Adobe Systems Incorporated

1585 Charleston Road
P.O. Box 7900
Mountain View, California 94039-7900
U.S.A.
(415) 961-4400
Fax: (415) 961-3769

Public Company
Incorporated: 1982
Employees: 1,000
Sales: $313.5 million
Stock Exchanges: NASDAQ
SICs: 7371 Computer Programming Services; 7372 Prepackaged Software

Adobe Systems Incorporated develops and provides support service for computer software products and technologies. Since the founding of the company in the early 1980s, Adobe products have had a profound impact on the fields of communications, publishing, and printing. The company’s PostScript page description language became the industry standard for the imaging and printing of electronic documents.

Adobe was founded in 1982 by John Warnock and Charles Geschke, both former employees of Xerox Corp.’s Research Center in Palo Alto, California. At Xerox, Warnock conducted interactive graphics research, while Geschke directed computer science and graphics research as the manager of the company’s Imaging Sciences Laboratory. In a 1989 interview with The San Jose Business Journal, Warnock recalled that he and Geschke were frustrated at Xerox “because of the difficulty in getting our products out of the research stage.” Believing in the profitability of an independent venture, they left Xerox to establish their own business, which they named after a creek that ran by their homes in Los Altos, California.

Shortly after it was launched, Adobe introduced PostScript, a powerful computer language that essentially described to a printer or other output device the appearance of an electronic page, including the placement of characters, lines, or images. The introduction of PostScript proved integral to the desktop publishing revolution. With a personal computer and a laser printer equipped with PostScript, users could produce polished, professional-looking documents with high quality graphics. An article in a 1989 issue of The Los Angeles Times stated that Adobe’s PostScript “made desktop publishing possible by enabling laser printers, typesetting equipment and other such devices to produce pages integrating text and graphics.” Advertising agencies, in particular, soon found the new technology indispensable.

Realizing the wealth of potential uses for the PostScript language, Adobe marketed and licensed PostScript to manufacturers of computers, printers, imagesetters, and film recorders. In 1985, Apple Computer, Inc., maker of the Macintosh computer, incorporated PostScript for its LaserWriter printer. Shortly thereafter, Apple invested in a 19 percent stake in Adobe, which had reported revenues of $1.7 million the year before. Adobe’s rapid growth led to an increase in staff from 27 in 1985 to 54 by 1986.

Over 5,000 PostScript applications were developed and made available for every operating system and hardware configuration. In 1986, Adobe signed an agreement to supply Texas Instruments Inc. with the software for two of its laser printers, producing the first PostScript-equipped printers made for use with IBM-compatible personal computers. In addition, PostScript soon became available for use with minicomputers and mainframes, and it remained the only page description language available for multiple-computer environments, such as corporate office networks. Independent software vendors marketed products that used PostScript to render images and text onto film, slides, and screens, for less money than traditional typesetting methods incurred. Used by corporations, professional publishers, and the U.S. government, PostScript rapidly became one of the most ubiquitous computer languages worldwide.

To supplement the PostScript language system, Adobe introduced a software technology known as Type 1, which provided digital type fonts that could be printed at any resolution. Vendors soon began developing different Type 1 typefaces, until there were more than 15,000, including Japanese and Cyrillic character sets. By the end of 1986, Adobe reported sales of $16 million and income of $3.6 million. During this time, the company was taken public and began expanding its customer base to include IBM and Digital Equipment Corp.

The strategy of marketing and licensing technology to original equipment manufacturers (OEMs) such as Apple became the cornerstone of Adobe’s success. In 1986, Apple accounted for 80 percent of Adobe’s sales, while the other 20 percent was comprised of retail sales, an area that Adobe moved into the following year.

In 1987, the company introduced the Adobe Illustrator, a design and illustration software program. Enabling users to create high-quality line drawings, the Illustrator became popular among graphic designers, desktop publishers, and technical illustrators. The company also released the Adobe Type Library, which contained a large selection of type fonts, many of which were original typefaces Adobe had created especially for the electronic medium. The Type Library would eventually become the most widely used collection in the industry.

