both companies offerings. Supporting MacTel and Vista is the next major stuff. Bruce: Acrobat, Video business, Platform and redistributing other people's products - I feel good about growing our business until CS3. Shantanu: marketing, we'll continue to work and convince people that CS2 is good.
  
• Where do you stand with the buyback? Answer: $813M are already bought
• we're mentioning that you're following the seasonal patterns. If you look at these patterns, how has this product cycle changed from other cycles in the past. Why there are surprises with these Spring breaks? Shantanu: CS2 is perceived very well by products. In middle of April, we were running ahead of the estimations. But MacTel, along with anticipation of the integration, made people accelerate the seasonality.
• In the past, Q were linear. Has that changed? Murray: in Q2, April weakness affected us. As we become more focused on enterprise solutions. However, we're still a linear company. July is very, very slow. We use a big uptake in the end of August as people get back to work and students return to school. Somehow linear, but never that linear
• I was curious how your sales forces organize. Tell us more about Steven. Will you re-allocate the sales force organization? Bruce: We've decided that through the transition we will move the force under Shantanu. Synergies between business people and sales is important. Sales  force is important for the enterprise products. You'll see the biggest impact of our revenue there.
• Is your intention as a company to identify a new leader. How it's going to be run? Bruce: we're searching a new head of sales at 2pm today :) Steve is still on our side.
  
• Clarification - seems like you're not going to operate MacTel until Q2 2007. Any advice on emulator or stuff for performance in the next year? Shantanu: Our products work well on an number of Mac. CS do not run well on NoteBook products. CS3 will be compatible with MacTel. Bruce: Mac is 20% of the overall business. Our products work for now, not fast, but we prefer to save force for CS3.
• Regarding some new bundles. Acrobat 3D. Shantanu: Web/Design/Video bundles. Video did very well. In addition to that, the web bundle (very expensive) performs well. Bruce: It's exciting that we've begun to integrate the MM products with the Adobe products.
• Microsoft issue - will the PDF format be included in Office? Bruce: I can't speculate what Microsoft is doing. Our issue is not about PDF, is about Microsoft taking advantage of their monopoly, reducing innovation and eliminate choice. The reality is (if we look at the PDF creating), Acrobat owns it. Microsoft concerns us for the future.
  
• CS3 and Acrobat 8 release? Shantanu: talking about the schedule, Acrobat will be released in Q4, and CS3 in Q2. Can't share other information
• Share repurchase - are you still active in the market? Bruce: it's out of our control, third parties are doing it.
• Other revenues - increse, yahoo. Was this a one time event? Shantanu: With respect with the other segments, we've been investing in the platform business - the engagement platform will be able to monetize it. We would expect that sequentially this will continue to be in the Q2 range.
• A decent proportion of the Macromedia products contributed to the decline? Do you think that you've had more costs post-merger? Shantanu: Primary revenue shortfall in Q2 was associated with Premiere Suite and Studio Products. We've focused on areas of investment, and we don't believe that we have to make any changes in the product structure.
• Regarding the bundles - CS3 is the largest product out there. How will you update old bundles to new bundles? Shantanu: We're doing a fair amount of research, and people is doing design mainly - but other are doing mobile, web. We're still looking at the best way to package them correctly for customers in these core areas.
  
• How do you explain performance difference between Japan and Europe/USA? Bruce: They are experiencing a stronger economy, healthy business, brand presence is strong, end of the year for some of their companies and great execution from our side. We're still delivering 38% operating margin. Nothing has changed in our business in terms of long term oportunities. Everything we've talked about is still true - explosion of information and people need it - and we have unique solutions to fulfill that need.
• We're getting closer to CS3 - we need some upgrade plans. Some typical guidance for Q1 2007. We need an idea of the core products slow down to forecast Q1 2007. Shantanu: Historically, compared with CS1, CS2 is still doing very strong. With respect with what we're doing right now, we have a consistent policy in plan, and we have no plans to change the strategy that we've employed in the past. Bruce: there are customers in the future that require features of existing products.
  
• Personal changes in the channel organization? Bruce: the organization is stable, efficient. We're focusing on the enterprise side of it
• What you're expcting with the margin? Bruce: We haven't talked for guidance for FY 2007. For Q3 we've gived guidance. Q4 we've given some EPS targets.
• How long prior to release will you announce shipping date? Shantanu: we don't :). We are transparent with Wall Street - but we're not disclosing dates.
• Revenue from August to November - steep increase. How will you do the growth? Shantanu: Q4 is pick-up in Europe. Retail holiday in US. Acrobat in Q4. These factors are our guidance.
• Regarding mobile - something coming from there? Shantanu: what we did is put Flash in the handset. Now we're working with content providers - FlashCast. If the ecosystem carry flash, this allow us to monetize in novel ways.
  
• Have you changed the mobile monetization approach Macromedia had? Shantanu: Three directions from mobile: royalty from handset manufacturers with Flash lite. Mobile manufacturers that require a customized user experience. Third approach - FlashCast - subscriber based. Bruce: we are still receiving royalties for handsets.
• Dual processors support? Shantanu: we're taking advantage of all advancements - 3D, CPU power, etc.
  

That's all, folks :)

Alexandru