As graphics became more widely used in business communications, Adobe was poised to offer new technologies. The company’s introduction of a new version of the Illustrator, designed for use with Microsoft’s Windows program, offered pc users an exciting array of graphics tools and helped pave the way for other PostScript language-based graphics packages. By 1988, many industries and universities had adopted the Illustrator standard. Moreover, the Type Library, with 300 typefaces, had become the world’s largest collection of typefaces for personal computers.

Having successfully marketed its technology to both Macintosh and IBM, Adobe tackled a new project—developing the Illustrator and the Type Library for the NeXT computer system. Once this was accomplished, the NeXT computer system became the first to implement a new Adobe technology, Display PostScript. This adaptation of the original PostScript was unique in that it communicated directly with the computer’s screen, rather than through the printer. Representing a breakthrough in the long struggle for what computer buffs called “WYSIWIG” (What You See Is What You Get), Display PostScript ensured users that images on the screen would be replicated exactly on paper through the printer. Display PostScript also allowed users to manipulate graphics on the screen; rotating, scaling, and skewing could all be performed to suit the user’s needs. IBM and Digital Equipment Corp. soon followed NeXT’s lead, licensing Display PostScript for their desktop systems.

In 1988, more than 25 PostScript printers and typesetters were on the market, and 20 computer corporations had signed PostScript licensing agreements with Adobe. The company’s revenues for 1988 were an impressive $83.5 million, representing a 112 percent increase over revenues of $39.3 million the year before. Moreover, net income for 1988 increased 137 percent, reaching $21 million. During this time, Apple Computer remained the company’s biggest customer, accounting for 33 percent of Adobe’s revenues. By the following year, Adobe’s staff had increased to 300. As one of the fastest-growing software developers, Adobe sought to maintain its position in the industry and foil any potential competitors. Toward this end, Adobe kept its typeface strategies confidential, while continuing to expand into new areas.

At the 1989 Mac World Exposition in San Francisco, Adobe introduced two new applications. Adobe Streamline software permitted users to reproduce hard-copy graphics on-screen, converting bitmapped images into high quality, PostScript artwork. The second product, Collectors Edition II, could be used to set patterns. Adobe eventually adapted these technologies for IBM and IBM-compatible computers that used the Windows program.

Next on Adobe’s agenda was international expansion. The company signed an agreement with Canon Inc. of Japan, under which Canon had full licensing rights to Adobe PostScript. The world’s leading manufacturer of laser printers, Canon could bring the PostScript technology to international and multinational customers. To enhance its Type Library, Adobe signed agreements that permitted several companies to develop downloadable typefaces based on Adobe’s proprietary technology.

Adobe ended the 1980s on a high note; revenues in 1989 were more than $121 million, and net income reached $33.7 million. That year, the company introduced Adobe Type Manager. This program used Adobe’s outline fonts to generate scalable characters on screen, giving users greater flexibility and better WYSIWYG. The Type Manager also represented an expansion of the Adobe Type Library to 420 typefaces.

Also during this time, Adobe announced that it had acquired all rights to a software program called PhotoShop, an image editing application. PhotoShop, designed especially for artists and desktop publishers, was slated for market in conjunction with the Apple Macintosh. Designed to work with type, line art, and other images, PhotoShop provided users with a complete toolbox for editing, creating, and manipulating images. Other unique PhotoShop features included color correction, retouching, and color separation capabilities.

By the end of the decade, the incredible boom in the computer business was showing signs of subsiding. In a 1989 Los Angeles Times interview, Adobe’s president, John Warnock, suggested that “if you think you have a formula for success, you’d better figure out how to change it from year to year.” Coming up with fresh formulas to ensure continued success was Adobe’s focus as the company entered the 1990s. One of its strategies involved developing software that could operate platform-independent, allowing documents to be worked on and sent over many different computers and networks. In other words, Adobe envisioned a world in which a document could be produced on an IBM pc, for example, and sent directly to a Macintosh.

On the way to realizing that goal, Adobe continued to set the pace for technological developments in the industry. In 1990, Adobe received what was believed to be the first copyright registration for a typeface program. The ITC Garamond font program was registered with the U.S. Copyright Office, a move that suggested that typeface programs could be considered creative works of authorship.

By this time, the Adobe Type Library had burgeoned from the original 12 type families to 134. The downloadable typefaces were available for both IBM and Macintosh personal computers. The Type Manager, Adobe’s scalable-font technology, was made available for IBM pcs, as well as UNIX, DOS, and OS/2 systems. Adobe launched PostScript Level 2, which enhanced the PostScript language with new features, such as improved forms handling, color support, and pattern manipulation, making PostScript a more practical and convenient language. One important feature of Level 2 was its use of data compression to reduced transmission times and save disk space by reducing the size of PostScript files on disk. Level 2 also boasted new screening and halftoning technology, better memory, and better printer support features, allowing users to specify color choices and receive those colors in their output.

Late in 1990, Adobe acquired BluePoint Technologies, a leading creator of chips for rendering type. Adobe also signed a new agreement with Apple Computer to work jointly on developing new products using Adobe’s PostScript software and Apple’s printer technology. Moreover, Adobe announced the creation of Adobe Illustrator for the NeXT system, providing NeXT users with the same powerful design and illustration tool used by owners of Macintosh and IBM pcs.

Adobe’s revenues continued to soar. In 1990, the company hit a new record of $168.7 million in revenues, with net income of $40 million. The following year, Adobe announced that it was developing a new type technology, multiple master typefaces, which would allow users to control the weight, width, visual scale, and style of a single typeface to produce endless variations.

Furthering its strategy of providing numerous licensing agreements throughout the early 1990s, Adobe signed contracts with Lotus Development Corp., Eastman Kodak, Tektronix, Inc., and others. In addition to its updated version of PhotoShop, Adobe was also responsible for another breakthrough in printing technology with the development of the Adobe Type 1 Coprocessor. The new device could render text 25 times faster than the fastest existing printers.

The company celebrated another year of record earnings in 1991. Revenues increased 36 percent to $229.7 million, and income shot up 29 percent to $51.6 million. Founders Charles Geschke and John Warnock received the MacUser magazine’s John J. Anderson Distinguished Service Award, for “enduring achievement in the Macintosh industry.”

Adobe’s efforts to create a universal standard for viewing complex documents continued in 1992. That year, the company marked its tenth anniversary and branched out into new ventures. With Hayden, a division of Prentice Hall Computer Publishing, Adobe signed an agreement to create Adobe Press, a joint publishing venture for developing books about graphic arts, Adobe computer applications, and advanced technologies.

During this time, competition in the industry intensified, and Adobe sought new ways to maintain its lead in the industry. Adobe Carousel was the company’s first foray into electronic transmission of newspapers, magazines, and other print media. Carousel would allow such materials to be displayed on screen complete with pictures, color, and multiple typefaces.

In June 1992, Adobe President and CEO Charles Geschke was kidnapped. Although he was eventually returned safely and began granting interviews two months after the incident, he refused to discuss details of the abduction. In an interview with The San Jose Business Journal, Geschke discussed Adobe’s plans for the future. Maintaining that the company was beginning “a long journey down a digital highway,” Geschke revealed that its primary mission was to make text, pictures, video, and perhaps sound computer-readable. Toward that end, Adobe acquired OCR Systems, an optical character recognition company that turned scanned documents in to manipulable text. With the introduction of Adobe Premiere 3.0 for Macintosh in 1993, Adobe entered the fields of video and multimedia. The software enabled users to perform desktop video editing formerly achieved only with expensive equipment. Adobe Premiere featured nonlinear editing, graphics, and special effects.

In 1993, Adobe realized its goal of enabling incompatible computer systems to communicate. Adobe Acrobat software was designed to turn computers into information distributors that would allow Mac users to view a document in its original form, with formatting and graphics intact, even if the document had been created on an IBM. Analysts hailed Acrobat as a tool that could facilitate electronic distribution of everything from interoffice memos to training manuals to magazines. Adobe’s revenues for the year rose to $313.4 million, up from $265.9 million in 1992, and net income was reported at $57 million. As the company set its course for the remainder of the decade, further forays into multimedia seemed likely and potentially profitable.

Adobe Systems Incorporated

Further Reading: