10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 1, 2013

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number: 0-15175

ADOBE SYSTEMS INCORPORATED

(Exact name of registrant as specified in its charter)

_________________________

Delaware (State or other jurisdiction of incorporation or organization) 77-0019522 (I.R.S. Employer Identification No.)

345 Park Avenue, San Jose, California 95110-2704

(Address of principal executive offices and zip code)

(408) 536-6000

(Registrant’s telephone number, including area code)

 _________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

The number of shares outstanding of the registrant’s common stock as of March 22, 2013 was 501,936,172.

ADOBE SYSTEMS INCORPORATED

FORM 10-Q

TABLE OF CONTENTS

		Page No.
PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Balance Sheets March 1, 2013 and November 30, 2012	3
	Condensed Consolidated Statements of Income Three Months Ended March 1, 2013 and March 2, 2012	4
	Condensed Consolidated Statements of Comprehensive Income Three Months Ended March 1, 2013 and March 2, 2012	5
	Condensed Consolidated Statements of Cash Flows Three Months Ended March 1, 2013 and March 2, 2012	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	41
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 4.	Mine Safety Disclosures	53
Item 6.	Exhibits	53
Signature		54
Summary of Trademarks		55
Index to Exhibits		56

2

PART I—FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ADOBE SYSTEMS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

	March 1, 2013			November 30, 2012
	(Unaudited)			(*)
ASSETS
Current assets:
Cash and cash equivalents	$	1,306,382		$	1,425,052
Short-term investments	2,354,307			2,113,301
Trade receivables, net of allowances for doubtful accounts of $12,715 and $12,643, respectively	485,801			617,233
Deferred income taxes	64,930			59,537
Prepaid expenses and other current assets	161,663			116,237
Total current assets	4,373,083			4,331,360
Property and equipment, net	686,014			664,302
Goodwill	4,221,487			4,133,259
Purchased and other intangibles, net	580,568			545,036
Investment in lease receivable	207,239			207,239
Other assets	97,320			93,327
Total assets	$	10,165,711		$	9,974,523
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	72,725		$	49,759
Accrued expenses	505,465			590,140
Capital lease obligations	22,406			11,217
Accrued restructuring	6,767			9,287
Income taxes payable	11,126			49,886
Deferred revenue	645,834			561,463
Total current liabilities	1,264,323			1,271,752
Long-term liabilities:
Debt and capital lease obligations	1,509,003			1,496,938
Deferred revenue	54,197			58,102
Accrued restructuring	10,053			12,263
Income taxes payable	159,859			155,096
Deferred income taxes	292,770			265,106
Other liabilities	70,168			50,084
Total liabilities	3,360,373			3,309,341
Stockholders’ equity:
Preferred stock, $0.0001 par value; 2,000 shares authorized, none issued	—			—
Common stock, $0.0001 par value; 900,000 shares authorized; 600,834 shares issued;     501,045 and 494,132 shares outstanding, respectively	61			61
Additional paid-in-capital	3,116,471			3,038,665
Retained earnings	6,808,489			7,003,003
Accumulated other comprehensive income	40,110			30,712
Treasury stock, at cost (99,789 and 106,702 shares, respectively), net of reissuances	(3,159,793		)	(3,407,259		)
Total stockholders’ equity	6,805,338			6,665,182
Total liabilities and stockholders’ equity	$	10,165,711		$	9,974,523

^{_________________________________________} 

(*) The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

3

ADOBE SYSTEMS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 1, 2013			March 2, 2012
Revenue:
Products	$	675,789		$	808,521
Subscription	224,266			146,230
Services and support	107,818			90,469
Total revenue	1,007,873			1,045,220
Cost of revenue:
Products	51,982			25,668
Subscription	62,580			48,780
Services and support	42,122			33,817
Total cost of revenue	156,684			108,265
Gross profit	851,189			936,955
Operating expenses:
Research and development	209,638			177,728
Sales and marketing	398,033			358,963
General and administrative	132,853			102,681
Restructuring charges	2			(2,825		)
Amortization of purchased intangibles	12,439			11,429
Total operating expenses	752,965			647,976
Operating income	98,224			288,979
Non-operating income (expense):
Interest and other income (expense), net	1,246			(2,785		)
Interest expense	(16,834		)	(16,838		)
Investment gains (losses), net	848			1,021
Total non-operating income (expense), net	(14,740		)	(18,602		)
Income before income taxes	83,484			270,377
Provision for income taxes	18,367			85,168
Net income	$	65,117		$	185,209
Basic net income per share	$	0.13		$	0.37
Shares used to compute basic net income per share	498,607			494,016
Diluted net income per share	$	0.13		$	0.37
Shares used to compute diluted net income per share	507,840			500,378

See accompanying Notes to Condensed Consolidated Financial Statements.

4

ADOBE SYSTEMS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended
	March 1, 2013			March 2, 2012
	Increase/(Decrease)
Net income	$	65,117		$	185,209
Other comprehensive income, net of taxes:
Available-for-sale securities:
Unrealized gains / losses on available-for-sale securities	702			12,864
Reclassification adjustment for gains on available-for-sale securities recognized during    the period	(1,584		)	(497		)
Net increase (decrease) from available-for-sale securities	(882		)	12,367
Derivatives designated as hedging instruments:
Unrealized gains on derivative instruments	21,776			12,581
Reclassification adjustment for gains on derivative instruments recognized during the    period	(7,094		)	(10,348		)
Net increase from derivatives designated as hedging instruments	14,682			2,233
Foreign currency translation adjustments	(4,402		)	2,198
Other comprehensive income	9,398			16,798
Total comprehensive income, net of taxes	$	74,515		$	202,007

See accompanying Notes to Condensed Consolidated Financial Statements.

5

ADOBE SYSTEMS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	March 1, 2013			March 2, 2012
Cash flows from operating activities:
Net income	$	65,117		$	185,209
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	76,752			69,861
Stock-based compensation	84,196			71,582
Deferred income taxes	15,176			63,377
Unrealized (gains) losses on investments	(418		)	(3,168		)
Other non-cash items	(4,647		)	(6,650		)
Excess tax benefits from stock-based compensation	—			(2,670		)
Changes in operating assets and liabilities, net of acquired assets and assumed       liabilities:
Trade receivables, net	131,511			152,721
Prepaid expenses and other current assets	(35,447		)	(15,080		)
Trade payables	22,477			(42,542		)
Accrued expenses	(78,966		)	(116,908		)
Accrued restructuring	(4,047		)	(39,057		)
Income taxes payable	(29,187		)	(19,051		)
Deferred revenue	79,514			16,739
Net cash provided by operating activities	322,031			314,363
Cash flows from investing activities:
Purchases of short-term investments	(723,541		)	(352,179		)
Maturities of short-term investments	110,958			112,089
Proceeds from sales of short-term investments	366,808			207,672
Acquisitions, net of cash acquired	(96,356		)	(353,184		)
Purchases of property and equipment	(60,190		)	(51,088		)
Purchases of long-term investments and other assets	(46,633		)	(5,203		)
Proceeds from sale of long-term investments	2,840			4,186
Net cash used for investing activities	(446,114		)	(437,707		)
Cash flows from financing activities:
Purchases of treasury stock	(100,000		)	(80,000		)
Proceeds from issuance of treasury stock	88,566			13,366
Excess tax benefits from stock-based compensation	—			2,670
Proceeds from debt and capital lease obligations	25,703			—
Repayment of debt and capital lease obligations	(2,507		)	(2,264		)
Debt issuance costs	(357		)	(2,297		)
Net cash provided by (used for) financing activities	11,405			(68,525		)
Effect of foreign currency exchange rates on cash and cash equivalents	(5,992		)	3,632
Net decrease in cash and cash equivalents	(118,670		)	(188,237		)
Cash and cash equivalents at beginning of period	1,425,052			989,500
Cash and cash equivalents at end of period	$	1,306,382		$	801,263
Supplemental disclosures:
Cash paid for income taxes, net of refunds	$	49,863		$	51,397
Cash paid for interest	$	31,960		$	33,883
Non-cash investing activities:
Issuance of common stock and stock awards assumed in business acquisitions	$	661		$	4,265

See accompanying Notes to Condensed Consolidated Financial Statements.

6

ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We have prepared the accompanying unaudited Condensed Consolidated Financial Statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended November 30, 2012 on file with the SEC (our “Annual Report”).

With the exception of the discussion below, there have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.

Recent Accounting Pronouncements

In December 2011, the FASB amended the accounting standards to increase the prominence of other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in shareholders’ equity and requires the components of OCI to be presented either in a single continuous statement of comprehensive income or in two consecutive statements. We adopted the amended accounting standards at the beginning of our first quarter of fiscal 2013 by electing to present separate consolidated statements of comprehensive income from the consolidated statements of income. The amended accounting standards only impact the financial statement presentation of OCI and do not change the components that are recognized in net income or OCI. The adoption had no impact on the Company’s financial position or results of operations.

NOTE 2.  ACQUISITIONS

On December 20, 2012, we completed our acquisition of privately held Behance, an online social media platform to showcase and discover creative work. During the first quarter of fiscal 2013, we began integrating Behance into our Digital Media reportable segment. Behance’s community and portfolio capabilities will accelerate our strategy to bring additional community features to the Creative Cloud. We have included the financial results of Behance in our condensed consolidated financial statements beginning on the acquisition date.

Under the acquisition method of accounting, the total preliminary purchase price was allocated to Behance’s net tangible and intangible assets based upon their estimated fair values as of December 20, 2012. The total adjusted preliminary purchase price for Behance was approximately $111.1 million of which approximately $90.5 million was allocated to goodwill, $28.5 million to identifiable intangible assets and $7.9 million to net liabilities assumed. The impact of this acquisition was not material to our condensed consolidated financial statements.

On January 13, 2012, we completed our acquisition of privately held Efficient Frontier, a multi-channel digital ad buying and optimization company. During the first quarter of fiscal 2012, we began integrating Efficient Frontier into our Digital Marketing reportable segment. The Efficient Frontier business adds cross-channel digital ad campaign forecasting, execution and optimization capabilities to our Adobe Marketing Cloud, along with a social marketing engagement platform and social ad buying capabilities. We have included the financial results of Efficient Frontier in our condensed consolidated financial statements beginning on the acquisition date.

Under the acquisition method of accounting, the total purchase price was allocated to Efficient Frontier’s net tangible and intangible assets based upon their estimated fair values as of January 13, 2012. The total final purchase price for Efficient Frontier was approximately $374.7 million of which approximately $291.4 million was allocated to goodwill, $122.7 million to identifiable intangible assets and $39.4 million to net liabilities assumed. The impact of this acquisition was not material to our condensed consolidated financial statements.

7

ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 3.  CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. We classify all of our cash equivalents and short-term investments as “available-for-sale.” In general, these investments are free of trading restrictions. We carry these investments at fair value, based on quoted market prices or other readily available market information. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in our Condensed Consolidated Balance Sheets. Gains and losses are recognized when realized in our Condensed Consolidated Statements of Income. When we have determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in income. Gains and losses are determined using the specific identification method.

Cash, cash equivalents and short-term investments consisted of the following as of March 1, 2013 (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	247,671	$	—	$	—		$	247,671
Cash equivalents:
Corporate bonds and commercial paper	9,514		1		(2		)	9,513
Money market mutual funds	895,845		—		—			895,845
Municipal securities	1,498		—		(1		)	1,497
Time deposits	63,956		—		—			63,956
U.S. Treasury securities	87,900		1		(1		)	87,900
Total cash equivalents	1,058,713		2		(4		)	1,058,711
Total cash and cash equivalents	1,306,384		2		(4		)	1,306,382
Short-term fixed income securities:
Corporate bonds and commercial paper	1,195,722		10,379		(165		)	1,205,936
Foreign government securities	12,492		64		(1		)	12,555
Municipal securities	185,907		386		(11		)	186,282
U.S. agency securities	506,699		2,024		(20		)	508,703
U.S. Treasury securities	439,712		926		(1		)	440,637
Subtotal	2,340,532		13,779		(198		)	2,354,113
Marketable equity securities	194		—		—			194
Total short-term investments	2,340,726		13,779		(198		)	2,354,307
Total cash, cash equivalents and short-term investments	$	3,647,110	$	13,781	$	(202	)	$	3,660,689

8

ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Cash, cash equivalents and short-term investments consisted of the following as of November 30, 2012 (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	200,771	$	—	$	—		$	200,771
Cash equivalents:
Corporate bonds and commercial paper	3,998		—		—			3,998
Money market mutual funds and repurchase agreements	1,171,270		—		—			1,171,270
Municipal securities	3,895		—		—			3,895
Time deposits	45,118		—		—			45,118
Total cash equivalents	1,224,281		—		—			1,224,281
Total cash and cash equivalents	1,425,052		—		—			1,425,052
Short-term fixed income securities:
Corporate bonds and commercial paper	1,059,158		11,415		(133		)	1,070,440
Foreign government securities	6,919		45		(12		)	6,952
Municipal securities	180,488		97		(60		)	180,525
Time deposits	20,113		—		—			20,113
U.S. agency securities	501,863		2,346		(18		)	504,191
U.S. Treasury securities	330,072		801		(37		)	330,836
Subtotal	2,098,613		14,704		(260		)	2,113,057
Marketable equity securities	237		7		—			244
Total short-term investments	2,098,850		14,711		(260		)	2,113,301
Total cash, cash equivalents and short-term investments	$	3,523,902	$	14,711	$	(260	)	$	3,538,353

See Note 4 for further information regarding the fair value of our financial instruments.

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in an unrealized loss position for less than twelve months, as of March 1, 2013 and November 30, 2012 (in thousands):

	2013					2012
	Fair  Value		Gross Unrealized Losses			Fair  Value		Gross Unrealized Losses
Corporate bonds and commercial paper	$	191,986	$	(167	)	$	95,489	$	(132	)
Foreign government securities	3,599		(1		)	2,105		(12		)
Municipal securities	14,950		(12		)	40,524		(60		)
U.S. Treasury and agency securities	102,862		(19		)	48,203		(55		)
Total	$	313,397	$	(199	)	$	186,321	$	(259	)

There were 153 securities and 65 securities that were in an unrealized loss position for less than twelve months at March 1, 2013 and at November 30, 2012, respectively.

9

ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in a continuous unrealized loss position for more than twelve months, as of March 1, 2013 and November 30, 2012 (in thousands):

	2013					2012
	Fair  Value		Gross Unrealized Losses			Fair  Value		Gross Unrealized Losses
Corporate bonds and commercial paper	$	—	$	—		$	2,999	$	(1	)
U.S. Treasury and agency securities	8,209		(3		)	—		—
Total	$	8,209	$	(3	)	$	2,999	$	(1	)

There was one security in an unrealized loss position for more than twelve months at March 1, 2013 and November 30, 2012.

The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated effective maturities as of March 1, 2013 (in thousands):

	Amortized Cost		Estimated Fair Value
Due within one year	$	549,442	$	550,707
Due between one and two years	701,820		706,425
Due between two and three years	728,813		732,718
Due after three years	360,457		364,263
Total	$	2,340,532	$	2,354,113

We review our debt and marketable equity securities classified as short-term investments on a regular basis to evaluate whether or not any security has experienced an other-than-temporary decline in fair value. We consider factors such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer and our intent to sell, or whether it is more likely than not we will be required to sell, the investment before recovery of the investment’s amortized cost basis. If we believe that an other-than-temporary decline exists in one of these securities, we write down these investments to fair value. For debt securities, the portion of the write-down related to credit loss would be recorded to interest and other income, net in our Condensed Consolidated Statements of Income. Any portion not related to credit loss would be recorded to accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in our Condensed Consolidated Balance Sheets. For equity securities, the write-down would be recorded to investment gains (losses), net in our Condensed Consolidated Statements of Income. During the three months ended March 1, 2013, we did not consider any of our investments to be other-than-temporarily impaired.

10

ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 4.  FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

We measure certain financial assets and liabilities at fair value on a recurring basis. There have been no transfers between fair value measurement levels during the three months ended March 1, 2013.

The fair value of our financial assets and liabilities at March 1, 2013 was determined using the following inputs (in thousands):

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate bonds and commercial paper	$	9,513	$	—	$	9,513	$	—
Money market mutual funds	895,845		895,845		—		—
Municipal securities	1,497		—		1,497		—
Time deposits	63,956		63,956		—		—
U.S. Treasury securities	87,900		—		87,900		—
Short-term investments:
Corporate bonds and commercial paper	1,205,936		—		1,205,936		—
Foreign government securities	12,555		—		12,555		—
Marketable equity securities	194		194		—		—
Municipal securities	186,282		—		186,282		—
U.S. agency securities	508,703		—		508,703		—
U.S. Treasury securities	440,637		—		440,637		—
Prepaid expenses and other current assets:
Foreign currency derivatives	32,466		—		32,466		—
Other assets:
Deferred compensation plan assets	17,456		506		16,950		—
Total assets	$	3,462,940	$	960,501	$	2,502,439	$	—

Liabilities:
Accrued expenses:
Foreign currency derivatives	$	3,251	$	—	$	3,251	$	—
Total liabilities	$	3,251	$	—	$	3,251	$	—

11

ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The fair value of our financial assets and liabilities at November 30, 2012 was determined using the following inputs (in thousands): 

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate bonds and commercial paper	$	3,998	$	—	$	3,998	$	—
Money market mutual funds and repurchase     agreements	1,171,270		1,171,270		—		—
Municipal securities	3,895		—		3,895		—
Time deposits	45,118		45,118		—		—
Short-term investments:
Corporate bonds and commercial paper	1,070,440		—		1,070,440		—
Foreign government securities	6,952		—		6,952		—
Marketable equity securities	244		244		—		—
Municipal securities	180,525		—		180,525		—
Time deposits	20,113		—		20,113		—
U.S. agency securities	504,191		—		504,191		—
U.S. Treasury securities	330,836		—		330,836		—
Prepaid expenses and other current assets:
Foreign currency derivatives	13,513		—		13,513		—
Other assets:
Deferred compensation plan assets	15,094		436		14,658		—
Total assets	$	3,366,189	$	1,217,068	$	2,149,121	$	—

Liabilities:
Accrued expenses:
Foreign currency derivatives	$	998	$	—	$	998	$	—
Total liabilities	$	998	$	—	$	998	$	—

See Note 3 for further information regarding the fair value of our financial instruments.

Our fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers with a minimum credit rating of BBB and a weighted average credit rating of AA-. We value these securities based on pricing from pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. However, we classify all of our fixed income available-for-sale securities as having Level 2 inputs. The valuation techniques used to measure the fair value of our financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques. Our procedures include controls to ensure that appropriate fair values are recorded such as comparing prices obtained from multiple independent sources.

Our deferred compensation plan assets consist of prime money market funds and mutual funds.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We also have direct investments in privately held companies accounted for under the cost method, which are periodically assessed for other-than-temporary impairment. If we determine that an other-than-temporary impairment has occurred, we write down the investment to its fair value. We estimate fair value of our cost method investments considering available information such as pricing in recent rounds of financing, current cash positions, earnings and cash flow forecasts, recent operational performance and any other readily available market data. For the three months ended March 1, 2013, we determined there were no material other-than-temporary impairments on our cost method investments.

As of March 1, 2013, the carrying value of our lease receivables approximated fair value, based on Level 2 valuation inputs which include Treasury rates, LIBOR rates and applicable credit spreads. See Note 12 for further details regarding our investment in lease receivables. The fair value of our long-term debt was approximately $1.6 billion as of March 1, 2013, based on Level 2 quoted prices in inactive markets. See Note 13 for further details regarding our debt.

NOTE 5.  DERIVATIVES AND HEDGING ACTIVITIES

In countries outside the U.S., we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities up to twelve months. We enter into these foreign exchange contracts to hedge a portion of our forecasted foreign currency denominated revenue in the normal course of business and accordingly, they are not speculative in nature.

We recognize these contracts as derivative instruments and they are classified as either assets or liabilities on the balance sheet and measured at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive income in our Condensed Consolidated Balance Sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain or loss on the cash flow hedge to revenue. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive income to interest and other income, net in our Condensed Consolidated Statements of Income at that time. If we do not elect hedge accounting, or the derivative does not qualify for hedge accounting, the changes in fair market value from period to period are recorded in interest and other income (expense), net in our Condensed Consolidated Statements of Income.

We also hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These derivative instruments hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded to interest and other income (expense), net in our Condensed Consolidated Statements of Income. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged.

The bank counterparties to these contracts expose us to credit-related losses in the event of their nonperformance. However, to mitigate that risk, we only contract with counterparties who meet our minimum requirements as determined by our counterparty risk assessment process. We monitor ratings, credit spreads and potential downgrades on at least a quarterly basis. Based on our ongoing assessment of counterparty risk, we may adjust our exposure to various counterparties. In addition, our hedging policy establishes maximum limits for each counterparty to mitigate any concentration of risk.

The aggregate fair value of derivative instruments in net asset positions as of March 1, 2013 and November 30, 2012 was $32.5 million and $13.5 million, respectively. These amounts represent the maximum exposure to loss at the reporting date as a result of all of the counterparties failing to perform as contracted. This exposure could be reduced by up to $3.3 million and $1.0 million, respectively, of liabilities included in master netting arrangements with those same counterparties.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The fair value of derivative instruments on our Condensed Consolidated Balance Sheets as of March 1, 2013 and November 30, 2012 were as follows (in thousands):

	2013				2012
	Fair Value Asset Derivatives(1)		Fair Value Liability Derivatives(2)		Fair Value Asset Derivatives(1)		Fair Value Liability Derivatives(2)
Derivatives designated as hedging instruments:
Foreign exchange option contracts(3)	$	25,521	$	—	$	10,897	$	—
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	6,945		3,251		2,616		998
Total derivatives	$	32,466	$	3,251	$	13,513	$	998

^{_________________________________________} 

⁽¹⁾  Included in prepaid expenses and other current assets on our Condensed Consolidated Balance Sheets.

⁽²⁾  Included in accrued expenses on our Condensed Consolidated Balance Sheets.

⁽³⁾  Hedging effectiveness expected to be recognized into income within the next twelve months.

The effect of derivative instruments designated as cash flow hedges and of derivative instruments not designated as hedges in our Condensed Consolidated Statements of Income for three months ended March 1, 2013 and March 2, 2012 was as follows (in thousands):

	2013					2012
	Foreign Exchange Option Contracts			Foreign Exchange Forward Contracts		Foreign Exchange Option Contracts			Foreign Exchange Forward Contracts
Derivatives in cash flow hedging relationships:
Net gain (loss) recognized in OCI, net of tax(1)	$	21,776		$	—	$	12,581		$	—
Net gain (loss) reclassified from accumulated OCI into income, net of tax(2)	$	7,094		$	—	$	10,348		$	—
Net gain (loss) recognized in income(3)	$	(4,668	)	$	—	$	(8,245	)	$	—
Derivatives not designated as hedging relationships:
Net gain (loss) recognized in income(4)	$	—		$	1,478	$	—		$	8,150

^{_________________________________________} 

⁽¹⁾  Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).

⁽²⁾  Effective portion classified as revenue.

⁽³⁾  Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net.

⁽⁴⁾  Classified in interest and other income (expense), net.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 6.  GOODWILL AND PURCHASED AND OTHER INTANGIBLES

Goodwill as of March 1, 2013 and November 30, 2012 was $4.221 billion and $4.133 billion, respectively. The increase was primarily due to our acquisition of Behance.

Purchased and other intangible assets subject to amortization as of March 1, 2013 and November 30, 2012 were as follows (in thousands): 

	2013							2012
	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Purchased technology	$	358,612	$	(162,882	)	$	195,730	$	366,574	$	(161,538	)	$	205,036
Customer contracts and relationships	$	324,221	$	(82,802	)	$	241,419	$	318,027	$	(74,214	)	$	243,813
Trademarks	66,551		(21,249		)	45,302		53,293		(19,171		)	34,122
Acquired rights to use technology	147,397		(61,222		)	86,175		104,402		(56,782		)	47,620
Localization	8,423		(5,369		)	3,054		8,586		(4,654		)	3,932
Other intangibles	17,646		(8,758		)	8,888		18,742		(8,229		)	10,513
Total other intangible assets	$	564,238	$	(179,400	)	$	384,838	$	503,050	$	(163,050	)	$	340,000
Purchased and other intangible     assets, net	$	922,850	$	(342,282	)	$	580,568	$	869,624	$	(324,588	)	$	545,036

During the three months ended March 1, 2013, we acquired rights to use certain technology for approximately $51.8 million. Of this cost, an estimated $25.3 million was related to future licensing rights and has been capitalized and will be amortized on a straight-line basis over the estimated useful lives ranging from five to ten years. We estimated that the remaining cost of approximately $26.5 million was related to historical use of licensing rights and was expensed as cost of product revenue.   

During the three months ended March 1, 2013, certain purchased intangibles associated with our Omniture acquisition became fully amortized and were removed from the balance sheet. Excluding the expense associated with historical use of the acquired rights to use the technology discussed above, amortization expense related to purchased and other intangible assets was $36.9 million and $33.1 million for the three months ended March 1, 2013 and March 2, 2012, respectively. Of these amounts, $26.4 million and $21.6 million were included in cost of sales for the three months ended March 1, 2013 and March 2, 2012, respectively.

As of March 1, 2013, we expect amortization expense in future periods to be as follows (in thousands):

Fiscal Year	Purchased Technology		Other Intangible Assets
Remainder of 2013	$	54,114	$	55,222
2014	66,501		66,192
2015	51,804		60,216
2016	13,140		54,621
2017	6,736		46,275
Thereafter	3,435		102,312
Total expected amortization expense	$	195,730	$	384,838

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 7.  ACCRUED EXPENSES

Accrued expenses as of March 1, 2013 and November 30, 2012 consisted of the following (in thousands):

	2013		2012
Accrued compensation and benefits	$	171,123	$	242,887
Sales and marketing allowances	79,081		87,916
Accrued corporate marketing	40,574		39,503
Taxes payable	16,724		26,164
Royalties payable	8,154		10,040
Accrued interest expense	5,039		20,796
Other	184,770		162,834
Accrued expenses	$	505,465	$	590,140

Other primarily includes general corporate accruals for local and regional expenses and technical support. Other is also comprised of deferred rent related to office locations with rent escalations and foreign currency liability derivatives.

NOTE 8.  STOCK-BASED COMPENSATION

Summary of Restricted Stock Units

Restricted stock unit activity for the three months ended March 1, 2013 and the fiscal year ended November 30, 2012 was as follows (in thousands):

	2013		2012
Beginning outstanding balance	18,415		16,871
Awarded	5,807		9,431
Released	(4,904	)	(5,854	)
Forfeited	(382	)	(2,147	)
Increase due to acquisition	—		114
Ending outstanding balance	18,936		18,415

 Information regarding restricted stock units outstanding at March 1, 2013 and March 2, 2012 is summarized below:

	Number of Shares (thousands)	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value(*) (millions)
2013
Restricted stock units outstanding	18,936	1.66	$	754.2
Restricted stock units vested and expected to vest	16,279	1.59	$	646.5
2012
Restricted stock units outstanding	18,350	1.90	$	618.9
Restricted stock units vested and expected to vest	15,432	1.79	$	519.6

^{_________________________________________} 

^(*)  The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively. 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Summary of Performance Shares

The following table sets forth the summary of performance share activity under our Performance Share Program for fiscal 2013 (the “2013 Program”) for the three months ended March 1, 2013 (in thousands): 

	Shares Granted		Maximum Shares Eligible to Receive
Beginning outstanding balance	—		—
Awarded	945		1,891
Forfeited	(4	)	(9	)
Ending outstanding balance	941		1,882

Effective January 24, 2013, our Executive Compensation Committee modified our Performance Share Program by eliminating the use of qualitative performance objectives, with 100% of shares to be earned based on the achievement of an objective total stockholder return measure over a three-year performance period. Performance awards will be granted under the 2013 Program pursuant to the terms of our 2003 Equity Incentive Plan. The purpose of the 2013 Program is to align key management and senior leadership with stockholders’ interests over the long term and to retain key employees. Performance share awards will be awarded and fully vest upon the Executive Compensation Committee's certification of the level of achievement following the three-year anniversary of the grant date on January 24, 2016. Participants in the 2013 Program generally have the ability to receive up to 200% of the target number of shares originally granted.

In the first quarter of fiscal 2013, the Executive Compensation Committee certified the actual performance achievement of participants in the 2012 Performance Share Program (the “2012 Program”). Based upon the achievement of specific and/or market-based performance goals outlined in the 2012 Program, participants had the ability to receive up to 150% of the target number of shares originally granted. Actual performance resulted in participants achieving 116% of target or approximately 1.3 million shares for the 2012 Program. One third of the shares under the 2012 Program vested in the first quarter of fiscal 2013 and the remaining two thirds vest evenly on the following two anniversaries of the grant, contingent upon the recipient's continued service to Adobe.

In the first quarter of fiscal 2012, the Executive Compensation Committee certified the actual performance achievement of participants in the 2011 Performance Share Program (the “2011 Program”). Based upon the achievement of goals outlined in the 2011 Program, participants had the ability to receive up to 150% of the target number of shares originally granted. Actual performance resulted in participants achieving 130% of target or approximately 0.5 million shares for the 2011 Program. One third of the shares under the 2011 Program vested in the first quarter of fiscal 2012 and the remaining two thirds vest evenly on the following two anniversaries of the grant, contingent upon the recipient's continued service to Adobe.

The following table sets forth the summary of performance share activity under our 2010, 2011 and 2012 programs, based upon share awards actually achieved, for the three months ended March 1, 2013 and the fiscal year ended November 30, 2012 (in thousands):

	2013		2012
Beginning outstanding balance	388		405
Achieved	1,279		492
Released	(657	)	(464	)
Forfeited	(32	)	(45	)
Ending outstanding balance	978		388

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Information regarding performance shares outstanding at March 1, 2013 and March 2, 2012 is summarized below: 

	Number of Shares (thousands)	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value(*) (millions)
2013
Performance shares outstanding	978	1.32	$	38.9
Performance shares vested and expected to vest	865	1.29	$	34.4
2012
Performance shares outstanding	453	1.23	$	15.3
Performance shares vested and expected to vest	403	1.20	$	13.5

^{_________________________________________} 

^(*)  The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively.

Summary of Stock Options

There were no option grants during the three months ended March 1, 2013. The assumptions used to value option grants during the three months ended March 2, 2012 were as follows: 

	Three Months
	2012
Expected life (in years)	3.9
Volatility	34	%
Risk free interest rate	0.54	%

The expected life of employee stock purchase plan (“ESPP”) shares is the average of the remaining purchase periods under each offering period. The assumptions used to value employee stock purchase rights during the three months ended March 1, 2013 and March 2, 2012 were as follows:

	Three Months
	2013	2012
Expected life (in years)	0.5 - 2.0	0.5 - 2.0
Volatility	26 - 30%	36	%
Risk free interest rate	0.12 - 0.27%	0.06 - 0.27%

Option activity for the three months ended March 1, 2013 and the fiscal year ended November 30, 2012 was as follows (in thousands):

	2013		2012
Beginning outstanding balance	24,517		34,802
Granted	—		57
Exercised	(4,869	)	(6,754	)
Cancelled	(1,242	)	(4,692	)
Increase due to acquisition	129		1,104
Ending outstanding balance	18,535		24,517

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Information regarding stock options outstanding at March 1, 2013 and March 2, 2012 is summarized below:

	Number of Shares (thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value(*) (millions)
2013
Options outstanding	18,535	$	32.56	2.76	$	139.3
Options vested and expected to vest	18,250	$	32.66	2.71	$	135.3
Options exercisable	15,495	$	33.71	2.25	$	99.4
2012
Options outstanding	32,594	$	30.97	3.14	$	148.4
Options vested and expected to vest	31,783	$	31.08	3.07	$	142.4
Options exercisable	25,490	$	32.61	2.39	$	85.2

^{_________________________________________} 

^(*)  The intrinsic value is calculated as the difference between the market value as of the end of the fiscal period and the exercise price of the shares. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively.

Summary of Employee Stock Purchase Plan Shares

Employees purchased 1.2 million shares at an average price of $25.49 and 1.1 million shares at an average price of $23.64 for the three months ended March 1, 2013 and March 2, 2012, respectively. The intrinsic value of shares purchased during the three months ended March 1, 2013 and March 2, 2012 was $14.5 million and $5.0 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.

Compensation Costs

As of March 1, 2013, there was $607.8 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based awards which will be recognized over a weighted average period of 2.4 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

Total stock-based compensation costs that have been included in our Condensed Consolidated Statements of Income for the three months ended March 1, 2013 and March 2, 2012 were as follows (in thousands):

	2013				2012
Income Statement Classifications	Option Grants and Stock Purchase Rights		Restricted Stock and Performance Share Awards		Option Grants and Stock Purchase Rights		Restricted Stock and Performance Share Awards
Cost of revenue—subscription	$	637	$	1,063	$	742	$	603
Cost of revenue—services and support	855		2,450		1,116		2,070
Research and development	5,820		25,731		7,199		18,081
Sales and marketing	6,667		23,752		8,780		16,916
General and administrative	2,514		14,707		4,500		11,574
Total	$	16,493	$	67,703	$	22,337	$	49,244

19

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 9.  RESTRUCTURING CHARGES

Fiscal 2011 Restructuring Plan

In the fourth quarter of fiscal 2011, we initiated a restructuring plan consisting of reductions in workforce and the consolidation of facilities in order to better align our resources around our Digital Media and Digital Marketing strategies.

During the three months ended March 1, 2013, we continued to implement restructuring activities under this plan. Total costs incurred to date and expected to be incurred for closing redundant facilities are $10.9 million as all facilities under this plan have been exited as of March 1, 2013.

Other Restructuring Plans

Other restructuring plans include other Adobe plans and other plans associated with certain of our acquisitions that are substantially complete. We continue to make cash outlays to settle obligations under these plans, however the current impact to our condensed consolidated financial statements is not significant. Our other restructuring plans primarily consist of the 2009 Restructuring Plan, which was implemented in the fourth quarter of fiscal 2009, in order to appropriately align our costs in connection with our fiscal 2010 operating plan.

During the three months ended March 1, 2013 we vacated approximately 21,000 square feet of sales facilities in Australia in connection with our other restructuring plans.

Summary of Restructuring Plans

The following table sets forth a summary of restructuring activities related to all of our restructuring plans described above during the three months ended March 1, 2013 (in thousands):

	November 30, 2012		Costs Incurred		Cash Payments			Other Adjustments*			March 1, 2013
Fiscal 2011 Restructuring Plan:
Termination benefits	$	1,248	$	—	$	(722	)	$	105		$	631
Cost of closing redundant facilities	9,623		—		(274		)	(3,687		)	5,662
Other Restructuring Plans:
Termination benefits	991		—		(198		)	(8		)	785
Cost of closing redundant facilities	9,688		4,328		(2,851		)	(1,423		)	9,742
Total restructuring plans	$	21,550	$	4,328	$	(4,045	)	$	(5,013	)	$	16,820

^{_________________________________________} 

^(*)  Included in Other Adjustments are foreign currency translation adjustments and goodwill adjustments of $0.5 million and $0.2 million, respectively.

Accrued restructuring charges of approximately $16.8 million as of March 1, 2013 includes $6.8 million recorded in accrued restructuring, current and $10.0 million related to long-term facilities obligations recorded in accrued restructuring, non-current on our Condensed Consolidated Balance Sheets. We expect to pay accrued termination benefits through fiscal 2013 and facilities-related liabilities under contract through fiscal 2021.

20

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 10.  STOCKHOLDERS’ EQUITY

Retained Earnings

The changes in retained earnings for the three months ended March 1, 2013 were as follows (in thousands): 

Balance as of November 30, 2012	$	7,003,003
Net income	65,117
Re-issuance of treasury stock	(259,631		)
Balance as of March 1, 2013	$	6,808,489

We account for treasury stock under the cost method. When treasury stock is re-issued at a price higher than its cost, the difference is recorded as a component of additional paid-in-capital in our Condensed Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a component of additional paid-in-capital to the extent that there are gains to offset the losses. If there are no treasury stock gains in additional paid-in-capital, the losses upon re-issuance of treasury stock are recorded as a component of retained earnings in our Condensed Consolidated Balance Sheets.

The components of accumulated other comprehensive income and activity, net of related taxes, for the three months ended March 1, 2013 was as follows (in thousands):

	November 30, 2012			Increase / Decrease			Reclassification Adjustments				March 1, 2013
Net unrealized gains on available-for-sale securities:
Unrealized gains on available-for-sale securities	$	14,699		$	659		$	(1,599	)		$	13,759
Unrealized losses on available-for-sale securities	(260		)	43			15				(202		)
Total net unrealized gains on available-for-sale securities	14,439			702			(1,584		)	(1)	13,557
Net unrealized gains on derivative instruments designated as hedging instruments	6,604			21,776			(7,094		)	(2)	21,286
Cumulative foreign currency translation adjustments	9,669			(4,402		)	—				5,267
Total accumulated other comprehensive income, net of taxes	$	30,712		$	18,076		$	(8,678	)		$	40,110

_________________________________________

⁽¹⁾  Classified in interest and other income (expense), net.

⁽²⁾  Classified as revenue.

Stock Repurchase Program

To facilitate our stock repurchase program, designed to return value to our stockholders and minimize dilution from stock issuances, we repurchase shares in the open market and also enter into structured repurchase agreements with third parties.

We currently have authority granted by our Board of Directors to repurchase up to $2.0 billion in common stock through the end of fiscal 2015. This stock repurchase program is similar to our previous $1.6 billion stock repurchase program which we exhausted during the second quarter of fiscal 2012.

During the three months ended March 1, 2013 and March 2, 2012, we entered into structured stock repurchase agreements with large financial institutions, whereupon we provided them with prepayments of $100.0 million and $80.0 million, respectively. The $100.0 million prepayments during the first quarter of fiscal 2013 were under the new $2.0 billion stock repurchase authority while the $80.0 million prepayments during the first quarter of fiscal 2012 were under the previous $1.6 billion authority. We enter into these agreements in order to take advantage of repurchasing shares at a guaranteed discount to the Volume Weighted Average Price (“VWAP”) of our common stock over a specified period of time. We only enter into such transactions when the discount that we receive is higher than the foregone return on our cash prepayments to the financial institutions. There were no explicit commissions or fees on these structured repurchases. Under the terms of the agreements, there is no requirement for the financial institutions to return any portion of the prepayment to us.

21

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The financial institutions agree to deliver shares to us at monthly intervals during the contract term. The parameters used to calculate the number of shares deliverable are: the total notional amount of the contract, the number of trading days in the contract, the number of trading days in the interval and the average VWAP of our stock during the interval less the agreed upon discount. During the three months ended March 1, 2013, we repurchased approximately 2.7 million shares at an average price of $37.32 through structured repurchase agreements entered into during fiscal 2012 and the three months ended March 1, 2013. During the three months ended March 2, 2012, we repurchased approximately 1.8 million shares at an average price of $30.07 through structured repurchase agreements entered into during the three months ended March 2, 2012.

As of March 1, 2013, the prepayments were classified as treasury stock on our Condensed Consolidated Balance Sheets at the payment date, though only shares physically delivered to us by the financial statement date were excluded from the computation of earnings per share. As of March 1, 2013, $32.8 million of prepayment remained under this agreement.

NOTE 11.  NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share for the three months ended March 1, 2013 and March 2, 2012 (in thousands, except per share data):

	Three Months
	2013		2012
Net income	$	65,117	$	185,209
Shares used to compute basic net income per share	498,607		494,016
Dilutive potential common shares:
Unvested restricted stock and performance share awards	6,526		4,280
Stock options	2,707		2,082
Shares used to compute diluted net income per share	507,840		500,378
Basic net income per share	$	0.13	$	0.37
Diluted net income per share	$	0.13	$	0.37

For the three months ended March 1, 2013, options to purchase approximately 6.8 million shares of common stock with exercise prices greater than the average fair market value of our stock of $37.82, were not included in the calculation because the effect would have been anti-dilutive. Comparatively, for the three months ended March 2, 2012, options to purchase approximately 26.1 million shares of common stock with exercise prices greater than the average fair market value of our stock of $30.16 were not included in the calculation because the effect would have been anti-dilutive.

NOTE 12.  COMMITMENTS AND CONTINGENCIES

Lease Commitments

We occupy three office buildings in San Jose, California where our corporate headquarters are located. We reference these office buildings as the Almaden Tower and the East and West Towers.

The lease agreements for the East and West Towers and the Almaden Tower are effective through August 2014 and March 2017, respectively. We are the investors in the lease receivables related to these leases for the East and West Towers and the Almaden Tower in the amount of $126.8 million and $80.4 million, respectively, which is recorded as investment in lease receivables on our Condensed Consolidated Balance Sheets. As of March 1, 2013, the carrying value of the lease receivables related to the towers approximated fair value. Under the agreement for the East and West Towers and the agreement for the Almaden Tower, we have the option to purchase the buildings at any time during the lease term for approximately $143.2 million and $103.6 million, respectively. The residual value guarantees under the East and West Towers and the Almaden Tower obligations are $126.8 million and $89.4 million, respectively. If we purchase the properties, the investments in the lease receivables may be credited against the purchase price.

22

ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

These two leases are both subject to standard covenants including certain financial ratios that are reported to the lessors quarterly. In addition, we are required to maintain a standby letter of credit for approximately $16.6 million for one of the leases which enables us to secure a lower interest rate and reduce the number of covenants. As defined in the lease agreement, the standby letter of credit primarily represents the lease investment equity balance which is callable in the event of default. As of March 1, 2013, we were in compliance with all of the covenants. In the case of a default, the lessor may demand we purchase the buildings for an amount equal to the lease balance, or require that we remarket or relinquish the buildings. If we choose to remarket or are required to do so upon relinquishing the buildings, we are bound to arrange the sale of the buildings to an unrelated party and will be required to pay the lessor any shortfall between the net remarketing proceeds and the lease balance, up to the residual value guarantee amount less our investment in the lease receivables. Both leases qualify for operating lease accounting treatment and, as such, the buildings and the related obligations are not included in our Condensed Consolidated Balance Sheets. 

In the first quarter of fiscal 2013, we entered into a sale-leaseback agreement totaling $25.7 million over a period of 24 months. This transaction was classified as a capital lease obligation and recorded at fair value. See Note 13 for further information regarding of our capital lease obligations.

The following are our future minimum lease payments under our non-cancellable capital leases for each of the next five years and thereafter as of March 1, 2013 (in thousands):

Fiscal Year	Capital Lease Obligations
Remainder of 2013	$	23,011
2014	13,660
2015	—
2016	—
2017	—
Thereafter	—
Gross lease commitment	$	36,671
Less: interest	(748		)
Net lease commitment	$	35,923

Royalties

We have royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally based on a dollar amount per unit shipped or a percentage of the underlying revenue.

Indemnifications

In the normal course of business, we provide indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.

To the extent permitted under Delaware law, we have agreements whereby we indemnify our directors and officers for certain events or occurrences while the director or officer is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited, however, we have director and officer insurance coverage that limits our exposure and enables us to recover a portion of any future amounts paid.

23

ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Legal Proceedings

In connection with disputes relating to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be very costly and can be disruptive to our business operations by diverting the attention and energies of management and key technical personnel. Although we have successfully defended or resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes. Third-party intellectual property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our sale of products or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification commitments with our customers including contractual provisions under various license arrangements and service agreements.

In addition to intellectual property disputes, we are subject to legal proceedings, claims and investigations in the ordinary course of business, including claims relating to commercial, employment and other matters. Some of these disputes and legal proceedings may include speculative claims for substantial or indeterminate amounts of damages. We consider all claims on a quarterly basis in accordance with GAAP and based on known facts assess whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, we then evaluate disclosure requirements and whether to accrue for such claims in our financial statements. This determination is then reviewed and discussed with our Audit Committee and our independent registered public accounting firm.

We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Unless otherwise specifically disclosed in this note, we have determined that no provision for liability nor disclosure is required related to any claim against us because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.

All legal costs associated with litigation are expensed as incurred. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our consolidated financial position, cash flows or results of operations could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations.

In connection with our anti-piracy efforts, conducted both internally and through organizations such as the Business Software Alliance, from time to time we undertake litigation against alleged copyright infringers. Such lawsuits may lead to counter-claims alleging improper use of litigation or violation of other laws. We believe we have valid defenses with respect to such counter-claims; however, it is possible that our consolidated financial position, cash flows or results of operations could be affected in any particular period by the resolution of one or more of these counter-claims.

NOTE 13.  DEBT

Notes

In February 2010, we issued $600.0 million of 3.25% senior notes due February 1, 2015 (the “2015 Notes”) and $900.0 million of 4.75% senior notes due February 1, 2020 (the “2020 Notes” and, together with the 2015 Notes, the “Notes”). Our proceeds were approximately $1.5 billion and were net of an issuance discount of $6.6 million. The Notes rank equally with our other unsecured and unsubordinated indebtedness. In addition, we incurred issuance costs of approximately $10.7 million. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the Notes using the effective interest method. The effective interest rate including the discount and issuance costs is 3.45% for the 2015 Notes and 4.92% for the 2020 Notes. Interest is payable semi-annually, in arrears, on February 1 and August 1, commencing on August 1, 2010. In February 2013, we made a semi-annual interest payment of $31.1 million. The proceeds from the Notes are available for general corporate purposes, including repayment of any balance outstanding on our credit facility. Based on quoted prices in inactive markets, the fair value of the Notes was approximately $1.6 billion as of March 1, 2013.

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ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

We may redeem the Notes at any time, subject to a make-whole premium. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The Notes also include covenants that limit our ability to grant liens on assets and to enter into sale and leaseback transactions, subject to significant allowances. As of March 1, 2013, we were in compliance with all of the covenants.

Credit Agreement

On March 2, 2012, we entered into a five-year $1.0 billion senior unsecured revolving credit agreement (the “Credit Agreement”), providing for loans to us and certain of our subsidiaries. Pursuant to the terms of the Credit Agreement, we may, subject to the agreement of the applicable lenders, request up to an additional $500.0 million in commitments, for a maximum aggregate commitment of $1.5 billion. Loans under the Credit Agreement will bear interest at either (i) the London Interbank Offered Rate (“LIBOR”) plus a margin, based on our debt ratings, ranging from 0.795% and 1.30% or (ii) the base rate, which is defined as the highest of (a) the agent’s prime rate, (b) the federal funds effective rate plus 0.50% or (c) LIBOR plus 1.00% plus a margin, based on our debt ratings, ranging from 0.00% to 0.30%. Commitment fees are payable quarterly at rates between 0.08% and 0.20% per year also based on our public debt ratings. Subject to certain conditions stated in the Credit Agreement, we and any of our subsidiaries designated as additional borrowers may borrow, prepay and re-borrow amounts under the revolving credit facility at any time during the term of the Credit Agreement.

The Credit Agreement contains customary representations, warranties, affirmative and negative covenants, including a financial covenant, events of default and indemnification provisions in favor of the lenders. The negative covenants include restrictions regarding the incurrence of liens and indebtedness, certain merger and acquisition transactions, dispositions and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires us not to exceed a maximum leverage ratio.

On March 1, 2013, we exercised an option under the Credit Agreement to extend the maturity date of the Credit Agreement by one year to March 2, 2018. The facility will terminate and all amounts owing thereunder will be due and payable on the maturity date unless (a) the commitments are terminated earlier upon the occurrence of certain events, including an event of default, or (b) the maturity date is further extended upon our request, subject to the agreement of the lenders.

As of March 1, 2013, there were no outstanding borrowings under this Credit Agreement and we were in compliance with all covenants.

Capital Lease Obligations

In January 2013, we entered into a sale-leaseback agreement totaling $25.7 million over a period of 24 months. As of March 1, 2013, our capital lease obligations of $35.9 million includes $22.4 million of current debt.

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ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 14.  NON-OPERATING INCOME (EXPENSE)

 Non-operating income (expense), net for the three months ended March 1, 2013 and March 2, 2012 included the following (in thousands):

	Three Months
	2013			2012
Interest and other income (expense), net:
Interest income	$	5,681		$	6,193
Foreign exchange gains (losses)	(6,174		)	(9,721		)
Realized gains on fixed income investment	1,598			702
Realized losses on fixed income investment	(14		)	(205		)
Other	155			246
Interest and other income (expense), net	$	1,246		$	(2,785	)
Interest expense	$	(16,834	)	$	(16,838	)
Investment gains (losses), net:
Realized investment gains	$	418		$	245
Unrealized investment gains	444			810
Realized investment losses	(14		)	(34		)
Investment gains (losses), net	$	848		$	1,021
Non-operating income (expense), net	$	(14,740	)	$	(18,602	)

NOTE 15.  SEGMENTS

We report segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.

Our CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments, but does not review operating expenses on a segment by segment basis. In addition, with the exception of goodwill and intangible assets, we do not identify or allocate our assets by the reportable segments.

Effective in the first quarter of fiscal 2013, we moved our video server solutions products from our Digital Media segment to our Digital Marketing segment to better align the role of how Adobe can help its customers monetize their video assets with our Digital Marketing solutions. Prior year information in the table below has been updated to reflect this change.

We have the following reportable segments:

• Digital Media—Our Digital Media segment provides tools and solutions that enable individuals, small businesses and enterprises to create, publish, promote and monetize their digital content anywhere. Our customers include traditional content creators, web application developers and digital media professionals, as well as their management in marketing departments and agencies, companies and publishers.

• Digital Marketing—Our Digital Marketing segment provides solutions and services for how digital advertising and marketing are created, managed, executed, measured and optimized. Our customers include digital marketers, advertisers, publishers, merchandisers, web analysts, chief marketing officers and chief revenue officers.

• Print and Publishing—Our Print and Publishing segment addresses market opportunities ranging from the diverse publishing needs of technical and business publishing to our legacy type and OEM printing businesses.

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ADOBE SYSTEMS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(in thousands)	Digital Media			Digital Marketing			Print and Publishing			Total
Three months ended March 1, 2013
Revenue	$	688,400		$	267,700		$	51,773		$	1,007,873
Cost of revenue	53,709			98,279			4,696			156,684
Gross profit	$	634,691		$	169,421		$	47,077		$	851,189
Gross profit as a percentage of revenue	92		%	63		%	91		%	84		%
Three months ended March 2, 2012
Revenue	$	724,353		$	265,837		$	55,030		$	1,045,220
Cost of revenue	25,625			79,547			3,093			108,265
Gross profit	$	698,728		$	186,290		$	51,937		$	936,955
Gross profit as a percentage of revenue	96		%	70		%	94		%	90		%

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto.

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements, including statements regarding product plans, future growth and market opportunities, which involve risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” in Part II, Item 1A of this report. You should carefully review the risks described herein and in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for fiscal 2012. When used in this report, the words “expects,” “could,” “would,” “may,” “anticipates,” “intends,” “plans,” “believes,” “seeks,”  “targets,” “estimates,” “looks for,” “looks to,” “continues” and similar expressions, as well as statements regarding our focus for the future, are generally intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

BUSINESS OVERVIEW

Founded in 1982, Adobe Systems Incorporated is one of the largest and most diversified software companies in the world. We offer a line of software and services used by creative professionals, marketers, knowledge workers, application developers, enterprises and consumers for creating, managing, delivering, measuring, optimizing and engaging with compelling content and experiences across multiple operating systems, devices and media. We market and license our software directly to enterprise customers through our sales force and to end users through app stores and our own website at www.adobe.com. We also distribute our products through a network of distributors, value-added resellers (“VARs”), systems integrators, independent software vendors (“ISVs”), retailers and original equipment manufacturers (“OEMs”). In addition, we license our technology to hardware manufacturers, software developers and service providers for use in their products and solutions. We offer some of our products via a Software-as-a-Service (“SaaS”) model (also known as a hosted or “cloud-based” model) as well as through term subscription and pay-per-use models. Our software runs on personal computers (“PCs”) and server-based computers, as well as on mobile, tablets and other devices, depending on the product. We have operations in the Americas, Europe, Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”).

We maintain executive offices and principal facilities at 345 Park Avenue, San Jose, California 95110-2704. Our telephone number is 408-536-6000. We maintain a website at www.adobe.com. Investors can obtain copies of our SEC filings from this site free of charge, as well as from the SEC website at www.sec.gov.

OPERATIONS OVERVIEW

For our first quarter of fiscal 2013, we reported solid financial results consistent with the continued execution of our plans for our two strategic growth areas, Digital Media and Digital Marketing, while continuing to market and license a broad portfolio of products and solutions.

In May 2012, we launched Adobe Creative Suite 6 (“CS6”) which is at the center of Adobe Creative Cloud, our new subscription-based model for creating and publishing content and applications that was also released in May 2012. The launch of CS6 included major updates to all of our core Creative Suite (“CS”) point products as well as four suite versions. Late in the fourth quarter of fiscal 2012, we launched Creative Cloud for teams, a platform for teams and workgroups to access all applications and online services in the Creative Cloud. Over time, we expect Creative Cloud to transform our business model and drive higher revenue growth through an expansion of our customer base by acquiring new users through a lower cost of entry, as well as keeping existing customers current on our latest release. This model will drive our revenue to be more recurring and predictable since revenue is recognized ratably. We continue to implement strategies that will accelerate the adoption of our Creative Cloud subscription model, causing our traditional perpetual license revenue to decline. We currently plan to continue to offer the perpetual licensing model as we transition our customers to this new subscription-based model.

Adoption of our Creative Cloud subscription offering continued to accelerate in the first quarter of fiscal 2013, which has and will continue to cause our traditional perpetual license revenue and, in turn, total net revenue in fiscal 2013, to decline. As anticipated during this transition, expenses did not and are not expected to decline in correlation to the decrease in revenue, which will adversely affect our net income and operating margin throughout fiscal 2013. However, over time we expect this business model transition will significantly increase our long-term revenue growth rate by attracting new users, keeping our end user base

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current and thereby driving higher average revenue per user. Additionally, our shift to a subscription model will increase the amount of recurring revenue that is ratably reported, driven by broader Creative Cloud adoption over the next several years.

To assist with the understanding of this transition and the related shift in revenue described above, we are using certain performance metrics to assess the health and trajectory of our overall Digital Media segment.

These metrics include the total number of current paid subscriptions and Annualized Recurring Revenue (“ARR”). We define ARR as the sum of:

• the number of current paid subscriptions, multiplied by the average subscription price paid per user per month, multiplied by twelve months; plus,

• twelve months of contract value of Enterprise Term License Agreements (“ETLAs”) where the revenue is ratably recognized over the life of the contract.

In addition, we expect renewal rates associated with Creative Cloud, and potentially other subscription offerings, will become key metrics used to measure their performance. Because the majority of Creative Cloud subscriptions have been annual and the Creative Cloud launched in May 2012, we have not yet reached the first anniversary of these annual subscriptions and, therefore, we anticipate that meaningful data regarding subscription renewal rates will first become available later in fiscal year 2013.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In preparing our Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC, we make assumptions, judgments and estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates. We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors.

We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, stock-based compensation, business combinations, goodwill impairment and income taxes have the greatest potential impact on our Condensed Consolidated Financial Statements. These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates, so we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

With the exception of the discussion below, there have been no significant changes in our critical accounting policies and estimates during the three months ended March 1, 2013, as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended November 30, 2012.

Recent Accounting Pronouncements

In December 2011, the FASB amended the accounting standards to increase the prominence of other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in shareholders’ equity and requires the components of OCI to be presented either in a single continuous statement of comprehensive income or in two consecutive statements. We adopted the amended accounting standards at the beginning of our first quarter of fiscal 2013 by electing to present separate consolidated statements of comprehensive income from the consolidated statements of income. The amended accounting standards only impact the financial statement presentation of OCI and do not change the components that are recognized in net income or OCI. The adoption had no impact on the Company’s financial position or results of operations.

Recent Accounting Pronouncements Not Yet Effective

There have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our condensed consolidated financial statements.

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RESULTS OF OPERATIONS

Financial Performance Summary for the First Quarter of Fiscal 2013

• We continue to derive the majority of our revenue from perpetual licenses. However, during the three months ended March 1, 2013, our subscription revenue as a percentage of total revenue increased to 22% from 14% in the year ago period, as we transition more of our business to a subscription-based model.

• Total Digital Media ARR of $297.0 million as of March 1, 2013 increased by $94.0 million, or 46% from November 30, 2012, primarily due to increases in the number of paid Creative Cloud individual and team subscribers.

• Our total deferred revenue of $700.0 million as of March 1, 2013 increased by $80.5 million, or 13% in the first quarter of fiscal 2013 primarily due to increases in enterprise term licenses agreements and renewals for our Adobe Marketing Cloud services.

• Cost of revenue and operating expenses of $909.6 million increased by $153.4 million, or 20%, year-over-year during the three months ended March 1, 2013 from $756.2 million. The increase is primarily due to increases in costs associated with compensation and related benefits driven by additional headcount and to a lesser extent, a one-time charge associated with technology licensing arrangements.

• Net income of $65.1 million decreased by $120.1 million, or 65%, year-over-year during the three months ended March 1, 2013 from $185.2 million primarily due to the reasons stated above and offset in part by the effects of the extension of the federal research and development credit.

• Net cash flow from operations of $322.0 million during the three months ended March 1, 2013 remained relatively stable compared to the three months ended March 2, 2012.

Revenue for the Three Months Ended March 1, 2013 and March 2, 2012 (dollars in millions)

	Three Months
	2013			2012			% Change
Product	$	675.8		$	808.5		(16	)%
Percentage of total revenue	67		%	77		%
Subscription	224.3			146.2			53	%
Percentage of total revenue	22		%	14		%
Services and support	107.8			90.5			19	%
Percentage of total revenue	11		%	9		%
Total revenue	$	1,007.9		$	1,045.2		(4	)%

Our subscription revenue is comprised primarily of fees we charge for our subscription and hosted service offerings including certain of our Adobe Marketing Cloud services and Creative Cloud. We recognize subscription revenue ratably over the term of agreements with our customers, beginning on the commencement of the service. We expect our subscription revenue will continue to increase as a result of our investments in new SaaS and subscription models. We also expect this to increase the amount of recurring revenue we generate as a percent of our total revenue. Of the $224.3 million and $146.2 million in subscription revenue during the three months ended March 1, 2013 and March 2, 2012, respectively, approximately $154.9 million and $129.1 million, respectively, is from our Digital Marketing segment, with the remaining amounts representing our Digital Media segment offerings.

Our services and support revenue is comprised of consulting, training and maintenance and support, primarily related to the licensing of our enterprise, developer and platform products and the sale of our hosted Adobe Marketing Cloud services. Our support revenue also includes technical support and developer support to partners and developer organizations related to our desktop products. Our maintenance and support offerings, which entitle customers to receive desktop product upgrades and enhancements or technical support, depending on the offering, are generally recognized ratably over the term of the arrangement.

As described in Note 15 of our Notes to Condensed Consolidated Financial Statements, we have the following segments: Digital Media, Digital Marketing and Print and Publishing.

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Effective in the first quarter of fiscal 2013, we moved our video server solutions products from our Digital Media segment to our Digital Marketing segment to better align the role of how Adobe can help its customers monetize their video assets with our Digital Marketing solutions. Prior year information has been updated to reflect this change.

Segment Information (dollars in millions)

	Three Months
	2013			2012			% Change
Digital Media	$	688.4		$	724.4		(5	)%
Percentage of total revenue	68		%	70		%
Digital Marketing	267.7			265.8			1	%
Percentage of total revenue	27		%	25		%
Print and Publishing	51.8			55.0			(6	)%
Percentage of total revenue	5		%	5		%
Total revenue	$	1,007.9		$	1,045.2		(4	)%

Digital Media

Revenue from Digital Media decreased $36.0 million during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012, primarily due to continued strong adoption of Creative Cloud and ETLAs as we continue to transition more of our business to a subscription-based model.

Revenue related to our creative professional products, which include our Creative Suite editions and CS point products as well as the recently released Creative Cloud, decreased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 due to continued customer adoption of Creative Cloud subscription offerings, released in May 2012. We anticipate accelerated adoption of Creative Cloud, for which revenue is recognized over time, and that this adoption will cause our traditional perpetual license revenue to decline.

Revenue associated with our other creative products increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 primarily due to increases associated with distribution of third-party software via Flash Player downloads and our Digital Publishing Suite, as well as continued demand related to the May 2012 release of Adobe Lightroom 4. These increases were offset in part by decreases associated with lower than expected demand for our Photoshop Elements family of products.

For our creative offerings, the total number of perpetual units licensed decreased while the number of subscription units licensed increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012. Unit average selling prices, excluding subscriptions, remained relatively stable during the three months ended March 1, 2013 as compared to the same period in the prior year.

Document Services revenue, which includes our Acrobat product family, also increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 primarily due to increased Document Exchange Services revenue including revenue generated from our EchoSign eSignatures service offset in part by the shift to ETLAs.

Within Document Services, excluding large enterprise license agreement deals, the number of units decreased while the unit average selling prices increased for the three months ended March 1, 2013, as compared to the three months ended March 2, 2012.

Digital Marketing

Revenue from Digital Marketing increased slightly during the three months ended March 1, 2013, as compared to the three months ended March 2, 2012 due to continued revenue growth associated with our Adobe Marketing Cloud, which increased 20% year-over-year. As expected, increases were offset by a decrease in revenue associated with Adobe LiveCycle product offerings as we continue to maintain our focus on Adobe Marketing Cloud.

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Print and Publishing

Revenue from Print and Publishing decreased $3.2 million during the three ended March 1, 2013 as compared to the three months ended March 2, 2012, primarily due to decreases in fees received for consulting services and royalties related to PostScript products.

Geographical Information (dollars in millions)

	Three Months
	2013			2012			% Change
Americas	$	500.3		$	503.1		(1	)%
Percentage of total revenue	50		%	48		%
EMEA	297.5			330.7			(10	)%
Percentage of total revenue	30		%	32		%
APAC	210.1			211.4			(1	)%
Percentage of total revenue	20		%	20		%
Total revenue	$	1,007.9		$	1,045.2		(4	)%

Overall revenue during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 remained relatively stable in the Americas and APAC and declined in EMEA. Revenue in the Americas remained relatively stable during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 due to increases in Digital Marketing revenue, offset in part by declines in Digital Media and Print and Publishing revenue. The economic conditions in Europe and the weakening of the Euro and the British Pound against the U.S. Dollar caused revenue in EMEA to decline during the three months ended March 1, 2013 compared with the comparable period a year earlier. Revenue in EMEA decreased across all reportable segments during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012. Revenue in APAC remained relatively stable during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 due to declines in Digital Media, offset by increases in Digital Marketing and Print and Publishing. Within each geographical region, the fluctuations in revenue by reportable segment were attributable to the factors noted in the segment information above.

Included in the overall decrease in revenue for the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 were impacts associated with foreign currency as shown below.

(in millions)	2013
Revenue impact:	Increase/(Decrease)
EMEA:
Euro	$	(0.4	)
British Pound	(0.4		)
Other currencies	0.1
Total EMEA	(0.7		)
Japanese Yen	(11.6		)
Other currencies	(0.4		)
Total revenue impact	(12.7		)
Hedging impact:
Japanese Yen	7.1
Total hedging impact	7.1
Total impact	$	(5.6	)

During the three months ended March 1, 2013, the U.S. Dollar strengthened against all major currencies causing revenue in EMEA and Japan measured in U.S. Dollar equivalents to decrease compared with the same reporting period last year. Our Yen currency hedging programs resulted in hedging gains during the three months ended March 1, 2013 as noted in the table above. 

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Cost of Revenue for the Three Months Ended March 1, 2013 and March 2, 2012 (dollars in millions)

	Three Months
	2013			2012			% Change
Product	$	52.0		$	25.7		102	%
Percentage of total revenue	5		%	2		%
Subscription	62.6			48.8			28	%
Percentage of total revenue	6		%	5		%
Services and support	42.1			33.8			25	%
Percentage of total revenue	4		%	3		%
Total cost of revenue	$	156.7		$	108.3		45	%

Product

Cost of product revenue includes product packaging, third-party royalties, excess and obsolete inventory, amortization related to localization costs, purchased intangibles and acquired rights to use technology and the costs associated with the manufacturing of our products.

Cost of product revenue increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 due to the following:

	% Change 2013-2012 QTD
Amortization of purchased intangibles and technology license arrangements	106	%
Cost of sales	(11	)
Royalty cost	9
Localization costs related to our product launches	5
Excess and obsolete inventory	(4	)
Various individually insignificant items	(3	)
Total change	102	%

Amortization of purchase intangibles and technology license arrangements increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 as we entered into certain technology licensing arrangements totaling $51.8 million during the three months ended March 1, 2013. Of this cost, an estimated $25.3 million was related to future licensing rights and has been capitalized and will be amortized on a straight-line basis over the estimated useful lives ranging from five to ten years. We estimated that the remaining cost of approximately $26.5 million was related to historical use of licensing rights and was expensed as cost of product revenue. In connection with certain of these licensing arrangements, we have the ability to acquire additional rights to use technology in the future.  

Cost of sales decreased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 primarily due to decreases in the number of perpetual units sold and packaging costs associated with our CS6 products.

Royalty costs increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 primarily due to increases in obligations to certain key vendors and royalty costs associated with the launch of CS6 and Creative Cloud in the second quarter of fiscal 2012.

Localization costs increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 primarily due to released updates for CS6 during the quarter and the product launch of Acrobat XI in the fourth quarter of fiscal 2012.

Excess and obsolete inventory decreased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 due to decreased reserve requirements for CS6.

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Subscription

Cost of subscription revenue consists of expenses related to operating our network infrastructure, including depreciation expenses and operating lease payments associated with computer equipment, data center costs, salaries and related expenses of network operations, implementation, account management and technical support personnel, amortization of intangible assets and allocated overhead. We enter into contracts with third parties for the use of their data center facilities and our data center costs largely consist of the amounts we pay to these third parties for rack space, power and similar items. 

Cost of subscription revenue increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 due to the following:

	% Change 2013-2012 QTD
Hosted server costs	19	%
Amortization of purchased intangibles	9	%
Total change	28	%

Hosted server costs increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 primarily due to increases in compensation and related benefits driven by additional headcount from our acquisitions of Efficient Frontier in the later part of the first quarter of fiscal 2012 and Behance in the first quarter of fiscal 2013, depreciation expense from higher capital expenditures after the first quarter of fiscal 2012 and data center costs related to higher transaction volumes in our Adobe Marketing Cloud and Creative Cloud services.

Amortization of purchase intangibles increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 primarily due to increased amortization of intangible assets from our acquisitions of Efficient Frontier in the later part of the first quarter of fiscal 2012 and Behance in the first quarter of fiscal 2013.

Services and Support

Cost of services and support revenue is primarily comprised of employee-related costs and associated costs incurred to provide consulting services, training and product support.

Cost of services and support revenue increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 primarily due to increases in compensation and related benefits and third-party fees.

Operating Expenses for the Three Months Ended March 1, 2013 and March 2, 2012 (dollars in millions)

	Three Months
	2013			2012			% Change
Research and development	$	209.6		$	177.7		18	%
Percentage of total revenue	21		%	17		%
Sales and marketing	398.0			359.0			11	%
Percentage of total revenue	39		%	34		%
General and administrative	132.9			102.7			29	%
Percentage of total revenue	13		%	10		%
Restructuring charges	—			(2.8		)	**
Percentage of total revenue	*			*
Amortization of purchased intangibles	12.5			11.4			10	%
Percentage of total revenue	1		%	1		%
Total operating expenses	$	753.0		$	648.0		16	%

^{_________________________________________} 

^(*)  Percentage is less than 1%.

^(**)  Percentage is not meaningful.

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Research and Development

Research and development expenses consist primarily of salary and benefit expenses for software developers, contracted development efforts, related facilities costs and expenses associated with computer equipment used in software development.

Research and development expenses increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 due to the following:

	% Change 2013-2012 QTD
Compensation associated with incentive compensation and stock-based compensation	10	%
Compensation and related benefits associated with headcount growth	4
Seminars	3
Various individually insignificant items	1
Total change	18	%

The increase in seminars during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 was primarily due to a technical event for our engineers which was held during the first quarter of fiscal 2013 that did not occur during fiscal 2012.

We believe that investments in research and development, including the recruiting and hiring of software developers, are critical to remain competitive in the marketplace and are directly related to continued timely development of new and enhanced products. We will continue to focus on long-term opportunities available in our end markets and make significant investments in the development of our applications, tools and service offerings.

Sales and Marketing

Sales and marketing expenses consist primarily of salary and benefit expenses, sales commissions, travel expenses and related facilities costs for our sales, marketing, order management and global supply chain management personnel. Sales and marketing expenses also include the costs of programs aimed at increasing revenue, such as advertising, trade shows, public relations and other market development programs.

Sales and marketing expenses increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 due to the following:

	% Change 2013-2012 QTD
Compensation and related benefits associated with headcount growth	7	%
Compensation associated with incentive compensation and stock-based compensation	5
Professional and consulting fees	(3	)
Various individually insignificant items	2
Total change	11	%

The decrease in professional and consulting fees during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 is primarily due to lower vendor support expenses and hosting fees for Adobe.com and decreased professional fees associated with our fiscal 2012 initiative to enable new process improvements and efficiencies.

General and Administrative

General and administrative expenses consist primarily of compensation and benefit expenses, travel expenses and related facilities costs for our finance, facilities, human resources, legal, information services and executive personnel. General and administrative expenses also include outside legal and accounting fees, provision for bad debts, expenses associated with computer equipment and software used in the administration of the business, charitable contributions and various forms of insurance.

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General and administrative expenses increased during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 due to the following:

	% Change 2013-2012 QTD
Compensation and related benefits associated with headcount growth	6	%
Compensation associated with incentive compensation and stock-based compensation	5
Charitable contributions	12
Professional and consulting fees	2
Depreciation and amortization	2
Various individually insignificant items	2
Total change	29	%

The increase in charitable contributions during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012 reflects a planned contribution to the Adobe Foundation during the first quarter of fiscal 2013.

Restructuring Charges

During the past several years, we have initiated various restructuring plans. In connection with our Fiscal 2011 Restructuring Plan and Other Restructuring Plans, we recorded charges during the three months ended March 1, 2013 associated with closing redundant facilities. These charges were largely offset by net favorable employee termination and facility related adjustments for changes in previous estimates during the three months ended March 1, 2013. During the three months ended March 2, 2012 we recorded net favorable employee termination and facility related adjustments of $2.8 million during three months ended March 2, 2012.

Amortization of Purchased Intangibles

Amortization expense increased 10% during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012. The increase was primarily due to amortization expense associated with intangible assets purchased through our acquisition of Behance in the first quarter of fiscal 2013 as well as our acquisition of Efficient Frontier in the first quarter of fiscal 2012.

Non-Operating Income (Expense), Net for the Three Months Ended March 1, 2013 and March 2, 2012 (dollars in millions)

	Three Months
	2013			2012			% Change
Interest and other income (expense), net	$	1.3		$	(2.8	)	(146	)%
Percentage of total revenue	*			*
Interest expense	(16.8		)	(16.8		)	—	%
Percentage of total revenue	(2		)%	(2		)%
Investment gains (losses), net	0.8			1.0			(20	)%
Percentage of total revenue	*			*
Total non-operating income (expense), net	$	(14.7	)	$	(18.6	)	(21	)%

^{_________________________________________} 

^(*)  Percentage is not meaningful.

Interest and Other Income (Expense), Net

Interest and other income (expense), net consists primarily of interest earned on cash, cash equivalents and short-term fixed income investments. Interest and other income (expense), net also includes foreign exchange gains and losses, and gains and losses on fixed income investments.

Interest and other income (expense), net changed from net expense for the three months ended March 2, 2012 to net income for the three months ended March 1, 2013 primarily due to decreased foreign currency losses and increased realized gains on fixed income investments.

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Interest Expense

Interest expense primarily consists of interest associated with our senior notes (the "Notes"). Interest expense remained stable during the three months ended March 1, 2013 as compared to the three months ended March 2, 2012.

Investment Gains (Losses), Net

Investment gains (losses), net consists principally of realized gains or losses from the sale of marketable equity investments, other-than-temporary declines in the value of marketable and non-marketable equity securities and unrealized holding gains and losses associated with our deferred compensation plan assets (classified as trading securities) and gains and losses associated with our direct and indirect investments in privately held companies. Our net investment gains for the three months ended March 1, 2013 and March 2, 2012 were primarily due to realized and unrealized gains on our deferred compensation plan assets.

Provision for Income Taxes for the Three Months Ended March 1, 2013 and March 2, 2012 (dollars in millions)

	Three Months
	2013			2012			% Change
Provision	$	18.4		$	85.2		(78	)%
Percentage of total revenue	2		%	8		%
Effective tax rate	22.0		%	31.5		%

Our effective tax rate decreased by approximately ten percentage points for the three months ended March 1, 2013 as compared to the three months ended March 2, 2012. The decrease was primarily due to the reinstatement of the federal research and development tax credit and to a lesser extent, due to lower year-over-year tax costs associated with licensing intellectual property to Adobe's trading companies. The reinstatement of the credit was retroactive to January 1, 2012. A $12.9 million tax benefit for the credit relating to fiscal 2012 was reflected in its entirety in the first quarter of fiscal 2013. The decrease was partially offset by tax benefits recognized in the first quarter of fiscal 2012 as a result of the completion of certain income tax examinations.

We are a United States-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. A significant portion of our foreign earnings for the current fiscal year were earned by our Irish subsidiaries. In addition to providing for U.S. income taxes on earnings from the U.S., we provide for U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries' earnings are considered permanently reinvested outside the U.S. While we do not anticipate changing our intention regarding permanently reinvested earnings, if certain foreign earnings previously treated as permanently reinvested are repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings. Currently, there are a significant amount of foreign earnings upon which U.S. income taxes have not been provided.

Accounting for Uncertainty in Income Taxes

The gross liability for unrecognized tax benefits at March 1, 2013 was $165.5 million, exclusive of interest and penalties. If the total unrecognized tax benefits at March 1, 2013 were recognized in the future, $152.3 million of unrecognized tax benefits would decrease the effective tax rate, which is net of an estimated $13.2 million federal benefit related to deducting certain payments on future state tax returns.

As of March 1, 2013, the combined amount of accrued interest and penalties related to tax positions taken on our tax returns was approximately $13.3 million. This amount is included in non-current income taxes payable.

The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of current and non-current assets and liabilities. We believe that within the next 12 months, it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Given the uncertainties described above, we can only determine a range of estimated potential decreases in underlying unrecognized tax benefits ranging from $0 to approximately $5 million. 

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LIQUIDITY AND CAPITAL RESOURCES

This data should be read in conjunction with our Condensed Consolidated Statements of Cash Flows.

	As of
(in millions)	March 1, 2013		November 30, 2012
Cash and cash equivalents	$	1,306.4	$	1,425.1
Short-term investments	$	2,354.3	$	2,113.3
Working capital	$	3,108.8	$	3,059.6
Stockholders’ equity	$	6,805.3	$	6,665.2

A summary of our cash flows is as follows:

	Three Months Ended
(in millions)	March 1, 2013			March 2, 2012
Net cash provided by operating activities	$	322.0		$	314.4
Net cash used for investing activities	(446.1		)	(437.7		)
Net cash provided by (used for) financing activities	11.4			(68.5		)
Effect of foreign currency exchange rates on cash and cash equivalents	(6.0		)	3.6
Net decrease in cash and cash equivalents	$	(118.7	)	$	(188.2	)

Our primary source of cash is receipts from revenue. The primary uses of cash are payroll related expenses, general operating expenses including marketing, travel and office rent, and cost of product revenue. Other sources of cash are proceeds from the exercise of employee stock options and participation in the employee stock purchase plan. Other uses of cash include our stock repurchase program, which is described below, business acquisitions and purchases of property and equipment.

Cash Flows from Operating Activities

Net cash provided by operating activities of $322.0 million for the three months ended March 1, 2013 was primarily comprised of net income plus the net effect of non-cash items. The primary working capital sources of cash were net income coupled with decreases in trade receivables and increases in deferred revenue and trade payables. Trade receivables declined primarily due to lower overall revenue levels as compared to the fourth quarter of fiscal 2012. The increase in deferred revenue is primarily due to annual billing for Digital Marketing hosted services, the majority of which were invoiced in January of fiscal 2013, coupled with a net increase in software subscription activity for our Creative Cloud offering. Trade payables increased primarily due to the timing of invoice receipts and cash payments associated with capital expenditures.

The primary working capital uses of cash were decreases in accrued expenses, taxes payable and increases in prepaid expenses and other assets. Accrued expenses decreased primarily due to payment of fiscal 2012 bonuses, commissions and other incentive plans occurring primarily in the first quarter of fiscal 2013. During the three months ended March 1, 2013, we also made our semi-annual interest payment associated with our Notes totaling $31.1 million. The resulting reduction in accrued interest was partially offset by additional interest accruals made during the period. The decrease in taxes payable is largely attributed to tax payments made during the first quarter of fiscal 2013, offset in part by current quarter tax expense and other adjustments. Prepaid expenses and other assets increased primarily due to payments of annual maintenance and support services associated with our licensed technologies, which were billed on a calendar-year basis and paid in January of fiscal 2013.

Cash Flows from Investing Activities

Net cash used for investing activities of $446.1 million for the three months ended March 1, 2013 was primarily due to purchases of short-term investments. Other uses of cash during the three months ended March 1, 2013 represented our acquisition of Behance, purchases of property and equipment primarily associated with our construction projects in Oregon and India and purchases of long-term technology licenses. These cash outflows were offset in part by sales and maturities of short-term investments.

Cash Flows from Financing Activities

Net cash provided by financing activities of $11.4 million for the three months ended March 1, 2013 was primarily due to proceeds from our treasury stock issuances and cash received from our sales-leaseback transaction, offset in part by treasury stock repurchases. See the section titled “Stock Repurchase Program” discussed below.

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We expect to continue our investing activities, including short-term and long-term investments, venture capital, facilities expansion and purchases of computer systems for research and development, sales and marketing, product support and administrative staff. Furthermore, cash reserves may be used to repurchase stock under our stock repurchase program and to strategically acquire companies, products or technologies that are complementary to our business.

Restructuring

During the past several years, we have initiated various restructuring plans. Currently, we have two active restructuring plans that were of significance to us:

• Fiscal 2011 Restructuring Plan

• Fiscal 2009 Restructuring Plan

As of March 1, 2013, we have accrued total restructuring charges of approximately $16.8 million of which approximately $15.4 million relates to the cost of closing redundant facilities and are expected to be paid under contract through fiscal 2021 of which approximately 65% will be paid through 2015.

We believe that our existing cash and cash equivalents, short-term investments and cash generated from operations will be sufficient to meet the cash outlays for the restructuring actions described above.

See Note 9 of our Notes to Condensed Consolidated Financial Statements for more detailed information regarding our restructuring plans.

Other Liquidity and Capital Resources Considerations

Our existing cash, cash equivalents and investment balances may fluctuate during fiscal 2013 due to changes in our planned cash outlay, including changes in incremental costs such as direct and integration costs related to our acquisitions. Our intent is to permanently reinvest a significant portion of our earnings from foreign operations, and current plans do not anticipate that we will need funds generated from foreign operations to fund our domestic operations. In the event funds from foreign operations are needed to fund operations in the United States and if U.S. tax has not already been previously provided, we would provide for and pay additional U.S. taxes in connection with repatriating these funds.

Cash from operations could also be affected by various risks and uncertainties, including, but not limited to the risks detailed in Part II, Item 1A titled “Risk Factors”. However, based on our current business plan and revenue prospects, we believe that our existing balances, our anticipated cash flows from operations and the available balance under our credit facility will be sufficient to meet our working capital and operating resource expenditure requirements for the next twelve months.

As of March 1, 2013, the amount outstanding under our senior notes was $1.5 billion. On March 2, 2012, we entered into a five-year $1.0 billion senior unsecured revolving credit agreement (the “Credit Agreement”), providing for loans to us and certain of our subsidiaries. On March 1, 2013, we exercised an option under the Credit Agreement to extend the maturity date of the Credit Agreement by one year to March 2, 2018. As of March 1, 2013, there were no outstanding borrowings under this Credit Agreement and the entire $1.0 billion credit line remains available for borrowing.

We use professional investment management firms to manage a large portion of our invested cash. External investment firms managed, on average, 69% of our consolidated invested balances during the first quarter of fiscal 2013. The fixed income portfolio is primarily invested in corporate bonds and commercial paper, foreign government securities, money market mutual funds, municipal securities, U.S. agency securities and U.S. Treasury securities.

Stock Repurchase Program

We currently have authority granted by our Board of Directors to repurchase up to $2.0 billion in common stock through the end of fiscal 2015. This stock repurchase program is similar to our previous $1.6 billion stock repurchase program which we exhausted during the second quarter of fiscal 2012.

During the three months ended March 1, 2013 and March 2, 2012, we entered into structured stock repurchase agreements with large financial institutions, whereupon we provided them with prepayments of $100.0 million and $80.0 million, respectively. The $100.0 million prepayments during the first quarter of fiscal 2013 were under the new $2.0 billion stock repurchase authority while the $80.0 million of prepayments during the first quarter of fiscal 2012 were under the previous $1.6 billion authority. We enter into these agreements in order to take advantage of repurchasing shares at a guaranteed discount to the Volume Weighted Average Price (“VWAP”) of our common stock over a specified period of time. We only enter into such transactions when the discount we receive is higher than the foregone return on our cash prepayments to the financial institutions. There were no explicit

39

commissions or fees on these structured repurchases. Under the terms of the agreements, there is no requirement for the financial institutions to return any portion of the prepayment to us.

The financial institutions agree to deliver shares to us at monthly intervals during the contract term. The parameters used to calculate the number of shares deliverable are: the total notional amount of the contract, the number of trading days in the contract, the number of trading days in the interval and the average VWAP of our stock during the interval less the agreed upon discount. During the three months ended March 1, 2013, we repurchased approximately 2.7 million shares at an average price of $37.32 through structured repurchase agreements entered into during fiscal 2012 and the three months ended March 1, 2013. During the three months ended March 2, 2012, we repurchased approximately 1.8 million shares at an average price of $30.07 through structured repurchase agreements entered into during the three months ended March 2, 2012.

Refer to Part II, Item 2 in this report for share repurchases during the quarter ended March 1, 2013.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

We presented our contractual obligations in our Annual Report on Form 10-K for the fiscal year ended November 30, 2012. Our principal commitments as of March 1, 2013 consist of obligations under operating leases, capital leases, royalty agreements and various service agreements. Except as discussed below, there have been no significant changes in those obligations during the three months ended March 1, 2013. See Notes 12 and 13 of our Notes to Condensed Consolidated Financial Statements for more detailed information.

Senior Notes

Interest on our senior notes is payable semi-annually, in arrears on February 1 and August 1. At March 1, 2013, our maximum commitment for interest payments under the Notes was $338.3 million for the remaining duration of our senior notes.

Capital Lease Obligation

In January 2013, we entered into a sale-leaseback agreement to sell equipment totaling $25.7 million and leaseback the same equipment over a period of 24 months. This transaction was classified as a capital lease obligation and was recorded at fair value.

The following table updates our capital lease obligations as of March 1, 2013 to include our new sale-leaseback agreement (in millions):

		Payment Due by Period
		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Capital lease obligations	$	36.7	$	23.0	$	13.7	$	—	$	—

Covenants

Our credit facility contains a financial covenant requiring us not to exceed a maximum leverage ratio. Our Almaden Tower lease includes certain financial ratios as defined in the lease agreements that are reported to the lessors quarterly. As of March 1, 2013, we were in compliance with all of our covenants. We believe these covenants will not impact our credit or cash in the coming fiscal year or restrict our ability to execute our business plan. Our Notes do not contain any financial covenants.

Under the terms of our credit agreement and lease agreements, we are not prohibited from paying cash dividends unless payment would trigger an event of default or one currently exists. We do not anticipate paying any cash dividends in the foreseeable future.

Royalties

We have certain royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally based on a dollar amount per unit shipped or a percentage of the underlying revenue.

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Indemnifications

In the normal course of business, we provide indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.

To the extent permitted under Delaware law, we have agreements whereby we indemnify our directors and officers for certain events or occurrences while the director or officer is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited, however, we have director and officer insurance coverage that limits our exposure and enables us to recover a portion of any future amounts paid.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We believe that there have been no significant changes in our market risk exposures for the three months ended March 1, 2013, as compared with those discussed in our Annual Report on Form 10-K for the fiscal year ended November 30, 2012.

ITEM 4.  CONTROLS AND PROCEDURES

Based on their evaluation as of March 1, 2013, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the quarter ended March 1, 2013 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Adobe have been detected.

PART II—OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

See Note 12 “Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements regarding our legal proceedings.

ITEM 1A.  RISK FACTORS

As previously discussed, our actual results could differ materially from our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed below. These and many other factors described in this report could adversely affect our operations, performance and financial condition.

If we cannot continue to develop, market and offer new products and services or upgrades or enhancements to existing products and services that meet customer requirements, our operating results could suffer.

The process of developing new high technology products and services and enhancing existing products and services is complex, costly and uncertain. If we fail to anticipate customers' changing needs and emerging technological trends, our market share and results of operations could suffer. We must make long-term investments, develop or obtain appropriate intellectual property and commit significant resources before knowing whether our predictions will accurately reflect customer demand for our products and services. If we are unable to extend our core technologies into new applications and new platforms, including the market for mobile, tablet and other IP-connected devices (“mobile devices”), and to anticipate or respond to technological changes, the market's acceptance of our products and services could decline and our results would suffer. Additionally, any delay in the development, production, marketing or offering of a new product or service or upgrade or enhancement to an existing product

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or service could result in customer attrition or impede our ability to attract new customers, causing a decline in our revenues, earnings or stock price and weakening our competitive position. We maintain strategic relationships with third parties to market certain of our products and support certain product functionality. If we are unsuccessful in establishing or maintaining our strategic relationships with these third parties, our ability to compete in the marketplace, to reach new customers and geographies or to grow our revenues would be impaired and our operating results would suffer.

We offer our products on a variety of PC and mobile devices. To the extent that there is a continued slowdown of customer purchases of personal computers or a general slowdown of purchases of devices on which our solutions are offered, or to the extent that significant demand arises for our products or competitive products on other platforms before we choose and are able to offer our products on these platforms, our business could be harmed. Releases of new devices or operating systems may make it more difficult for our products to perform or may require significant costs in order for us to adapt our solutions to such devices or operating systems. These potential costs and delays could harm our business.

Introduction of new products, services and business models by existing and new competitors could harm our competitive position and results of operations.

The markets for our products and services are characterized by intense competition, evolving industry standards, emerging business and distribution models, disruptive software and hardware technology developments, frequent new product and service introductions, including limited functionality alternatives available at lower costs or free of charge, short product and service life cycles and price sensitivity on the part of customers, all of which may result in downward pressure on pricing and gross margins and could adversely affect our renewal and upgrade rates, as well as our ability to attract new customers. Our future success will depend on our ability to enhance our existing products and services, introduce new products and services on a timely and cost-effective basis, meet changing customer needs, extend our core technology into new applications, and anticipate and respond to emerging standards, business models, software delivery methods and other technological changes, such as the evolution and emergence of digital application marketplaces as a direct sales and software delivery environment. These digital application marketplaces often have exclusive distribution for certain platforms, which may make it more difficult for us to compete in these markets. If any competing products, services, or operating systems achieve widespread acceptance, our operating results could suffer. In addition, consolidation has occurred among some of the competitors in the markets in which we compete. Further consolidations in these markets may subject us to increased competitive pressures and may therefore harm our results of operations.

For additional information regarding our competition and the risks arising out of the competitive environment in which we operate, see the section entitled “Competition” contained in Item 1 of our Annual Report on Form 10-K for the fiscal year ended November 30, 2012.

If we fail to successfully manage transitions to new business models and markets, our results of operations could be negatively impacted.

We often release numerous new product and service offerings and employ new software and services delivery methods in connection with our diversification into new business models and markets. It is uncertain whether these strategies will prove successful or whether we will be able to develop the necessary infrastructure and business models more quickly than our competitors. Market acceptance of these new product and service offerings will be dependent on our ability to (1) include functionality and usability in such releases that address certain customer requirements where our operating history is less extensive, and (2) to optimally price our products in light of marketplace conditions, our costs and customer demand. Some of these new product and service offerings could subject us to increased risk of legal liability related to the provision of services as well as cause us to incur significant technical, legal or other costs. For example, with our introduction of on-demand or cloud-based services and subscription-based licensing models, such as Creative Cloud, we are entering markets that may be unaccustomed to cloud-based subscription offerings. Market acceptance of such services is affected by a variety of factors, including information security, reliability, performance, social/community engagement, local government regulations regarding online services and user-generated content, the sufficiency of technological infrastructure to support our products in certain geographies, customer concerns with entrusting a third party to store and manage their data, public concerns regarding privacy and the enactment of laws or regulations that restrict our ability to provide such services to customers in the U.S. or internationally. From time to time we open source certain of our technology initiatives, provide broader open access to our technology, license certain of our technology on a royalty-free basis, and release selected technology for industry standardization. These changes may have negative revenue implications and make it easier for our competitors to produce products or services similar to ours. If we are unable to respond to these competitive threats, our business could be harmed.

Additionally, customer requirements for open standards or open-source products could impact adoption or use of some of our products or services. To the extent we incorrectly predict customer requirements for such products or services, or if there is a delay in market acceptance of such products or services, our business could be harmed.

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We are also devoting significant resources to the development of technologies and service offerings in markets where our operating history is less extensive, including cloud-based computing and mobile device markets. These new offerings and markets require a considerable investment of technical, financial, compliance and sales resources, and a scalable organization. Many of our competitors may have advantages over us due to their larger presence, larger developer network, deeper experience in the cloud-based computing and mobile device markets, and larger sales, consulting and marketing resources. If we are unable to successfully establish these new offerings in light of the competitive environment, our results of operations could suffer.

The increased emphasis on a cloud strategy may give rise to risks that could harm our business.

To accelerate the growth of our business, we launched our subscription-based Creative Cloud offering in fiscal 2012. As a result, we expect to derive an increasing portion of our revenues in the future from subscriptions to our creative tools and cloud-based offerings. This subscription model prices and delivers our products in a way that differs from the historical pricing and delivery methods of our creative tools. These changes reflect a shift from perpetual license sales and distribution of our software in favor of providing our customers the right to access certain of our software in a hosted environment or use downloaded software for a specified subscription period. This cloud strategy requires continued investment in product development and cloud operations, and may give rise to a number of risks, including the following:

• if new or current customers desire only perpetual licenses, our subscription sales may lag behind expectations;

• if new or current customers desire to purchase or renew only point product subscriptions rather than acquire the entire Creative Cloud offering, our subscription sales may lag behind our expectations;

• the increased emphasis on a cloud strategy may raise concerns among our installed perpetual license customer base;

• we may be unsuccessful in maintaining our target pricing, new seat adoption and projected renewal rates, or we may select a target price that is not optimal and could negatively affect our sales or earnings;

• our revenues are expected to decline over the short term and may decline over the long term as a result of this strategy;

• our shift to a subscription licensing model may result in confusion among our customers, partners, resellers and investors;

• our relationships with existing partners that resell perpetual license products may be damaged; and

• we may incur costs at a higher than forecasted rate as we expand our cloud operations.

Revenue from our product and service offerings may be difficult to predict.

As previously discussed, we are devoting significant resources to the development of product and service offerings as well as new distribution models where our operating history is less extensive. As our customers' purchases trend away from perpetual licenses toward subscriptions, we are experiencing and will continue to experience a deferral of revenues and cash received from customers. During this transition, our perpetual license revenue may decline more quickly than anticipated. Under a subscription model, downturns or upturns in sales may not be immediately reflected in our reported financial results. Subscription pricing allows customers to use our products at a lower initial cost when compared to the sale of a perpetual license. Although the subscription model is designed to increase the number of customers who purchase our products and services and create a recurring revenue stream that is more predictable, it creates certain risks related to the timing of revenue recognition and potential reductions in cash flows.

As a result, a portion of the subscription-based revenue we report each quarter results from the recognition of deferred revenue relating to subscription agreements entered into during previous quarters. A decline in new or renewed subscriptions in any period may not be immediately reflected in our reported financial results for that period, but may result in a decline in our revenue in future quarters. If we were to experience significant downturns in subscription sales and renewal rates, our reported financial results might not reflect such downturns until future periods. Our subscription model could also make it difficult for us to rapidly increase our revenues from subscription- or SaaS-based services through additional sales in any period, as revenue from new customers will be recognized over the applicable subscription term. Further, any increases in sales under our subscription sales model could result in decreased revenues over the short term if they are offset by a decline in sales from perpetual license customers.

Additionally, in connection with our sales efforts to enterprise customers and our introduction of enterprise term license agreements, a number of factors could affect our revenues, including longer than expected sales and implementation cycles, potential deferral of revenue due to multiple-element revenue arrangements and alternate licensing arrangements. If any of our

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assumptions about revenue from our new businesses or our addition of a subscription-based model prove incorrect, our actual results may vary materially from those anticipated, estimated or projected.

We may be unable to predict subscription renewal or upgrade rates and the impact these rates may have on our future revenue and operating results.

The SaaS business model we utilize in our Adobe Marketing Cloud offerings typically involves selling services on a subscription basis pursuant to service agreements that are generally one to three years in length, our individual Creative Cloud subscription agreements are generally month to month or one year in length, and subscription agreements for other products and services may provide for shorter or longer terms. Although many of our service and subscription agreements contain automatic renewal terms, our customers have no obligation to renew their subscriptions for our services after the expiration of their initial subscription period, and some customers elect not to renew. We cannot provide assurance that these subscriptions will be renewed at the same or higher level of service, for the same number of seats or for the same duration of time, if at all. Moreover, under certain circumstances, some of our customers have the right to cancel their service agreements prior to the expiration of the terms of their agreements. We cannot be assured that we will be able to accurately predict future customer renewal rates. Our customers' renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our services, the prices of our services, the prices of services offered by our competitors, mergers and acquisitions affecting our customer base, reductions in our customers' spending levels, or declines in customer activity as a result of economic downturns or uncertainty in financial markets. If our customers do not renew their subscriptions for our services or if they renew on less favorable terms to us, our revenues may decline.

Our future growth is also affected by our ability to sell additional features and services to our current customers, which depends on a number of factors, including our customers' satisfaction with our services, the prices of our services and general economic conditions. If our efforts to cross-sell and upsell to our customers are unsuccessful, the rate at which our business grows might decline.

Security vulnerabilities in our products and systems could lead to reduced revenues or to liability claims.

Maintaining the security of our products, computers and networks is a critical issue for us and our customers. Security researchers, criminal hackers and other third parties regularly develop new techniques to penetrate computer and network security measures and have in the past managed to penetrate certain of our systems and misused certain of our systems and software. In addition, hackers also develop and deploy viruses, worms and other malicious software programs, some of which may be specifically designed to attack our products, systems, computers or networks. Sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain defects in design or manufacture, including bugs and other problems that could unexpectedly compromise the security of the system. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions, as well as potential liability to the company.

Outside parties have attempted in the past and may in the future attempt to fraudulently induce our employees or users of our products to disclose sensitive information in order to gain access to our data or our customers' data. Unauthorized parties may also attempt to gain physical access to one of our facilities in order to infiltrate our information systems. These potential breaches of our security measures and the accidental loss, inadvertent disclosure or unauthorized dissemination of proprietary information or sensitive, personal or confidential data about us, our employees or our customers, including the potential loss or disclosure of such information or data as a result of hacking, fraud, trickery or other forms of deception, could expose us, our employees, our customers or the individuals affected to a risk of loss or misuse of this information, result in litigation and potential liability or fines for us, governmental inquiry and oversight, damage our brand and reputation or otherwise harm our business.

Although these are industry-wide problems that affect computers and products across all platforms, they affect our products in particular because hackers tend to focus their efforts on the most popular operating systems and programs and we expect them to continue to do so. Critical vulnerabilities may be identified in certain of our applications. These vulnerabilities could cause such applications to crash and could potentially allow an attacker to take control of the affected system, which could result in liability to us or limit our ability to conduct our business and deliver our products and services to customers. We devote significant resources to address security vulnerabilities through engineering more secure products, enhancing security and reliability features in our products and systems, code hardening, conducting rigorous penetration tests, deploying security updates to address security vulnerabilities and improving our incident response time. The cost of these steps could reduce our operating margins, and we may be unable to implement these measures quickly enough to prevent hackers from gaining unauthorized access into our systems and products. Despite our preventative efforts, actual or perceived security vulnerabilities in our products and systems may lead to claims against us and harm our reputation, and could lead some customers to seek to return products, to stop using certain services,

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to reduce or delay future purchases of products or services, or to use competing products or services. If we do not make the appropriate level of investment in our technology systems or if our systems become out-of-date or obsolete and we are not able to deliver the quality of data security customers require, our business could be adversely affected. Customers may also increase their expenditures on security measures designed to protect their existing computer systems from attack, which could delay adoption of new technologies. Further, if we or our customers are subject to an attack, or our technology is utilized in a third-party attack, it may be necessary for us to take certain measures and make certain expenditures to take appropriate responsive and preventative steps. Any of these actions by customers could adversely affect our revenues or margins. Moreover, delayed sales, lower margins or lost customers resulting from the disruptions of cyber-attacks or preventative measures could adversely affect our financial results, stock price and reputation.

Uncertainty about current and future economic conditions and other adverse changes in general political conditions in any of the major countries in which we do business could adversely affect our operating results.

As our business has grown, we have become increasingly subject to the risks arising from adverse changes in economic and political conditions, both domestically and globally. Uncertainty about current and future economic and political conditions on us, our customers, suppliers and partners, makes it difficult for us to forecast operating results and to make decisions about future investments. If economic growth in the U.S., Europe and other countries slows or does not improve, or if the U.S., Europe or other countries in which we do business experience further economic recessions, many customers may delay or reduce technology purchases, advertising spending or marketing spending. This could result in reductions in sales of our products and services, longer sales cycles, slower adoption of new technologies and increased price competition. Additionally, we cannot yet predict how federal or state spending cuts in the U.S. may affect our business, if at all. Our customers include government entities, including the U.S. federal government, and if spending cuts impede the government's ability to purchase our products and solutions, our revenues could decline. Deterioration in economic conditions in any of the countries in which we do business could also cause slower or impaired collections on accounts receivable, which may adversely impact our liquidity and financial condition.

There could be a number of effects from a financial institution credit crisis on our business, which could include impaired credit availability and financial stability of our customers, including our distribution partners and channels. A disruption in the financial markets may also have an effect on our derivative counterparties and could also impair our banking partners on which we rely for operating cash management. Any of these events would likely harm our business, results of operations and financial condition.

Political instability in any of the major countries in which we do business would also likely harm our business, results of operations and financial condition.

We may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt our business and management.

We have in the past and may in the future acquire additional companies, products or technologies. We may not realize the anticipated benefits of an acquisition, each of which involves numerous risks. These risks include:

• difficulty in integrating the operations and personnel of the acquired company;

• difficulty in effectively integrating the acquired technologies, products or services with our current technologies, products or services;

• difficulty in maintaining controls, procedures and policies during the transition and integration;

• entry into markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;

• disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges;

• difficulty integrating the acquired company's accounting, management information, human resources and other administrative systems;

• inability to retain personnel of the acquired business;

• inability to retain key customers, distributors, vendors and other business partners of the acquired business;

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• inability to achieve the financial and strategic goals for the acquired and combined businesses;

• inability to take advantage of anticipated tax benefits as a result of unforeseen difficulties in our integration activities;

• incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;

• potential additional exposure to fluctuations in currency exchange rates;

• potential additional costs of bringing acquired companies into compliance with laws and regulations applicable to us as a multi-national corporation;

• potential impairment of our relationships with employees, customers, partners, distributors or third-party providers of our technologies, products or services;

• potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company or technology, including but not limited to, issues with the acquired company's intellectual property, product quality or product architecture, data back-up and security (including security from cyber-attacks), privacy practices, revenue recognition or other accounting practices, employee, customer or partner issues or legal and financial contingencies;

• exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to, claims from terminated employees, customers, former stockholders or other third parties;

• incurring significant exit charges if products or services acquired in business combinations are unsuccessful;

• potential inability to assert that internal controls over financial reporting are effective;

• potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions;

• potential delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product and service offerings; and

• potential incompatibility of business cultures.

Mergers and acquisitions of high technology companies are inherently risky, and ultimately, if we do not complete an announced acquisition transaction or integrate an acquired business successfully and in a timely manner, we may not realize the benefits of the acquisition to the extent anticipated.

We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a result of litigation or other proceedings.

In connection with the enforcement of our own intellectual property rights, the acquisition of third-party intellectual property rights, or disputes relating to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation are typically very costly and can be disruptive to our business operations by diverting the attention and energies of management and key technical personnel. Although we have successfully defended or resolved past lawsuits and other disputes, we may not prevail in the future. Third-party intellectual property disputes, including those initiated by non-practicing entities, could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our sale of products or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification commitments with our customers including contractual provisions under various license arrangements and service agreements. In addition, we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products, in some cases to fulfill contractual obligations with our customers. Any of these occurrences could significantly harm our business.

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We may not be able to protect our intellectual property rights, including our source code, from third-party infringers or unauthorized copying, use or disclosure.

Although we defend our intellectual property rights and combat unlicensed copying, access and use of software and intellectual property through a variety of techniques, preventing unauthorized use or infringement of our rights is inherently difficult. We actively combat software piracy as part of our enforcement of our intellectual property rights, but we nonetheless lose significant revenue due to illegal use of our software. If piracy activities continue at historical levels or increase, it may further harm our business.

Additionally, we take significant measures to protect the secrecy of our confidential information and trade secrets, including our source code. Despite these measures, hackers have managed to obtain limited access to certain of our source code in the past and may obtain access in the future. If unauthorized disclosure of our source code occurs through security breach, attack or otherwise, we could potentially lose future trade secret protection for that source code. The loss of future trade secret protection could make it easier for third parties to compete with our products by copying functionality, which could cause us to lose customers and could adversely affect our revenue and operating margins. We also seek to protect our confidential information and trade secrets through the use of non-disclosure agreements with our customers, contractors, vendors and partners. However, there is a risk that our confidential information and trade secrets may be disclosed or published without our authorization, and in these situations it may be difficult and/or costly for us to enforce our rights.

Increasing regulatory focus on privacy issues and expanding laws and regulations could impact our new business models and expose us to increased liability.

Our new business models are more highly regulated, including for privacy and data security. We are also expanding these new models in countries that have more stringent data protection laws than those in the U.S. With these new business models, our liability exposure, compliance requirements and costs associated with privacy issues will likely increase. Privacy laws globally are changing and evolving. Governments, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share or transmit personal data. New laws and industry self-regulatory codes have been enacted and more are being considered that may affect our ability to reach current and prospective customers, to understand how our products and services are being used, to respond to customer requests allowed under the laws, and to implement our new business models effectively. These new laws and regulations would similarly affect our competitors as well as our customers. Any perception of our practices or products as an invasion of privacy, whether or not consistent with current regulations and industry practices, may subject us to public criticism, class action lawsuits, reputational harm or claims by regulators, industry groups or other third parties, all of which could disrupt our business and expose us to increased liability. Additionally, both laws regulating privacy, as well as third-party products addressing perceived privacy concerns, could affect the functionality of and demand for our products, thereby harming our revenues.

On behalf of certain of our customers using some of our services, we collect and store information derived from the activities of website visitors, which may include anonymous and/or personal information. This enables us to provide such customers with reports on aggregated anonymous or personal information from and about the visitors to their websites in the manner specifically directed by each such individual customer. Federal, state and foreign governments and agencies have adopted or are considering adopting laws regarding the collection, use and disclosure of this information. Our compliance with privacy laws and regulations and our reputation among the public body of website visitors depend in part on such customers' adherence to privacy laws and regulations and their use of our services in ways consistent with such visitors' expectations. We also rely on representations made to us by customers that their own use of our services and the information they provide to us via our services do not violate any applicable privacy laws, rules and regulations or their own privacy policies. We ask customers to represent to us that they provide their website visitors the opportunity to “opt-out” of the information collection associated with our services, as applicable. We do not formally audit such customers to confirm compliance with these representations. If these representations are false or if such customers do not otherwise comply with applicable privacy laws, we could face potentially adverse publicity and possible legal or other regulatory action. In addition, some countries are considering enacting laws that would expand the scope of privacy-related obligations required of service providers, such as Adobe, that would require additional compliance expense and increased liability.

Some of our lines of business rely on us or our third-party service providers to host and deliver services and data, and any interruptions or delays in these hosted services, security or privacy breaches, or failures in data collection could expose us to liability and harm our business and reputation.

Some of our lines of business and services, including our online store at adobe.com, our Creative Cloud offering, our hosted Digital Media offerings and our Adobe Marketing Cloud offerings, rely on services hosted and controlled directly by us or by third parties. Because we hold large amounts of customer data, some of which is hosted in third-party facilities, a security incident at those facilities may compromise the confidentiality, integrity or availability of customer data. Unauthorized access to customer data stored on our computers or networks may be obtained through break-ins, breach of our secure network by an unauthorized

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party, employee theft or misuse, or other misconduct. It is also possible that unauthorized access to customer data may be obtained through inadequate use of security controls by customers. While our products and services provide and support strong password controls, IP restriction and account controls, their use is controlled by the customer. As such, this could allow accounts to be created with weak passwords, which could result in allowing an attacker to gain access to customer data. Additionally, failure by customers to remove accounts of their own employees, or granting of accounts by the customer in an uncontrolled manner, may allow for access by former or unauthorized customer employees. If there were an inadvertent disclosure of personal information, or if a third party were to gain unauthorized access to the personal information we possess on behalf of our customers, our operations could be disrupted, our reputation could be harmed and we could be subject to claims or other liabilities. In addition, such perceived or actual unauthorized disclosure of the information we collect or breach of our security could damage our reputation, result in the loss of customers and harm our business.

Because of the large amount of data that we collect and manage on behalf of our customers, it is possible that hardware or software failures or errors in our systems (or those of our third-party service providers) could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant. Furthermore, our ability to collect and report data may be delayed or interrupted by a number of factors, including access to the internet, the failure of our network or software systems, security breaches or significant variability in visitor traffic on customer websites. In addition, computer viruses may harm our systems causing us to lose data, and the transmission of computer viruses could expose us to litigation. We may also find, on occasion, that we cannot deliver data and reports to our customers in near real time because of a number of factors, including significant spikes in customer activity on their websites or failures of our network or software. If we supply inaccurate information or experience interruptions in our ability to capture, store and supply information in near real time or at all, our reputation could be harmed and we could lose customers, or we could be found liable for damages or incur other losses.

Failure to manage our sales and distribution channels and third-party customer service and technical support providers effectively could result in a loss of revenue and harm to our business.

A significant amount of our revenue for application products is from one distributor, Ingram Micro, Inc., which represented 8% of our net revenue for the first quarter of fiscal 2013. We have multiple non-exclusive, independently negotiated distribution agreements with Ingram Micro and its subsidiaries covering our arrangements in specified countries and regions. Each of these contracts has an independent duration, is independent of any other agreement (such as a master distribution agreement) and any termination of one agreement does not affect the status of any of the other agreements. In the first quarter of fiscal 2013, no single agreement with this or any other distributor was responsible for over 5% of our total net revenue. If any one of our agreements with this distributor were terminated, we believe we could make arrangements with new or existing distributors to distribute our products without a substantial disruption to our business; however, any prolonged delay in securing a replacement distributor could have a negative short-term impact on our results of operations.

Successfully managing our indirect channel efforts to reach various potential customer segments for our products and services is a complex process across the broad range of geographies where we do business or plan to do business. Our distributors and other channel partners are independent businesses that we do not control. Notwithstanding the independence of our channel partners, we face potential legal risk and reputational harm from the activities of these third parties including, but not limited to, export control violations, workplace conditions, corruption and anti-competitive behavior. Although we have undertaken efforts to reduce these third-party risks, they remain present. We cannot be certain that our distribution channel will continue to market or sell our products effectively, especially in terms of selling our Creative Cloud subscription offerings. If our distribution channel is not successful, we may lose sales opportunities, customers and revenues.

Our distributors also sell our competitors' products, and if they favor our competitors' products for any reason, they may fail to market our products as effectively or to devote resources necessary to provide effective sales, which would cause our results to suffer. We also distribute some products through our OEM channel, and if our OEMs decide not to bundle our applications on their devices, our results could suffer.

In addition, the financial health of our distributors and our continuing relationships with them are important to our success. Some of these distributors may be adversely impacted by changes to our business model and practices, such as our release of Creative Cloud offerings for teams and enterprises, or unable to withstand adverse changes in current economic conditions, which could result in insolvency and/or the inability of such distributors to obtain credit to finance purchases of our products. In addition, weakness in the end-user market could further negatively affect the cash flows of our distributors who could, in turn, delay paying their obligations to us, which would increase our credit risk exposure. Our business could be harmed if the financial condition of some of these distributors substantially weakened and we were unable to timely secure replacement distributors.

We also sell certain of our products and services through our direct sales force. Risks associated with this sales channel include longer sales and collection cycles associated with direct sales efforts, challenges related to hiring, retaining and motivating

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our direct sales force, and substantial amounts of training for sales representatives, including regular updates to cover new and upgraded systems, products and services. Moreover, our recent hires may not become as productive as we would like, as in most cases it takes a significant period of time before they achieve full productivity. Our business could be seriously harmed if these expansion efforts do not generate a corresponding significant increase in revenues and we are unable to achieve the efficiencies we anticipate. In addition, the loss of key sales employees could impact our relationships and future ability to sell to certain accounts covered by such employees.

We also provide products and services, directly and indirectly, to a variety of governmental entities, both domestically and internationally. Risks associated with licensing and selling products and services to governmental entities include longer sales cycles associated with selling to diverse governmental entities, varying governmental budgeting processes and timelines and adherence to potentially complex specific procurement regulations and other requirements. Ineffectively managing these risks could result in the potential assessment of penalties and fines, harm to our reputation and lost sales opportunities to such governmental entities.

We outsource a substantial portion of our customer service and technical support activities to third-party service providers. We rely heavily on these third-party customer service and technical support representatives working on our behalf and we expect to continue to rely heavily on third parties in the future. This strategy provides us with lower operating costs and greater flexibility, but also presents risks to our business, including the possibilities that we may not be able to influence the quality of support that we provide as directly as we would be able to do in our own company-run call centers, and that our customers may react negatively to providing information to, and receiving support from, third-party organizations, especially if based overseas. If we encounter problems with our third-party customer service and technical support providers, our reputation may be harmed and our revenue may be adversely affected.

Catastrophic events may disrupt our business.

We are a highly automated business and rely on our network infrastructure and enterprise applications, internal technology systems and our website for our development, marketing, operational, support, hosted services and sales activities. In addition, some of our businesses rely on third-party hosted services and we do not control the operation of third-party data center facilities serving our customers from around the world, which increases our vulnerability. A disruption, infiltration or failure of these systems or third-party hosted services in the event of a major earthquake, fire, flood, power loss, telecommunications failure, software or hardware malfunctions, cyber-attack, war, terrorist attack or other catastrophic event could cause system interruptions, reputational harm, loss of intellectual property, delays in our product development, lengthy interruptions in our services, breaches of data security and loss of critical data and could prevent us from fulfilling our customers' orders. Our corporate headquarters, a significant portion of our research and development activities, certain of our data centers and certain other critical business operations are located in the San Francisco Bay Area, and additional facilities where we conduct significant operations are located in the Salt Lake Valley Area, both of which are near major earthquake faults. We have developed certain disaster recovery plans and backup systems to reduce the potentially adverse effect of such events, but a catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected.

Net revenue, margin or earnings shortfalls or the volatility of the market generally may cause the market price of our stock to decline.

The market price for our common stock has experienced significant fluctuations and may continue to fluctuate significantly. A number of factors may affect the market price for our common stock, including:

• shortfalls in our revenue, margins, earnings or key performance metrics;

• confusion on the part of industry analysts and investors about the long-term impact to our business resulting from our subscription offerings;

• shortfalls in the number of paid, active Creative Cloud subscribers and ARR;

• shortfalls in new business bookings within our Adobe Marketing Cloud business;

• changes in estimates or recommendations by securities analysts;

• the announcement of new products, product enhancements or service introductions by us or our competitors;

• seasonal variations in the demand for our products and services and the implementation cycles for our new customers;

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• the loss of a large customer or our inability to increase sales to existing customers or attract new customers;

• variations in our or our competitors' results of operations, changes in the competitive landscape generally and developments in our industry; and

• unusual events such as significant acquisitions, divestitures, litigation, general socio-economic, regulatory, political or market conditions and other factors, including factors unrelated to our operating performance.

We are subject to risks associated with compliance with laws and regulations globally which may harm our business.

We are a global company subject to varied and complex laws, regulations and customs domestically and internationally. These laws and regulations relate to a number of aspects of our business, including trade protection, import and export control, data and transaction processing security, records management, employee data privacy, user-generated content hosted on websites we operate, corporate governance, employee and third-party complaints, gift policies, conflicts of interest, employment and labor relations laws, securities regulations and other regulatory requirements affecting trade and investment. The application of these laws and regulations to our business is often unclear and may at times conflict. Compliance with these laws and regulations may involve significant costs or require changes in our business practices that result in reduced revenue and profitability. Non-compliance could also result in fines, damages, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business, and damage to our reputation. We incur additional legal compliance costs associated with our global operations and could become subject to legal penalties if we fail to comply with local laws and regulations in U.S. jurisdictions or in foreign countries, which laws and regulations may be substantially different from those in the U.S. In many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by U.S. regulations applicable to us, including the Foreign Corrupt Practices Act. Although we implement policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, including those based in or from countries where practices that violate such U.S. laws may be customary, will not take actions in violation of our internal policies. Any such violation, even if prohibited by our internal policies, could have an adverse effect on our business.

As a global business that generates approximately 50% of our total revenue from sales to customers outside of the Americas, we are subject to a number of risks, including:

• foreign currency fluctuations;

• changes in government preferences for software procurement;

• international economic, political and labor conditions;

• tax laws (including U.S. taxes on foreign subsidiaries);

• increased financial accounting and reporting burdens and complexities;

• unexpected changes in, or impositions of, legislative or regulatory requirements;

• failure of laws to protect our intellectual property rights adequately;

• inadequate local infrastructure and difficulties in managing and staffing international operations;

• delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers and restrictions;

• the imposition of governmental economic sanctions on countries in which we do business or where we plan to expand our business;

• transportation delays;

• operating in locations with a higher incidence of corruption and fraudulent business practices; and

• other factors beyond our control, including terrorism, war, natural disasters and pandemics.

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If sales to any of our customers outside of the Americas are delayed or canceled because of any of the above factors, our revenue may be negatively impacted.

In addition, approximately 48% of our employees are located outside the U.S. Accordingly, we are exposed to changes in laws governing our employee relationships in various U.S. and foreign jurisdictions, including laws and regulations regarding wage and hour requirements, fair labor standards, employee data privacy, unemployment tax rates, workers' compensation rates, citizenship requirements and payroll and other taxes, which likely would have a direct impact on our operating costs. We also intend to continue expansion of our international operations and international sales and marketing activities. Expansion in international markets has required, and will continue to require, significant management attention and resources. We may be unable to scale our infrastructure effectively or as quickly as our competitors in these markets, and our revenues may not increase to offset these expected increases in costs and operating expenses, which would cause our results to suffer.

We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure.

Our operating results are subject to fluctuations in foreign currency exchange rates. We attempt to mitigate a portion of these risks through foreign currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity and expense. We have established a hedging program to partially hedge our exposure to foreign currency exchange rate fluctuations for various currencies. If the foreign currency hedging markets are negatively affected by clearing and trade execution regulations imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the cost of hedging our foreign exchange exposure could increase.

We regularly review our hedging program and make adjustments as necessary based on the judgment factors discussed above. Our hedging activities may not offset more than a portion of the adverse financial impact resulting from unfavorable movement in foreign currency exchange rates, which could adversely affect our financial condition or results of operations.

We have issued $1.5 billion of notes in a debt offering and may incur other debt in the future, which may adversely affect our financial condition and future financial results.

In the first quarter of fiscal 2010, we issued $1.5 billion in senior unsecured notes. We also have a $1.0 billion revolving credit facility, which is currently undrawn. Although we have no current plans to request any advances under this credit facility, we may use the proceeds of any future borrowing for general corporate purposes, or for future acquisitions or expansion of our business.

This debt may adversely affect our financial condition and future financial results by, among other things:

• requiring the dedication of a portion of our expected cash from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions; and

• limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

Our senior unsecured notes and revolving credit facility impose restrictions on us and require us to maintain compliance with specified covenants. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the lenders or noteholders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.

In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our debt and equity securities, as well as the potential costs associated with a refinancing of our debt. Under certain circumstances, if our credit ratings are downgraded or other negative action is taken, the interest rate payable by us under our revolving credit facility could increase. Downgrades in our credit ratings could also restrict our ability to obtain additional financing in the future and could affect the terms of any such financing.

Changes in, or interpretations of, accounting principles could have a significant impact on our financial position and results of operations.

We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions.

For example, the U.S.-based Financial Accounting Standards Board (“FASB”) is currently working together with the International Accounting Standards Board (“IASB”) on several projects to further align accounting principles and facilitate more comparable financial reporting between companies who are required to follow GAAP under SEC regulations and those who are

51

required to follow International Financial Reporting Standards outside of the U.S. These efforts by the FASB and IASB may result in different accounting principles under GAAP that may result in materially different financial results for us in areas including, but not limited to, principles for recognizing revenue and lease accounting.

If our goodwill or amortizable intangible assets become impaired we may be required to record a significant charge to earnings.

Under GAAP, we review our goodwill and amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. GAAP requires us to test for goodwill impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable include a decline in stock price and market capitalization, future cash flows and slower growth rates in our industry. We may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, resulting in an impact on our results of operations.

Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.

We are a United States-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. A significant portion of our foreign earnings for the current fiscal year were earned by our Irish subsidiaries. In addition to providing for U.S. income taxes on earnings from the United States, we provide for U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries' earnings are considered permanently reinvested outside the United States. While we do not anticipate changing our intention regarding permanently reinvested earnings, if certain foreign earnings previously treated as permanently reinvested are repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings.

Our income tax expense has differed from the tax computed at the U.S. federal statutory income tax rate due primarily to discrete items and to earnings considered as permanently reinvested in foreign operations. Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates could be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned, by changes in, or our interpretation of, tax rules and regulations in the jurisdictions in which we do business, by unanticipated decreases in the amount of earnings in countries with low statutory tax rates, by lapses of the availability of the U.S. research and development tax credit, or by changes in the valuation of our deferred tax assets and liabilities.

In addition, we are subject to the continual examination of our income tax returns by the Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities, including a current examination by the IRS of our fiscal 2008 and 2009 tax returns. These examinations are expected to focus on our intercompany transfer pricing practices as well as other matters. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from the current examinations. We believe such estimates to be reasonable; however, there can be no assurance that the final determination of any of these examinations will not have an adverse effect on our operating results and financial position.

If we are unable to recruit and retain key personnel our business may be harmed.

Much of our future success depends on the continued service and availability of our senior management. These individuals have acquired specialized knowledge and skills with respect to Adobe. The loss of any of these individuals could harm our business. Our business is also dependent on our ability to retain, hire and motivate talented, highly skilled personnel across all levels of our organization. Experienced personnel in the information technology industry are in high demand and competition for their talents is intense in many areas where our employees are located. If we are unable to continue to successfully attract and retain key personnel, our business may be harmed. Effective succession planning is also a key factor for our long-term success. Our failure to enable the effective transfer of knowledge and facilitate smooth transitions of our key employees could adversely affect our long-term strategic planning and execution.

We believe that a critical contributor to our success to date has been our corporate culture, which we have built to foster innovation, teamwork and employee satisfaction. As we grow, including from the integration of employees and businesses acquired in connection with our previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture which could negatively affect our ability to retain and recruit personnel and otherwise adversely affect our future success.

Our investment portfolio may become impaired by deterioration of the capital markets.

Our cash equivalent and short-term investment portfolio as of March 1, 2013 consisted of corporate bonds and commercial paper, foreign government securities, money market mutual funds, municipal securities, time deposits, U.S. agency securities and U.S. Treasury securities. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes.

52

Should financial market conditions worsen in the future, investments in some financial instruments may pose risks arising from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and expense to vary from expectations. As of March 1, 2013, we had no material impairment charges associated with our short-term investment portfolio, and although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Below is a summary of stock repurchases for the three months ended March 1, 2013. See Note 10 of our Notes to Condensed Consolidated Financial Statements for information regarding our stock repurchase program.

Period	Shares Repurchased	Average Price Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value that May Yet be Purchased Under the Plans (1)
	(in thousands, except average price per share)
Beginning repurchase authority					$	1,933,005
December 1—December 28, 2012
Shares repurchased	918	$	35.94	918	$	(33,005	)
December 29—January 28, 2013
Shares repurchased	911	$	37.78	911	$	(34,426	)	(2	)
January 29—March 1, 2013
Shares repurchased	856	$	38.32	856	$	(32,784	)	(2	)
Total	2,685			2,685	$	1,832,790

^{_________________________________________} 

⁽¹⁾  We currently have authority granted by our Board of Directors to repurchase up to $2.0 billion in common stock through the end of fiscal 2015. This stock repurchase program is similar to our previous $1.6 billion stock repurchase program which we exhausted during the second quarter of fiscal 2012.

⁽²⁾  In December 2012, as part of the new stock repurchase program, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $100.0 million. As of March 1, 2013, approximately $32.8 million of the prepayment remained under this agreement.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

ITEM 6.  EXHIBITS

The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-Q.

53

SIGNATURE

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

ADOBE SYSTEMS INCORPORATED
By:	/s/ MARK GARRETT
	Mark Garrett
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

Date: March 28, 2013

54

SUMMARY OF TRADEMARKS

The following trademarks of Adobe Systems Incorporated or its subsidiaries, which may be registered in the United States and/or other countries, are referenced in this Form 10-Q:

Adobe

Acrobat

Creative Cloud

Creative Suite

EchoSign

Flash

Lightroom

LiveCycle

Photoshop

PostScript

All other trademarks are the property of their respective owners.

55

INDEX TOEXHIBITS

		Incorporated by Reference**
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
3.1	Restated Certificate of Incorporation of Adobe Systems Incorporated	8-K	4/26/11	3.3
3.2	Amended and Restated Bylaws	8-K	10/30/12	3.1
4.1	Specimen Common Stock Certificate	S-3	1/15/10	4.3
4.2	Form of Indenture	S-3	1/15/10	4.1
4.3	Forms of Global Note for Adobe Systems Incorporated’s 3.250% Notes due 2015 and 4.750% Notes due 2020, together with Form of Officer’s Certificate setting forth the terms of the Notes	8-K	1/26/10	4.1
10.1	Amended 1994 Performance and Restricted Stock Plan*	10-Q	4/9/10	10.1
10.2	Form of Restricted Stock Agreement used in connection with the Amended 1994 Performance and Restricted Stock Plan*	10-K	1/23/09	10.3
10.3	1997 Employee Stock Purchase Plan, as amended*	8-K	4/26/11	10.1
10.4	1996 Outside Directors Stock Option Plan, as amended*	10-Q	4/12/06	10.6
10.5	Forms of Stock Option Agreements used in connection with the 1996 Outside Directors Stock Option Plan*	S-8	6/16/00	4.8
10.6	2003 Equity Incentive Plan, as amended and restated*	8-K	4/13/12	10.1
10.7	Form of Stock Option Agreement used in connection with the 2003 Equity Incentive Plan*	8-K	12/20/10	99.4
10.8	Form of Indemnity Agreement*	10-Q	6/26/09	10.12
10.9	Forms of Retention Agreement*	10-K	2/17/98	10.44
10.10	Second Amended and Restated Master Lease of Land and Improvements by and between SMBC Leasing and Finance, Inc. and Adobe Systems Incorporated	10-Q	10/7/04	10.14
10.11	Lease between Adobe Systems Incorporated and Selco Service Corporation, dated March 26, 2007	8-K	3/28/07	10.1

56

		Incorporated by Reference**
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
10.12	Participation Agreement among Adobe Systems Incorporated, Selco Service Corporation, et al. dated March 26, 2007	8-K	3/28/07	10.2
10.13	Master Amendment No. 2 among Adobe Systems Incorporated, Selco Service Corporation and KeyBank National Association dated October 31, 2011	10-K	1/22/13	10.13
10.14	Form of Restricted Stock Unit Agreement used in connection with the Amended 1994 Performance and Restricted Stock Plan*	10-K	1/26/12	10.13
10.15	Form of RSU Grant Notice and Award Agreement pursuant to the 2003 Equity Incentive Plan*	8-K	1/28/13	10.6
10.16	Form of Restricted Stock Agreement used in connection with the 2003 Equity Incentive Plan*	10-Q	10/7/04	10.11
10.17	2005 Equity Incentive Assumption Plan, as amended*	10-Q	4/9/10	10.19
10.18	Form of Stock Option Agreement used in connection with the 2005 Equity Incentive Assumption Plan*	8-K	12/20/10	99.10
10.19	Allaire Corporation 1997 Stock Incentive Plan*	S-8	3/27/01	4.06
10.20	Allaire Corporation 1998 Stock Incentive Plan, as amended*	S-8	3/27/01	4.07
10.21	Allaire Corporation 2000 Stock Incentive Plan*	S-8	3/27/01	4.08
10.22	Andromedia, Inc. 1999 Stock Plan*	S-8	12/7/99	4.09
10.23	Blue Sky Software Corporation 1996 Stock Option Plan*	S-8	12/29/03	4.07
10.24	Macromedia, Inc. 1999 Stock Option Plan*	S-8	8/17/00	4.07
10.25	Macromedia, Inc. 2002 Equity Incentive Plan*	S-8	8/10/05	4.08
10.26	Form of Macromedia, Inc. Stock Option Agreement*	S-8	8/10/05	4.09
10.27	Form of Macromedia, Inc. Revised Non-Plan Stock Option Agreement*	S-8	11/23/04	4.10
10.28	Form of Macromedia, Inc. Restricted Stock Purchase Agreement*	10-Q	2/8/05	10.01

57

		Incorporated by Reference**
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
10.29	Adobe Systems Incorporated Form of Performance Share Program pursuant to the 2003 Equity Incentive Plan*	8-K	1/26/12	10.2
10.30	Form of Award Grant Notice and Performance Share Award Agreement used in connection with grants under the Adobe Systems Incorporated 2008 Performance Share Program pursuant to the 2003 Equity Incentive Plan*	8-K	1/30/08	10.2
10.31	2008 Award Calculation Methodology Exhibit A to the 2008 Performance Share Program pursuant to the 2003 Equity Incentive Plan*	8-K	1/30/08	10.3
10.32	Adobe Systems Incorporated Deferred Compensation Plan*	10-K	1/24/08	10.52
10.33	Adobe Systems Incorporated Executive Cash Performance Bonus Plan*	DEF 14A	2/24/06	Appendix B
10.34	Second Amendment to Retention Agreement between Adobe Systems Incorporated and Shantanu Narayen, effective as of December 17, 2010*	10-K	1/27/11	10.40
10.35	Employment offer letter between Adobe Systems Incorporated and Richard Rowley, dated October 30, 2006*	8-K	11/16/06	10.1
10.36	Employment offer letter between Adobe Systems Incorporated and Mark Garrett dated January 5, 2007*	8-K	1/26/07	10.1
10.37	Credit Agreement, dated as of March 2, 2012, among Adobe Systems Incorporated and certain subsidiaries as Borrowers, The Royal Bank of Scotland PLC and U.S. Bank National Association as Co-Documentation Agents, JPMorgan Chase Bank, N.A., as Syndication Agent, Bank of America, N.A. as Administrative Agent and Swing Line Lender, and the Other Lenders Party Thereto	8-K	3/7/12	10.1
10.38	Purchase and Sale Agreement, by and between NP Normandy Overlook, LLC, as Seller and Adobe Systems Incorporated as Buyer, effective as of May 12, 2008	8-K	5/15/08	10.1
10.39	Form of Director Annual Grant Stock Option Agreement used in connection with the 2003 Equity Incentive Plan*	8-K	12/20/10	99.8
10.40	Form of Director Initial Grant Restricted Stock Unit Agreement in connection with the 2003 Equity Incentive Plan*	8-K	12/20/10	99.6

58

		Incorporated by Reference**
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
10.41	Form of Director Annual Grant Restricted Stock Unit Agreement in connection with the 2003 Equity Incentive Plan*	8-K	12/20/10	99.7
10.42	2009 Executive Annual Incentive Plan*	8-K	1/29/09	10.4
10.43	Omniture, Inc. 1999 Equity Incentive Plan, as amended (the “Omniture 1999 Plan”)*	S-1	4/4/06	10.2A
10.44	Forms of Stock Option Agreement under the Omniture 1999 Plan*	S-1	4/4/06	10.2B
10.45	Form of Stock Option Agreement under the Omniture 1999 Plan used for Named Executive Officers and Non-Employee Directors*	S-1	6/9/06	10.2C
10.46	Omniture, Inc. 2006 Equity Incentive Plan and related forms*	10-Q	8/6/09	10.3
10.47	Omniture, Inc. 2007 Equity Incentive Plan and related forms*	10-K	2/27/09	10.9
10.48	Omniture, Inc. 2008 Equity Incentive Plan and related forms*	10-K	2/27/09	10.10
10.49	Visual Sciences, Inc. (formerly, WebSideStory, Inc.) Amended and Restated 2000 Equity Incentive Plan*	10-K	2/29/08	10.5
10.50	Visual Sciences, Inc. (formerly, WebSideStory, Inc.) 2004 Equity Incentive Award Plan (the “VS 2004 Plan”) and Form of Option Grant Agreement*	10-K	2/29/08	10.6
10.51	Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement under the VS 2004 Plan*	10-K	2/29/08	10.6A
10.52	Visual Sciences, Inc. (formerly, WebSideStory, Inc.) 2006 Employment Commencement Equity Incentive Award Plan and Form of Option Grant Agreement*	10-K	2/29/08	10.8
10.53	Avivo Corporation 1999 Equity Incentive Plan and Form of Option Grant Agreement*	10-K	2/29/08	10.7
10.54	The Touch Clarity Limited Enterprise Management Incentives Share Option Plan 2002*	S-8	3/16/07	99.5
10.55	Forms of Agreements under The Touch Clarity Limited Enterprise Management Incentives Share Option Plan 2002*	S-8	3/16/07	99.6

59

		Incorporated by Reference**
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
10.56	Form of Performance Share Award Grant Notice and Performance Share Award Agreement pursuant to the 2003 Equity Incentive Plan*	8-K	1/28/13	10.3
10.57	2010 Performance Share Program Award Calculation Methodology pursuant to the 2003 Equity Incentive Plan*	8-K	1/29/10	10.3
10.58	Fiscal Year 2010 Executive Annual Incentive Plan*	8-K	1/29/10	10.4
10.59	Day Software Holding AG International Stock Option/Stock Issuance Plan*	S-8	11/1/10	99.1
10.60	Day Interactive Holding AG U.S. Stock Option/ Stock Issuance Plan*	S-8	11/1/10	99.2
10.61	Form of RSU Grant Notice and Award Agreement pursuant to the 2005 Equity Incentive Assumption Plan*	8-K	1/28/13	10.7
10.62	Description of 2011 Director Compensation*	10-K	1/27/11	10.73
10.63	Demdex, Inc. 2008 Stock Plan, as amended*	S-8	1/27/11	99.1
10.64	Award Calculation Methodology to the 2011 Performance Share Program pursuant to the 2003 Equity Incentive Plan*	8-K	1/28/11	10.3
10.65	2011 Executive Cash Performance Bonus Plan*	8-K	1/28/11	10.4
10.66	2011 Executive Annual Incentive Plan*	8-K	1/28/11	10.5
10.67	EchoSign, Inc. 2005 Stock Plan, as amended*	S-8	7/29/11	99.1
10.68	TypeKit, Inc. 2009 Equity Incentive Plan, as amended*	S-8	10/7/11	99.1
10.69	Auditude, Inc. 2009 Equity Incentive Plan, as amended*	S-8	11/18/11	99.1
10.70	Auditude, Inc. Employee Stock Option Plan, as amended*	S-8	11/18/11	99.2
10.71	Description of 2012 Director Compensation*	10-K	1/26/12	10.76
10.72	Adobe Systems Incorporated 2011 Executive Severance Plan in the Event of a Change of Control for Prior Participants *	8-K	12/15/11	10.1

60

		Incorporated by Reference**
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
10.73	Adobe Systems Incorporated 2011 Executive Severance Plan in the Event of a Change in Control*	8-K	12/15/11	10.2
10.74	Award Calculation Methodology to the 2012 Performance Share Program pursuant to the 2003 Equity Incentive Plan*	8-K	1/26/12	10.3
10.75	2012 Executive Annual Incentive Plan*	8-K	1/26/12	10.4
10.76	Efficient Frontier, Inc. 2003 Stock Option/Stock Issuance Plan, as Amended and Restated*	S-8	1/27/12	99.1
10.77	Form of Efficient Frontier, Inc. Non-Plan Notice of Grant, Stock Option Agreement and Stock Purchase Agreement*	S-8	1/27/12	99.2
10.78	Nomination and Standstill Agreement between the Company and the ValueAct Group dated December 4, 2012	8-K	12/5/12	99.1
10.79	Behance, Inc. 2012 Equity Incentive Plan*	S-8	1/23/13	99.1
10.80	Amendment No. 1 to the Behance, Inc. 2012 Equity Incentive Plan*	S-8	1/23/13	99.2
10.81	2013 Performance Share Program pursuant to the 2003 Equity Incentive Plan*	8-K	1/28/13	10.2
10.82	2013 Executive Annual Incentive Plan*	8-K	1/28/13	10.5
31.1	Certification of Chief Executive Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934				X
31.2	Certification of Chief Financial Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934				X
32.1	Certification of Chief Executive Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934†				X
32.2	Certification of Chief Financial Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934†				X
101.INS	XBRL Instance				X
101.SCH	XBRL Taxonomy Extension Schema				X
101.CAL	XBRL Taxonomy Extension Calculation				X

61

		Incorporated by Reference**
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
101.LAB	XBRL Taxonomy Extension Labels				X
101.PRE	XBRL Taxonomy Extension Presentation				X
101.DEF	XBRL Taxonomy Extension Definition				X

___________________________

*	Compensatory plan or arrangement.
**	References to Exhibits 10.19 through 10.28 are to filings made by Macromedia, Inc. References to Exhibits 10.43 through 10.55 are to filings made by Omniture, Inc.
†	The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Adobe Systems Incorporated under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

62

EX-31.1

	
		
		
		ADBE EX 31.1 Q113
	
	

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Mark Garrett, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Adobe Systems Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: March 28, 2013	/s/ MARK GARRETT
	Mark Garrett
	Executive Vice President and
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO

RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Adobe Systems Incorporated (the “Registrant”) on Form 10-Q for the quarterly period ended March 1, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Shantanu Narayen, certify, in accordance with Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that to the best of my knowledge:

(1) The Report, to which this certification is attached as Exhibit 32.1, fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: March 28, 2013	/s/ SHANTANU NARAYEN
	Shantanu Narayen
	President and Chief Executive Officer

A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EX-32.2

EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO

RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Adobe Systems Incorporated (the “Registrant”) on Form 10-Q for the quarterly period ended March 1, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Garrett, certify, in accordance with Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that to the best of my knowledge:

(1) The Report, to which this certification is attached as Exhibit 32.2, fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: March 28, 2013	/s/ MARK GARRETT
	Mark Garrett
	Executive Vice President and
	Chief Financial Officer

A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

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Derivatives and Hedging Activities (Details) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013		Nov. 30, 2012
Derivative, Fair Value, Net [Abstract]
Fair value asset derivatives	$ 32,466	[1]	$ 13,513	[1]
Fair value liability derivatives	3,251	[2]	998	[2]
Derivatives designated as hedging instruments [Member] | Foreign Exchange Option Contracts [Member]
Derivative, Fair Value, Net [Abstract]
Fair value asset derivatives	25,521	[1],[3]	10,897	[1],[3]
Fair value liability derivatives	0	[2],[3]	0	[2],[3]
Derivatives not designated as hedging instruments [Member] | Foreign Exchange Forward Contracts [Member]
Derivative, Fair Value, Net [Abstract]
Fair value asset derivatives	6,945	[1]	2,616	[1]
Fair value liability derivatives	$ 3,251	[2]	$ 998	[2]

[1] Included in prepaid expenses and other current assets on our Condensed Consolidated Balance Sheets.

[2] Included in accrued expenses on our Condensed Consolidated Balance Sheets.

[3] Hedging effectiveness expected to be recognized into income within the next twelve months.

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Stockholders' Equity (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 01, 2013
Gross unrealized gains, available-for-sale securities [Abstract]
Beginning balance, unrealized gains on available-for-sale securities	$ 14,699
Gross unrealized gains on available for sale securities, increase or decrease	659
Gross unrealized gains on available for sale securities, reclassification adjustments	(1,599)
Ending balance, unrealized gains on available-for-sale securities	13,759
Gross unrealized losses, available-for-sale securities [Abstract]
Beginning balance, unrealized losses on available-for-sale securities	260
Gross unrealized losses on available for sale securities, increase or decrease	43
Gross unrealized losses on available for sale securities, reclassification adjustments	15
Ending balance, unrealized losses on available-for-sale securities	202
Net unrealized gains on available-for-sale securities [Abstract]
Beginning Balance, net unrealized gains on available-for-sale securities	14,439
Net unrealized gains on available for sale securities, increase or decrease	702
Net unrealized gains on available for sale securities, reclassification adjustments	(1,584)	[1]
Ending Balance, net unrealized gains on available-for-sale securities	13,557
Net unrealized gains on derivatives designated as hedging instuments [Abstract]
Beginning balance, net unrealized gains on derivative instruments designated as hedging instruments	6,604
Net unrealized gains on derivative instruments designated as hedging instruments, increase or decrease	21,776
Net unrealized gains on derivative instruments designated as hedging instruments, reclassification adjustments	(7,094)	[2]
Ending balance, net unrealized gains on derivative instruments designated as hedging instruments	21,286
Cumulative foreign currency translation adjustments [Abstract]
Beginning balance, cumulative foreign currency translation adjustments	9,669
Cumulative foreign currency translation adjustment, increase or decrease	(4,402)
Cumulative foreign currency translation adjustment, reclassification adjustments	0
Ending balance, cumulative foreign currency translation adjustments	5,267
Accumulated other comprehensive income totals [Abstract]
Beginning balance, total accumulated other comprehensive income, net of taxes	30,712	[3]
Accumulated other comprehensive income, increase or decrease	18,076
Accumulated other comprehensive income, reclassification adjustments	(8,678)
Ending balance, total accumulated other comprehensive income, net of taxes	$ 40,110

[1] Classified in interest and other income (expense), net.

[2] Classified as revenue.

[3] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Stock-Based Compensation (Details 3) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 01, 2013	Nov. 30, 2012	Mar. 02, 2012
Restricted Stock Unit [Member]
Restricted Stock and Performance Shares Activity
Beginning outstanding balance	18,415	16,871	18,350
Awarded, Shares	5,807	9,431
Released, Shares	(4,904)	(5,854)
Forfeited, Shares	(382)	(2,147)
Increase due to acquisition, Shares	0	114
Ending outstanding balance	18,936	18,415	18,350
Performance Shares [Member] | Current Program [Member] | Shares Granted [Member]
Restricted Stock and Performance Shares Activity
Beginning outstanding balance	0
Awarded, Shares	945
Forfeited, Shares	(4)
Ending outstanding balance	941
Performance Shares [Member] | Current Program [Member] | Maximum Shares Eligible to Receive [Member]
Restricted Stock and Performance Shares Activity
Beginning outstanding balance	0
Awarded, Shares	1,891
Forfeited, Shares	(9)
Ending outstanding balance	1,882
Performance Shares [Member] | Prior Year [Member]
Restricted Stock and Performance Shares Activity
Beginning outstanding balance	388	405	453
Achieved, Shares	1,279	492
Released, Shares	(657)	(464)
Forfeited, Shares	(32)	(45)
Ending outstanding balance	978	388	453

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Stockholders' Equity (Details Numeric) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 01, 2013	Jun. 01, 2012	Mar. 02, 2012	Sep. 03, 2010
Structured Stock Repurchase Prepayments	$ 100,000,000		$ 80,000,000
Stock Repurchase Program, Authorized Amount		2,000,000,000		1,600,000,000
Repurchased Shares	2.7		1.8
Repurchased Shares, Average Price	$ 37.32		$ 30.07
Up-Front Payments Remaining	$ 32,800,000

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Stock-Based Compensation (Details 1) (Stock Options [Member]) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 01, 2013	Nov. 30, 2012	Mar. 02, 2012
Stock Options [Member]
Stock Option Activity [Rollforward]
Beginning outstanding balance	24,517	34,802	32,594
Granted, Shares	0	57
Exercised, Shares	(4,869)	(6,754)
Cancelled, Shares	(1,242)	(4,692)
Increase due to acquisition, Shares	129	1,104
Ending outstanding balance	18,535	24,517	32,594

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Segments (Tables)

3 Months Ended

Mar. 01, 2013

Segment Reporting [Abstract]

Segment Reporting

(in thousands)	Digital Media			Digital Marketing			Print and Publishing			Total
Three months ended March 1, 2013
Revenue	$	688,400		$	267,700		$	51,773		$	1,007,873
Cost of revenue	53,709			98,279			4,696			156,684
Gross profit	$	634,691		$	169,421		$	47,077		$	851,189
Gross profit as a percentage of revenue	92		%	63		%	91		%	84		%
Three months ended March 2, 2012
Revenue	$	724,353		$	265,837		$	55,030		$	1,045,220
Cost of revenue	25,625			79,547			3,093			108,265
Gross profit	$	698,728		$	186,290		$	51,937		$	936,955
Gross profit as a percentage of revenue	96		%	70		%	94		%	90		%

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013
Commitments and Contingencies Disclosure [Abstract]
Future Minimum Capital Lease Payments, Remainder of 2013	$ 23,011
Future Minimum Capital Lease Payments, 2014	13,660
Future Minimum Capital Lease Payments, 2015	0
Future Minimum Capital Lease Payments, 2016	0
Future Minimum Capital Lease Payments, 2017	0
Future Minimum Capital Lease Payments Due Thereafter	0
Future Minimum Capital Lease Payments, Total	36,671
Less: Interest	(748)
Total	$ 35,923

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Goodwill and Purchased and Other Intangibles (Tables)

3 Months Ended

Mar. 01, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Purchased and other intangible assets

Purchased and other intangible assets subject to amortization as of March 1, 2013 and November 30, 2012 were as follows (in thousands): 

	2013							2012
	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Purchased technology	$	358,612	$	(162,882	)	$	195,730	$	366,574	$	(161,538	)	$	205,036
Customer contracts and relationships	$	324,221	$	(82,802	)	$	241,419	$	318,027	$	(74,214	)	$	243,813
Trademarks	66,551		(21,249		)	45,302		53,293		(19,171		)	34,122
Acquired rights to use technology	147,397		(61,222		)	86,175		104,402		(56,782		)	47,620
Localization	8,423		(5,369		)	3,054		8,586		(4,654		)	3,932
Other intangibles	17,646		(8,758		)	8,888		18,742		(8,229		)	10,513
Total other intangible assets	$	564,238	$	(179,400	)	$	384,838	$	503,050	$	(163,050	)	$	340,000
Purchased and other intangible     assets, net	$	922,850	$	(342,282	)	$	580,568	$	869,624	$	(324,588	)	$	545,036

Amortization expense in future periods

As of March 1, 2013, we expect amortization expense in future periods to be as follows (in thousands):

Fiscal Year	Purchased Technology		Other Intangible Assets
Remainder of 2013	$	54,114	$	55,222
2014	66,501		66,192
2015	51,804		60,216
2016	13,140		54,621
2017	6,736		46,275
Thereafter	3,435		102,312
Total expected amortization expense	$	195,730	$	384,838

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Stock-Based Compensation (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 01, 2013	Mar. 02, 2012
Option Grants and Stock Purchase Rights [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	$ 16,493	$ 22,337
Restricted Stock and Performance Share Awards [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	67,703	49,244
Cost of Subscription Revenue [Member] | Option Grants and Stock Purchase Rights [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	637	742
Cost of Subscription Revenue [Member] | Restricted Stock and Performance Share Awards [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	1,063	603
Cost of Service and Support Revenue [Member] | Option Grants and Stock Purchase Rights [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	855	1,116
Cost of Service and Support Revenue [Member] | Restricted Stock and Performance Share Awards [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	2,450	2,070
Research and Development [Member] | Option Grants and Stock Purchase Rights [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	5,820	7,199
Research and Development [Member] | Restricted Stock and Performance Share Awards [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	25,731	18,081
Sales and Marketing [Member] | Option Grants and Stock Purchase Rights [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	6,667	8,780
Sales and Marketing [Member] | Restricted Stock and Performance Share Awards [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	23,752	16,916
General and Administrative [Member] | Option Grants and Stock Purchase Rights [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	2,514	4,500
General and Administrative [Member] | Restricted Stock and Performance Share Awards [Member]
Total stock-based compensation costs [Abstract]
Stock-based compensation costs	$ 14,707	$ 11,574

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Goodwill and Purchased and Other Intangibles (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013
Purchased technology [Member]
Amortization Expense in Future Periods [Abstract]
Remainder of 2013	$ 54,114
2014	66,501
2015	51,804
2016	13,140
2017	6,736
Thereafter	3,435
Total expected amortization expense	195,730
Other intangible assets [Member]
Amortization Expense in Future Periods [Abstract]
Remainder of 2013	55,222
2014	66,192
2015	60,216
2016	54,621
2017	46,275
Thereafter	102,312
Total expected amortization expense	$ 384,838

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Cash, Cash Equivalents and Short-Term Investments (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013
Amortized cost and Estimated Fair Value of Short-term fixed Income Securities [Abstract]
Due within one year, Amortized Cost	$ 549,442
Due between one and two years, Amortized Cost	701,820
Due between two and three years, Amortized Cost	728,813
Due after three years, Amortized Cost	360,457
Total, Amortized Cost	2,340,532
Due within one year, Estimated Fair value	550,707
Due between one and two years, Estimated Fair value	706,425
Due between two and three years, Estimated Fair value	732,718
Due after three years, Estimated Fair value	364,263
Total, Estimated Fair value	$ 2,354,113

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Restructuring Charges (Details) (USD $)	3 Months Ended			3 Months Ended	18 Months Ended	3 Months Ended
	Mar. 01, 2013	Nov. 30, 2012		Mar. 01, 2013 Fiscal 2011 Restructuring Plan [Member] Cost of closing redundant facilities [Member]	Mar. 01, 2013 Fiscal 2011 Restructuring Plan [Member] Cost of closing redundant facilities [Member]	Mar. 01, 2013 Fiscal 2011 Restructuring Plan [Member] Termination benefits [Member]	Mar. 01, 2013 Other Restructuring Plans [Member] Cost of closing redundant facilities [Member] sqft	Mar. 01, 2013 Other Restructuring Plans [Member] Termination benefits [Member]
Summary of Restructuring Plans [Roll Forward]
Beginning accrued restructuring charges	$ 21,550,000			$ 9,623,000		$ 1,248,000	$ 9,688,000	$ 991,000
Costs incurred	4,328,000			0		0	4,328,000	0
Cash Payments	(4,045,000)			(274,000)		(722,000)	(2,851,000)	(198,000)
Restructuring Reserve, Translation and Other Adjustment	(5,013,000)			(3,687,000)		105,000	(1,423,000)	(8,000)
Ending accrued restructuring charges	16,820,000			5,662,000	5,662,000	631,000	9,742,000	785,000
Restructuring Reserve, Foreign Currency Translation Adjustment	500,000
Restructuring Reserve, Goodwill Adjustment	200,000
Restructuring Charges (Numeric) [Abstract]
Square footage of facility vacated under restructuring plan							21,000
Total restructuring costs expected to be incurred for closing redundant facilities					10,900,000
Restructuring and Related Cost, Cost Incurred to Date					10,900,000
Accrued restructuring, current	6,767,000	9,287,000	[1]
Accrued restructuring, non-current	$ 10,053,000	$ 12,263,000	[1]

[1] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 01, 2013	Mar. 02, 2012
Segment Reporting [Abstract]
Revenue	$ 1,007,873	$ 1,045,220
Cost of revenue	156,684	108,265
Gross profit	851,189	936,955
Gross profit as a percentage of revenue	84.00%	90.00%
Digital Media [Member]
Segment Reporting [Abstract]
Revenue	688,400	724,353
Cost of revenue	53,709	25,625
Gross profit	634,691	698,728
Gross profit as a percentage of revenue	92.00%	96.00%
Digital Marketing [Member]
Segment Reporting [Abstract]
Revenue	267,700	265,837
Cost of revenue	98,279	79,547
Gross profit	169,421	186,290
Gross profit as a percentage of revenue	63.00%	70.00%
Print And Publishing [Member]
Segment Reporting [Abstract]
Revenue	51,773	55,030
Cost of revenue	4,696	3,093
Gross profit	$ 47,077	$ 51,937
Gross profit as a percentage of revenue	91.00%	94.00%

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Stock-Based Compensation (Details 2) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended
	Mar. 01, 2013		Mar. 02, 2012		Nov. 30, 2012	Dec. 02, 2011
Stock options outstanding [Abstract]
Share Price	$ 39.83		$ 33.73
Stock Options [Member]
Stock options outstanding [Abstract]
Number of shares outstanding	18,535		32,594		24,517	34,802
Number of shares vested and expected to vest	18,250		31,783
Number of shares exercisable	15,495		25,490
Options outstanding weighted average exercise price (per share)	$ 32.56		$ 30.97
Options vested and expected to vest weighted average exercise price (per share)	$ 32.66		$ 31.08
Options exercisable weighted average exercise price (per share)	$ 33.71		$ 32.61
Options outstanding weighted average remaining contractual life (in years)	2 years 9 months 4 days		3 years 1 month 21 days
Options vested and expected to vest weighted average remaining contractual life (in years)	2 years 8 months 16 days		3 years 0 months 26 days
Options exercisable weighted average remaining contractual life (in years)	2 years 3 months		2 years 4 months 21 days
Options outstanding aggregate intrinsic value	$ 139.3	[1]	$ 148.4	[1]
Options vested and expected to vest aggregate intrinsic value	135.3	[1]	142.4	[1]
Options exercisable aggregate intrinsic value	$ 99.4	[1]	$ 85.2	[1]

[1] (*) The intrinsic value is calculated as the difference between the market value as of the end of the fiscal period and the exercise price of the shares. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively

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Cash, Cash Equivalents and Short-Term Investments

3 Months Ended

Mar. 01, 2013

Cash, Cash Equivalents, and Short Term Investments Disclosure [Abstract]

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. We classify all of our cash equivalents and short-term investments as “available-for-sale.” In general, these investments are free of trading restrictions. We carry these investments at fair value, based on quoted market prices or other readily available market information. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in our Condensed Consolidated Balance Sheets. Gains and losses are recognized when realized in our Condensed Consolidated Statements of Income. When we have determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in income. Gains and losses are determined using the specific identification method.

Cash, cash equivalents and short-term investments consisted of the following as of March 1, 2013 (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	247,671	$	—	$	—		$	247,671
Cash equivalents:
Corporate bonds and commercial paper	9,514		1		(2		)	9,513
Money market mutual funds	895,845		—		—			895,845
Municipal securities	1,498		—		(1		)	1,497
Time deposits	63,956		—		—			63,956
U.S. Treasury securities	87,900		1		(1		)	87,900
Total cash equivalents	1,058,713		2		(4		)	1,058,711
Total cash and cash equivalents	1,306,384		2		(4		)	1,306,382
Short-term fixed income securities:
Corporate bonds and commercial paper	1,195,722		10,379		(165		)	1,205,936
Foreign government securities	12,492		64		(1		)	12,555
Municipal securities	185,907		386		(11		)	186,282
U.S. agency securities	506,699		2,024		(20		)	508,703
U.S. Treasury securities	439,712		926		(1		)	440,637
Subtotal	2,340,532		13,779		(198		)	2,354,113
Marketable equity securities	194		—		—			194
Total short-term investments	2,340,726		13,779		(198		)	2,354,307
Total cash, cash equivalents and short-term investments	$	3,647,110	$	13,781	$	(202	)	$	3,660,689

Cash, cash equivalents and short-term investments consisted of the following as of November 30, 2012 (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	200,771	$	—	$	—		$	200,771
Cash equivalents:
Corporate bonds and commercial paper	3,998		—		—			3,998
Money market mutual funds and repurchase agreements	1,171,270		—		—			1,171,270
Municipal securities	3,895		—		—			3,895
Time deposits	45,118		—		—			45,118
Total cash equivalents	1,224,281		—		—			1,224,281
Total cash and cash equivalents	1,425,052		—		—			1,425,052
Short-term fixed income securities:
Corporate bonds and commercial paper	1,059,158		11,415		(133		)	1,070,440
Foreign government securities	6,919		45		(12		)	6,952
Municipal securities	180,488		97		(60		)	180,525
Time deposits	20,113		—		—			20,113
U.S. agency securities	501,863		2,346		(18		)	504,191
U.S. Treasury securities	330,072		801		(37		)	330,836
Subtotal	2,098,613		14,704		(260		)	2,113,057
Marketable equity securities	237		7		—			244
Total short-term investments	2,098,850		14,711		(260		)	2,113,301
Total cash, cash equivalents and short-term investments	$	3,523,902	$	14,711	$	(260	)	$	3,538,353

See Note 4 for further information regarding the fair value of our financial instruments.

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in an unrealized loss position for less than twelve months, as of March 1, 2013 and November 30, 2012 (in thousands):

	2013					2012
	Fair  Value		Gross Unrealized Losses			Fair  Value		Gross Unrealized Losses
Corporate bonds and commercial paper	$	191,986	$	(167	)	$	95,489	$	(132	)
Foreign government securities	3,599		(1		)	2,105		(12		)
Municipal securities	14,950		(12		)	40,524		(60		)
U.S. Treasury and agency securities	102,862		(19		)	48,203		(55		)
Total	$	313,397	$	(199	)	$	186,321	$	(259	)

There were 153 securities and 65 securities that were in an unrealized loss position for less than twelve months at March 1, 2013 and at November 30, 2012, respectively.

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in a continuous unrealized loss position for more than twelve months, as of March 1, 2013 and November 30, 2012 (in thousands):

	2013					2012
	Fair  Value		Gross Unrealized Losses			Fair  Value		Gross Unrealized Losses
Corporate bonds and commercial paper	$	—	$	—		$	2,999	$	(1	)
U.S. Treasury and agency securities	8,209		(3		)	—		—
Total	$	8,209	$	(3	)	$	2,999	$	(1	)

There was one security in an unrealized loss position for more than twelve months at March 1, 2013 and November 30, 2012.

The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated effective maturities as of March 1, 2013 (in thousands):

	Amortized Cost		Estimated Fair Value
Due within one year	$	549,442	$	550,707
Due between one and two years	701,820		706,425
Due between two and three years	728,813		732,718
Due after three years	360,457		364,263
Total	$	2,340,532	$	2,354,113

We review our debt and marketable equity securities classified as short-term investments on a regular basis to evaluate whether or not any security has experienced an other-than-temporary decline in fair value. We consider factors such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer and our intent to sell, or whether it is more likely than not we will be required to sell, the investment before recovery of the investment’s amortized cost basis. If we believe that an other-than-temporary decline exists in one of these securities, we write down these investments to fair value. For debt securities, the portion of the write-down related to credit loss would be recorded to interest and other income, net in our Condensed Consolidated Statements of Income. Any portion not related to credit loss would be recorded to accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in our Condensed Consolidated Balance Sheets. For equity securities, the write-down would be recorded to investment gains (losses), net in our Condensed Consolidated Statements of Income. During the three months ended March 1, 2013, we did not consider any of our investments to be other-than-temporarily impaired.

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Goodwill and Purchased and Other Intangibles (Details Numeric) (USD $)	3 Months Ended
	Mar. 01, 2013	Mar. 02, 2012	Nov. 30, 2012
Finite-Lived Intangible Assets [Line Items]
Amortization of purchased and other intangible assets	$ 36,900,000	$ 33,100,000
Amortization expense included in cost of sales	26,400,000	21,600,000
Goodwill	4,221,487,000		4,133,259,000	[1]
Certain Technology Rights Acquired [Member] | Developed Technology Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Payments to Acquire Intangible Assets	51,800,000
Acquired Finite-lived Intangible Asset, Amount	25,300,000
Historical Use of Intangibles, Expensed Amount	$ 26,500,000

[1] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 01, 2013

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The components of accumulated other comprehensive income and activity, net of related taxes, for the three months ended March 1, 2013 was as follows (in thousands):

	November 30, 2012			Increase / Decrease			Reclassification Adjustments				March 1, 2013
Net unrealized gains on available-for-sale securities:
Unrealized gains on available-for-sale securities	$	14,699		$	659		$	(1,599	)		$	13,759
Unrealized losses on available-for-sale securities	(260		)	43			15				(202		)
Total net unrealized gains on available-for-sale securities	14,439			702			(1,584		)	(1)	13,557
Net unrealized gains on derivative instruments designated as hedging instruments	6,604			21,776			(7,094		)	(2)	21,286
Cumulative foreign currency translation adjustments	9,669			(4,402		)	—				5,267
Total accumulated other comprehensive income, net of taxes	$	30,712		$	18,076		$	(8,678	)		$	40,110

_________________________________________

⁽¹⁾  Classified in interest and other income (expense), net.

⁽²⁾  Classified as revenue.

^[1],[2]

Retained Earnings

The changes in retained earnings for the three months ended March 1, 2013 were as follows (in thousands): 

Balance as of November 30, 2012	$	7,003,003
Net income	65,117
Re-issuance of treasury stock	(259,631		)
Balance as of March 1, 2013	$	6,808,489

[1] Classified as revenue.

[2] Classified in interest and other income (expense), net.

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Restructuring Charges (Tables)

3 Months Ended

Mar. 01, 2013

Restructuring and Related Activities [Abstract]

Summary of Restructuring Plans

Summary of Restructuring Plans

The following table sets forth a summary of restructuring activities related to all of our restructuring plans described above during the three months ended March 1, 2013 (in thousands):

	November 30, 2012		Costs Incurred		Cash Payments			Other Adjustments*			March 1, 2013
Fiscal 2011 Restructuring Plan:
Termination benefits	$	1,248	$	—	$	(722	)	$	105		$	631
Cost of closing redundant facilities	9,623		—		(274		)	(3,687		)	5,662
Other Restructuring Plans:
Termination benefits	991		—		(198		)	(8		)	785
Cost of closing redundant facilities	9,688		4,328		(2,851		)	(1,423		)	9,742
Total restructuring plans	$	21,550	$	4,328	$	(4,045	)	$	(5,013	)	$	16,820

^{_________________________________________} 

^(*)  Included in Other Adjustments are foreign currency translation adjustments and goodwill adjustments of $0.5 million and $0.2 million, respectively.

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Net Income Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 01, 2013	Mar. 02, 2012
Earnings Per Share [Abstract]
Net income	$ 65,117	$ 185,209
Shares used to compute basic net income per share	498,607,000	494,016,000
Dilutive potential common shares:
Unvested restricted stock and performance share awards	6,526,000	4,280,000
Stock options	2,707,000	2,082,000
Shares used to compute diluted net income per share	507,840,000	500,378,000
Basic net income per share	$ 0.13	$ 0.37
Diluted net income per share	$ 0.13	$ 0.37
Net Income Per Share (Numeric) [Abstract]
Common stock with exercise prices greater than average fair market value	6,800,000	26,100,000
Average fair market value	$ 37.82	$ 30.16

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Accrued Expenses (Details) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013	Nov. 30, 2012
Accrued Expense [Abstract]
Accrued compensation and benefits	$ 171,123	$ 242,887
Sales and marketing allowances	79,081	87,916
Accrued corporate marketing	40,574	39,503
Taxes payable	16,724	26,164
Royalties payble	8,154	10,040
Accrued interest expense	5,039	20,796
Other	184,770	162,834
Accrued expenses	$ 505,465	$ 590,140	[1]

[1] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Net Income Per Share (Tables)

3 Months Ended

Mar. 01, 2013

Earnings Per Share [Abstract]

Net Income Per Share

The following table sets forth the computation of basic and diluted net income per share for the three months ended March 1, 2013 and March 2, 2012 (in thousands, except per share data):

	Three Months
	2013		2012
Net income	$	65,117	$	185,209
Shares used to compute basic net income per share	498,607		494,016
Dilutive potential common shares:
Unvested restricted stock and performance share awards	6,526		4,280
Stock options	2,707		2,082
Shares used to compute diluted net income per share	507,840		500,378
Basic net income per share	$	0.13	$	0.37
Diluted net income per share	$	0.13	$	0.37

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 01, 2013

Commitments and Contingencies Disclosure [Abstract]

Summary of unconditional purchase obligations, capital leases [Table Text Block]

Fiscal Year	Capital Lease Obligations
Remainder of 2013	$	23,011
2014	13,660
2015	—
2016	—
2017	—
Thereafter	—
Gross lease commitment	$	36,671
Less: interest	(748		)
Net lease commitment	$	35,923

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Acquisitions

3 Months Ended

Mar. 01, 2013

Business Combinations [Abstract]

ACQUISITIONS

 ACQUISITIONS

On December 20, 2012, we completed our acquisition of privately held Behance, an online social media platform to showcase and discover creative work. During the first quarter of fiscal 2013, we began integrating Behance into our Digital Media reportable segment. Behance’s community and portfolio capabilities will accelerate our strategy to bring additional community features to the Creative Cloud. We have included the financial results of Behance in our condensed consolidated financial statements beginning on the acquisition date.

Under the acquisition method of accounting, the total preliminary purchase price was allocated to Behance’s net tangible and intangible assets based upon their estimated fair values as of December 20, 2012. The total adjusted preliminary purchase price for Behance was approximately $111.1 million of which approximately $90.5 million was allocated to goodwill, $28.5 million to identifiable intangible assets and $7.9 million to net liabilities assumed. The impact of this acquisition was not material to our condensed consolidated financial statements.

On January 13, 2012, we completed our acquisition of privately held Efficient Frontier, a multi-channel digital ad buying and optimization company. During the first quarter of fiscal 2012, we began integrating Efficient Frontier into our Digital Marketing reportable segment. The Efficient Frontier business adds cross-channel digital ad campaign forecasting, execution and optimization capabilities to our Adobe Marketing Cloud, along with a social marketing engagement platform and social ad buying capabilities. We have included the financial results of Efficient Frontier in our condensed consolidated financial statements beginning on the acquisition date.

Under the acquisition method of accounting, the total purchase price was allocated to Efficient Frontier’s net tangible and intangible assets based upon their estimated fair values as of January 13, 2012. The total final purchase price for Efficient Frontier was approximately $374.7 million of which approximately $291.4 million was allocated to goodwill, $122.7 million to identifiable intangible assets and $39.4 million to net liabilities assumed. The impact of this acquisition was not material to our condensed consolidated financial statements.

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Non-Operating Income (Expense) (Tables)

3 Months Ended

Mar. 01, 2013

Other Income and Expenses [Abstract]

Non-Operating Income (Expense)

 Non-operating income (expense), net for the three months ended March 1, 2013 and March 2, 2012 included the following (in thousands):

	Three Months
	2013			2012
Interest and other income (expense), net:
Interest income	$	5,681		$	6,193
Foreign exchange gains (losses)	(6,174		)	(9,721		)
Realized gains on fixed income investment	1,598			702
Realized losses on fixed income investment	(14		)	(205		)
Other	155			246
Interest and other income (expense), net	$	1,246		$	(2,785	)
Interest expense	$	(16,834	)	$	(16,838	)
Investment gains (losses), net:
Realized investment gains	$	418		$	245
Unrealized investment gains	444			810
Realized investment losses	(14		)	(34		)
Investment gains (losses), net	$	848		$	1,021
Non-operating income (expense), net	$	(14,740	)	$	(18,602	)

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Derivatives and Hedging Activities (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 01, 2013		Mar. 02, 2012
Derivatives designated as hedging instruments [Member] | Cash Flow Hedging [Member] | Foreign Exchange Option Contracts [Member]
Derivatives in cash flow hedging relationships [Abstract]
Net gain (loss) recognized in OCI, net of tax	$ 21,776	[1]	$ 12,581	[1]
Net gain (loss) reclassified from accumulated OCI into income, net of tax	7,094	[2]	10,348	[2]
Net gain (loss) recognized in income	(4,668)	[3]	(8,245)	[3]
Derivatives designated as hedging instruments [Member] | Cash Flow Hedging [Member] | Foreign Exchange Forward Contracts [Member]
Derivatives in cash flow hedging relationships [Abstract]
Net gain (loss) recognized in OCI, net of tax	0	[1]	0	[1]
Net gain (loss) reclassified from accumulated OCI into income, net of tax	0	[2]	0	[2]
Net gain (loss) recognized in income	0	[3]	0	[3]
Derivatives not designated as hedging instruments [Member] | Foreign Exchange Option Contracts [Member]
Derivatives not designated as hedging relationships [Abstract]
Net gain (loss) recognized in income	0	[4]	0	[4]
Derivatives not designated as hedging instruments [Member] | Foreign Exchange Forward Contracts [Member]
Derivatives not designated as hedging relationships [Abstract]
Net gain (loss) recognized in income	$ 1,478	[4]	$ 8,150	[4]

[1] Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).

[2] Effective portion classified as revenue.

[3] Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net.

[4] Classified in interest and other income (expense), net.

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Stockholders' Equity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 01, 2013		Mar. 02, 2012
Changes in retained earnings [Abstract]
Beginning Balance	$ 7,003,003	[1]
Net income	65,117		185,209
Re-issuance of treasury stock	(259,631)
Ending Balance	$ 6,808,489

[1] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013	Nov. 30, 2012
Current assets:
Cash and cash equivalents	$ 1,306,382	$ 1,425,052	[1]
Short-term investments	2,354,307	2,113,301	[1]
Trade receivables, net of allowances for doubtful accounts of $12,715 and $12,643 respectively	485,801	617,233	[1]
Deferred income taxes	64,930	59,537	[1]
Prepaid expenses and other current assets	161,663	116,237	[1]
Total current assets	4,373,083	4,331,360	[1]
Property and equipment, net	686,014	664,302	[1]
Goodwill	4,221,487	4,133,259	[1]
Purchased and other intangibles, net	580,568	545,036	[1]
Investment in lease receivable	207,239	207,239	[1]
Other assets	97,320	93,327	[1]
Total assets	10,165,711	9,974,523	[1]
Current liabilities:
Trade payables	72,725	49,759	[1]
Accrued expenses	505,465	590,140	[1]
Capital lease obligations	22,406	11,217	[1]
Accrued restructuring	6,767	9,287	[1]
Income taxes payable	11,126	49,886	[1]
Deferred revenue	645,834	561,463	[1]
Total current liabilities	1,264,323	1,271,752	[1]
Long-term liabilities:
Debt and capital lease obligations	1,509,003	1,496,938	[1]
Deferred revenue	54,197	58,102	[1]
Accrued restructuring	10,053	12,263	[1]
Income taxes payable	159,859	155,096	[1]
Deferred income taxes	292,770	265,106	[1]
Other liabilities	70,168	50,084	[1]
Total liabilities	3,360,373	3,309,341	[1]
Stockholders' equity:
Preferred stock, $0.0001 par value; 2,000 shares authorized, none issued	0	0	[1]
Common stock, $0.0001 par value; 900,000 shares authorized; 600,834 shares issued; 501,045 and 494,132 shares outstanding, respectively	61	61	[1]
Additional paid-in-capital	3,116,471	3,038,665	[1]
Retained earnings	6,808,489	7,003,003	[1]
Accumulated other comprehensive income	40,110	30,712	[1]
Treasury stock, at cost (99,789 and 106,702 shares, respectively), net of reissuances	(3,159,793)	(3,407,259)	[1]
Total stockholders' equity	6,805,338	6,665,182	[1]
Total liabilities and stockholders' equity	$ 10,165,711	$ 9,974,523	[1]

[1] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Stock-Based Compensation (Details)	3 Months Ended
	Mar. 01, 2013	Mar. 02, 2012
Stock Options [Member]
Valuation Assumptions Volatility
From	0.00%	34.00%
To	0.00%	34.00%
Valuation Assumptions Risk Free Interest Rate Range
From	0.00%	0.54%
To	0.00%	0.54%
Employee Stock Purchase Plan [Member]
Valuation Assumptions Volatility
From	26.00%	36.00%
To	30.00%	36.00%
Valuation Assumptions Risk Free Interest Rate Range
From	0.12%	0.06%
To	0.27%	0.27%
Minimum [Member] | Stock Options [Member]
Valuation Assumptions Expected Life (In Years)
Expected life (in years)	0 years 0 months 0 days	3 years 10 months 24 days
Minimum [Member] | Employee Stock Purchase Plan [Member]
Valuation Assumptions Expected Life (In Years)
Expected life (in years)	6 months	6 months
Maximum [Member] | Stock Options [Member]
Valuation Assumptions Expected Life (In Years)
Expected life (in years)	0 years 0 months 0 days	3 years 10 months 24 days
Maximum [Member] | Employee Stock Purchase Plan [Member]
Valuation Assumptions Expected Life (In Years)
Expected life (in years)	2 years	2 years

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 01, 2013		Mar. 02, 2012
Cash flows from operating activities:
Net income	$ 65,117,000		$ 185,209,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	76,752,000		69,861,000
Stock-based compensation	84,196,000		71,582,000
Deferred income taxes	15,176,000		63,377,000
Unrealized gains on investments	(418,000)		(3,168,000)
Other non-cash items	(4,647,000)		(6,650,000)
Excess tax benefits from stock-based compensation	0		(2,670,000)
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:
Trade receivables, net	131,511,000		152,721,000
Prepaid expenses and other current assets	(35,447,000)		(15,080,000)
Trade payables	22,477,000		(42,542,000)
Accrued expenses	(78,966,000)		(116,908,000)
Accrued restructuring	(4,047,000)		(39,057,000)
Income taxes payable	(29,187,000)		(19,051,000)
Deferred revenue	79,514,000		16,739,000
Net cash provided by operating activities	322,031,000		314,363,000
Cash flows from investing activities:
Purchases of short-term investments	(723,541,000)		(352,179,000)
Maturities of short-term investments	110,958,000		112,089,000
Proceeds from sales of short-term investments	366,808,000		207,672,000
Acquisitions, net of cash acquired	(96,356,000)		(353,184,000)
Purchases of property and equipment	(60,190,000)		(51,088,000)
Purchases of long-term investments and other assets	(46,633,000)		(5,203,000)
Proceeds from sale of long-term investments	2,840,000		4,186,000
Net cash used for investing activities	(446,114,000)		(437,707,000)
Cash flows from financing activities:
Purchases of treasury stock	(100,000,000)		(80,000,000)
Proceeds from issuance of treasury stock	88,566,000		13,366,000
Excess tax benefits from stock-based compensation	0		2,670,000
Proceeds from debt and capital lease obligations	25,703,000		0
Repayment of debt and capital lease obligations	(2,507,000)		(2,264,000)
Debt issuance costs	(357,000)		(2,297,000)
Net cash used for financing activities	11,405,000		(68,525,000)
Effect of foreign currency exchange rates on cash and cash equivalents	(5,992,000)		3,632,000
Net (decrease) increase in cash and cash equivalents	(118,670,000)		(188,237,000)
Cash and cash equivalents at beginning of period	1,425,052,000	[1]	989,500,000
Cash and cash equivalents at end of period	1,306,382,000		801,263,000
Supplemental disclosures:
Cash paid for income taxes, net of refunds	49,863,000		51,397,000
Cash paid for interest	31,960,000		33,883,000
Non-cash investing activities:
Issuance of common stock and stock awards assumed in business acquisitions	661,000		4,265,000
Property and equipment acquired under capital leases	$ 25,700,000

[1] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Debt (Details) (USD $)	3 Months Ended				3 Months Ended		1 Months Ended	3 Months Ended
	Mar. 01, 2013	Nov. 30, 2012		Mar. 02, 2012	Mar. 01, 2013 From [Member]	Mar. 01, 2013 To [Member]	Feb. 28, 2010 Notes 2015 and 2020 [Member]	Mar. 01, 2013 Notes 2015 and 2020 [Member]	Feb. 28, 2010 Notes 2015 [Member]	Feb. 28, 2010 Notes 2020 [Member]	Mar. 02, 2012 Scenario i [Member] Line of Credit [Member] From [Member]	Mar. 02, 2012 Scenario i [Member] Line of Credit [Member] To [Member]	Mar. 02, 2012 Scenario ii [Member] Line of Credit [Member]	Mar. 02, 2012 Scenario ii [Member] Line of Credit [Member] From [Member]	Mar. 02, 2012 Scenario ii [Member] Line of Credit [Member] To [Member]
Debt Instrument [Line Items]
Senior notes, issued									$ 600,000,000	$ 900,000,000
Senior notes, interest rate									3.25%	4.75%
Proceeds from isssuance of senior notes							1,500,000,000
Issuance discount							6,600,000
Issuance cost							10,700,000
Effective Interest rate									3.45%	4.92%
Interest Paid								31,100,000
Fair value of the Notes								1,600,000,000
Repurchase notes at price of their principal amount, plus accrued and unpaid interest							101.00%
Line of Credit Facility [Abstract]
Total senior unsecured revolving credit facility				1,000,000,000
Option to request additional commitments on credit facility				500,000,000
Maximum aggregate, credit facility				1,500,000,000
Debt Instrument, Basis Spread on Variable Rate											0.795%	1.30%
Margin Added to LIBOR in Determining Interest Rate														0.00%	0.30%
Percentage Added to Federal Funds Effective Rate in Determining Interest Rate													0.50%
Percentage Added to LIBOR in Determining Interest Rate													1.00%
Line of Credit Facility, Commitment Fee Percentage					0.08%	0.20%
Line of Credit Facility, Extension Period	1 year
Line of Credit Facility, Amount Outstanding	0
Capital Lease Obligations [Abstract]
Capital Lease Obligations Incurred	25,700,000
Sale Leaseback Agreement, Leaseback Period	24 months
Capital lease obligations	35,923,000
Captial lease obligations, current	$ 22,406,000	$ 11,217,000	[1]

[1] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Cash, Cash Equivalents and Short-Term Investments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013	Nov. 30, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 3,647,110	$ 3,523,902
Unrealized Gains	13,781	14,711
Unrealized Losses	(202)	(260)
Estimated Fair Value, Total cash, cash equivalents and short-term investments	3,660,689	3,538,353
Cash and cash equivalents [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,306,384	1,425,052
Unrealized Gains	2	0
Unrealized Losses	(4)	0
Estimated Fair Value, cash and cash equivalents	1,306,382	1,425,052
Cash [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	247,671	200,771
Unrealized Gains	0	0
Unrealized Losses	0	0
Estimated Fair Value, cash and cash equivalents	247,671	200,771
Cash equivalents [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,058,713	1,224,281
Unrealized Gains	2	0
Unrealized Losses	(4)	0
Estimated Fair Value, cash and cash equivalents	1,058,711	1,224,281
Cash equivalents [Member] | Corporate bonds and commercial paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	9,514	3,998
Unrealized Gains	1	0
Unrealized Losses	(2)	0
Estimated Fair Value, cash and cash equivalents	9,513	3,998
Cash equivalents [Member] | Money Market Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	895,845
Unrealized Gains	0
Unrealized Losses	0
Estimated Fair Value, cash and cash equivalents	895,845
Cash equivalents [Member] | Money Market Mutual Funds and Repurchase Agreements [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		1,171,270
Unrealized Gains		0
Unrealized Losses		0
Estimated Fair Value, cash and cash equivalents		1,171,270
Cash equivalents [Member] | Municipal securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,498	3,895
Unrealized Gains	0	0
Unrealized Losses	(1)	0
Estimated Fair Value, cash and cash equivalents	1,497	3,895
Cash equivalents [Member] | Time deposits [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	63,956	45,118
Unrealized Gains	0	0
Unrealized Losses	0	0
Estimated Fair Value, cash and cash equivalents	63,956	45,118
Cash equivalents [Member] | U.S. Treasury securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	87,900
Unrealized Gains	1
Unrealized Losses	(1)
Estimated Fair Value, cash and cash equivalents	87,900
Short-term investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,340,726	2,098,850
Unrealized Gains	13,779	14,711
Unrealized Losses	(198)	(260)
Estimated Fair Value, short-term investments	2,354,307	2,113,301
Short-term investments [Member] | Marketable equity securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	194	237
Unrealized Gains	0	7
Unrealized Losses	0	0
Estimated Fair Value, short-term investments	194	244
Short-term fixed income securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,340,532	2,098,613
Unrealized Gains	13,779	14,704
Unrealized Losses	(198)	(260)
Estimated Fair Value, short-term investments	2,354,113	2,113,057
Short-term fixed income securities [Member] | Corporate bonds and commercial paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,195,722	1,059,158
Unrealized Gains	10,379	11,415
Unrealized Losses	(165)	(133)
Estimated Fair Value, short-term investments	1,205,936	1,070,440
Short-term fixed income securities [Member] | Foreign government securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	12,492	6,919
Unrealized Gains	64	45
Unrealized Losses	(1)	(12)
Estimated Fair Value, short-term investments	12,555	6,952
Short-term fixed income securities [Member] | Municipal securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	185,907	180,488
Unrealized Gains	386	97
Unrealized Losses	(11)	(60)
Estimated Fair Value, short-term investments	186,282	180,525
Short-term fixed income securities [Member] | Time deposits [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		20,113
Unrealized Gains		0
Unrealized Losses		0
Estimated Fair Value, short-term investments		20,113
Short-term fixed income securities [Member] | U.S. agency securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	506,699	501,863
Unrealized Gains	2,024	2,346
Unrealized Losses	(20)	(18)
Estimated Fair Value, short-term investments	508,703	504,191
Short-term fixed income securities [Member] | U.S. Treasury securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	439,712	330,072
Unrealized Gains	926	801
Unrealized Losses	(1)	(37)
Estimated Fair Value, short-term investments	$ 440,637	$ 330,836

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Cash, Cash Equivalents and Short-Term Investments (Tables)

3 Months Ended

Mar. 01, 2013

Cash, Cash Equivalents, and Short Term Investments Disclosure [Abstract]

Cash Cash Equivalents and Short term Investments

Cash, cash equivalents and short-term investments consisted of the following as of March 1, 2013 (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	247,671	$	—	$	—		$	247,671
Cash equivalents:
Corporate bonds and commercial paper	9,514		1		(2		)	9,513
Money market mutual funds	895,845		—		—			895,845
Municipal securities	1,498		—		(1		)	1,497
Time deposits	63,956		—		—			63,956
U.S. Treasury securities	87,900		1		(1		)	87,900
Total cash equivalents	1,058,713		2		(4		)	1,058,711
Total cash and cash equivalents	1,306,384		2		(4		)	1,306,382
Short-term fixed income securities:
Corporate bonds and commercial paper	1,195,722		10,379		(165		)	1,205,936
Foreign government securities	12,492		64		(1		)	12,555
Municipal securities	185,907		386		(11		)	186,282
U.S. agency securities	506,699		2,024		(20		)	508,703
U.S. Treasury securities	439,712		926		(1		)	440,637
Subtotal	2,340,532		13,779		(198		)	2,354,113
Marketable equity securities	194		—		—			194
Total short-term investments	2,340,726		13,779		(198		)	2,354,307
Total cash, cash equivalents and short-term investments	$	3,647,110	$	13,781	$	(202	)	$	3,660,689

Cash, cash equivalents and short-term investments consisted of the following as of November 30, 2012 (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	200,771	$	—	$	—		$	200,771
Cash equivalents:
Corporate bonds and commercial paper	3,998		—		—			3,998
Money market mutual funds and repurchase agreements	1,171,270		—		—			1,171,270
Municipal securities	3,895		—		—			3,895
Time deposits	45,118		—		—			45,118
Total cash equivalents	1,224,281		—		—			1,224,281
Total cash and cash equivalents	1,425,052		—		—			1,425,052
Short-term fixed income securities:
Corporate bonds and commercial paper	1,059,158		11,415		(133		)	1,070,440
Foreign government securities	6,919		45		(12		)	6,952
Municipal securities	180,488		97		(60		)	180,525
Time deposits	20,113		—		—			20,113
U.S. agency securities	501,863		2,346		(18		)	504,191
U.S. Treasury securities	330,072		801		(37		)	330,836
Subtotal	2,098,613		14,704		(260		)	2,113,057
Marketable equity securities	237		7		—			244
Total short-term investments	2,098,850		14,711		(260		)	2,113,301
Total cash, cash equivalents and short-term investments	$	3,523,902	$	14,711	$	(260	)	$	3,538,353

Continuous Unrealized Loss Position Less Than Twelve Months Related to Available-for-Sale Securities

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in an unrealized loss position for less than twelve months, as of March 1, 2013 and November 30, 2012 (in thousands):

	2013					2012
	Fair  Value		Gross Unrealized Losses			Fair  Value		Gross Unrealized Losses
Corporate bonds and commercial paper	$	191,986	$	(167	)	$	95,489	$	(132	)
Foreign government securities	3,599		(1		)	2,105		(12		)
Municipal securities	14,950		(12		)	40,524		(60		)
U.S. Treasury and agency securities	102,862		(19		)	48,203		(55		)
Total	$	313,397	$	(199	)	$	186,321	$	(259	)

Continuous Unrealized Loss Position Twelve Months or Longer Related to Available-for-Sale Securities

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in a continuous unrealized loss position for more than twelve months, as of March 1, 2013 and November 30, 2012 (in thousands):

	2013					2012
	Fair  Value		Gross Unrealized Losses			Fair  Value		Gross Unrealized Losses
Corporate bonds and commercial paper	$	—	$	—		$	2,999	$	(1	)
U.S. Treasury and agency securities	8,209		(3		)	—		—
Total	$	8,209	$	(3	)	$	2,999	$	(1	)

Cost and Estimated Fair Value of Debt Securities

The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated effective maturities as of March 1, 2013 (in thousands):

	Amortized Cost		Estimated Fair Value
Due within one year	$	549,442	$	550,707
Due between one and two years	701,820		706,425
Due between two and three years	728,813		732,718
Due after three years	360,457		364,263
Total	$	2,340,532	$	2,354,113

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Cash, Cash Equivalents and Short-Term Investments (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013 securities	Nov. 30, 2012 securities
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities [Abstract]
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, fair value	$ 313,397	$ 186,321
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, gross unrealized losses	(199)	(259)
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value	8,209	2,999
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, gross unrealized losses	(3)	(1)
Available-for-sale Securities, Continuous Unrealized Loss Position, Qualitative Disclosure [Abstract]
Number of securities in a continuous unrealized loss position for less than twelve months	153	65
Number of securities in a continuous unrealized loss position for more than twelve months	1	1
Corporate bonds and commercial paper [Member]
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities [Abstract]
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, fair value	191,986	95,489
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, gross unrealized losses	(167)	(132)
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value	0	2,999
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, gross unrealized losses	0	(1)
US Treasury and Government [Member]
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities [Abstract]
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, fair value	102,862	48,203
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, gross unrealized losses	(19)	(55)
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value	8,209	0
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, gross unrealized losses	(3)	0
Foreign government securities [Member]
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities [Abstract]
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, fair value	3,599	2,105
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, gross unrealized losses	(1)	(12)
Municipal securities [Member]
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities [Abstract]
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, fair value	14,950	40,524
Available-for-sale securities in a continuous unrealized loss position for less than twelve months, gross unrealized losses	$ (12)	$ (60)

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Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 01, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value of Derivative Instruments

The fair value of derivative instruments on our Condensed Consolidated Balance Sheets as of March 1, 2013 and November 30, 2012 were as follows (in thousands):

	2013				2012
	Fair Value Asset Derivatives(1)		Fair Value Liability Derivatives(2)		Fair Value Asset Derivatives(1)		Fair Value Liability Derivatives(2)
Derivatives designated as hedging instruments:
Foreign exchange option contracts(3)	$	25,521	$	—	$	10,897	$	—
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	6,945		3,251		2,616		998
Total derivatives	$	32,466	$	3,251	$	13,513	$	998

^{_________________________________________} 

⁽¹⁾  Included in prepaid expenses and other current assets on our Condensed Consolidated Balance Sheets.

⁽²⁾  Included in accrued expenses on our Condensed Consolidated Balance Sheets.

⁽³⁾  Hedging effectiveness expected to be recognized into income within the next twelve months.

Effect of Derivative Instruments as Designated Cash Flow Hedges and Not Designated as Hedges

The effect of derivative instruments designated as cash flow hedges and of derivative instruments not designated as hedges in our Condensed Consolidated Statements of Income for three months ended March 1, 2013 and March 2, 2012 was as follows (in thousands):

	2013					2012
	Foreign Exchange Option Contracts			Foreign Exchange Forward Contracts		Foreign Exchange Option Contracts			Foreign Exchange Forward Contracts
Derivatives in cash flow hedging relationships:
Net gain (loss) recognized in OCI, net of tax(1)	$	21,776		$	—	$	12,581		$	—
Net gain (loss) reclassified from accumulated OCI into income, net of tax(2)	$	7,094		$	—	$	10,348		$	—
Net gain (loss) recognized in income(3)	$	(4,668	)	$	—	$	(8,245	)	$	—
Derivatives not designated as hedging relationships:
Net gain (loss) recognized in income(4)	$	—		$	1,478	$	—		$	8,150

^{_________________________________________} 

⁽¹⁾  Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).

⁽²⁾  Effective portion classified as revenue.

⁽³⁾  Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net.

⁽⁴⁾  Classified in interest and other income (expense), net

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Basis of Presentation and Summary of Significant Accounting Policies

3 Months Ended

Mar. 01, 2013

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We have prepared the accompanying unaudited Condensed Consolidated Financial Statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended November 30, 2012 on file with the SEC (our “Annual Report”).

With the exception of the discussion below, there have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.

Recent Accounting Pronouncements

In December 2011, the FASB amended the accounting standards to increase the prominence of other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in shareholders’ equity and requires the components of OCI to be presented either in a single continuous statement of comprehensive income or in two consecutive statements. We adopted the amended accounting standards at the beginning of our first quarter of fiscal 2013 by electing to present separate consolidated statements of comprehensive income from the consolidated statements of income. The amended accounting standards only impact the financial statement presentation of OCI and do not change the components that are recognized in net income or OCI. The adoption had no impact on the Company’s financial position or results of operations.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Mar. 01, 2013	Nov. 30, 2012
Current assets:
Allowances for doubtful accounts	$ 12,715	$ 12,643
Stockholders' equity:
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	2,000	2,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	900,000	900,000
Common stock, shares issued	600,834	600,834
Common stock, shares outstanding	501,045	494,132
Treasury stock, shares	99,789	106,702

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Net Income Per Share

3 Months Ended

Mar. 01, 2013

Earnings Per Share [Abstract]

NET INCOME PER SHARE

 NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share for the three months ended March 1, 2013 and March 2, 2012 (in thousands, except per share data):

	Three Months
	2013		2012
Net income	$	65,117	$	185,209
Shares used to compute basic net income per share	498,607		494,016
Dilutive potential common shares:
Unvested restricted stock and performance share awards	6,526		4,280
Stock options	2,707		2,082
Shares used to compute diluted net income per share	507,840		500,378
Basic net income per share	$	0.13	$	0.37
Diluted net income per share	$	0.13	$	0.37

For the three months ended March 1, 2013, options to purchase approximately 6.8 million shares of common stock with exercise prices greater than the average fair market value of our stock of $37.82, were not included in the calculation because the effect would have been anti-dilutive. Comparatively, for the three months ended March 2, 2012, options to purchase approximately 26.1 million shares of common stock with exercise prices greater than the average fair market value of our stock of $30.16 were not included in the calculation because the effect would have been anti-dilutive.

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Document and Entity Information	3 Months Ended
	Mar. 01, 2013	Mar. 22, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	ADOBE SYSTEMS INC
Entity Central Index Key	0000796343
Document Type	10-Q
Document Period End Date	Mar. 01, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--11-29
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		501,936,172

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Commitments and Contingencies

3 Months Ended

Mar. 01, 2013

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

 COMMITMENTS AND CONTINGENCIES

Lease Commitments

We occupy three office buildings in San Jose, California where our corporate headquarters are located. We reference these office buildings as the Almaden Tower and the East and West Towers.

The lease agreements for the East and West Towers and the Almaden Tower are effective through August 2014 and March 2017, respectively. We are the investors in the lease receivables related to these leases for the East and West Towers and the Almaden Tower in the amount of $126.8 million and $80.4 million, respectively, which is recorded as investment in lease receivables on our Condensed Consolidated Balance Sheets. As of March 1, 2013, the carrying value of the lease receivables related to the towers approximated fair value. Under the agreement for the East and West Towers and the agreement for the Almaden Tower, we have the option to purchase the buildings at any time during the lease term for approximately $143.2 million and $103.6 million, respectively. The residual value guarantees under the East and West Towers and the Almaden Tower obligations are $126.8 million and $89.4 million, respectively. If we purchase the properties, the investments in the lease receivables may be credited against the purchase price.

These two leases are both subject to standard covenants including certain financial ratios that are reported to the lessors quarterly. In addition, we are required to maintain a standby letter of credit for approximately $16.6 million for one of the leases which enables us to secure a lower interest rate and reduce the number of covenants. As defined in the lease agreement, the standby letter of credit primarily represents the lease investment equity balance which is callable in the event of default. As of March 1, 2013, we were in compliance with all of the covenants. In the case of a default, the lessor may demand we purchase the buildings for an amount equal to the lease balance, or require that we remarket or relinquish the buildings. If we choose to remarket or are required to do so upon relinquishing the buildings, we are bound to arrange the sale of the buildings to an unrelated party and will be required to pay the lessor any shortfall between the net remarketing proceeds and the lease balance, up to the residual value guarantee amount less our investment in the lease receivables. Both leases qualify for operating lease accounting treatment and, as such, the buildings and the related obligations are not included in our Condensed Consolidated Balance Sheets. 

In the first quarter of fiscal 2013, we entered into a sale-leaseback agreement totaling $25.7 million over a period of 24 months. This transaction was classified as a capital lease obligation and recorded at fair value. See Note 13 for further information regarding of our capital lease obligations.

The following are our future minimum lease payments under our non-cancellable capital leases for each of the next five years and thereafter as of March 1, 2013 (in thousands):

Fiscal Year	Capital Lease Obligations
Remainder of 2013	$	23,011
2014	13,660
2015	—
2016	—
2017	—
Thereafter	—
Gross lease commitment	$	36,671
Less: interest	(748		)
Net lease commitment	$	35,923

Royalties

We have royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally based on a dollar amount per unit shipped or a percentage of the underlying revenue.

Indemnifications

In the normal course of business, we provide indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.

To the extent permitted under Delaware law, we have agreements whereby we indemnify our directors and officers for certain events or occurrences while the director or officer is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited, however, we have director and officer insurance coverage that limits our exposure and enables us to recover a portion of any future amounts paid.

Legal Proceedings

In connection with disputes relating to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be very costly and can be disruptive to our business operations by diverting the attention and energies of management and key technical personnel. Although we have successfully defended or resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes. Third-party intellectual property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our sale of products or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification commitments with our customers including contractual provisions under various license arrangements and service agreements.

In addition to intellectual property disputes, we are subject to legal proceedings, claims and investigations in the ordinary course of business, including claims relating to commercial, employment and other matters. Some of these disputes and legal proceedings may include speculative claims for substantial or indeterminate amounts of damages. We consider all claims on a quarterly basis in accordance with GAAP and based on known facts assess whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, we then evaluate disclosure requirements and whether to accrue for such claims in our financial statements. This determination is then reviewed and discussed with our Audit Committee and our independent registered public accounting firm.

We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Unless otherwise specifically disclosed in this note, we have determined that no provision for liability nor disclosure is required related to any claim against us because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.

All legal costs associated with litigation are expensed as incurred. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our consolidated financial position, cash flows or results of operations could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations.

In connection with our anti-piracy efforts, conducted both internally and through organizations such as the Business Software Alliance, from time to time we undertake litigation against alleged copyright infringers. Such lawsuits may lead to counter-claims alleging improper use of litigation or violation of other laws. We believe we have valid defenses with respect to such counter-claims; however, it is possible that our consolidated financial position, cash flows or results of operations could be affected in any particular period by the resolution of one or more of these counter-claims.

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Condensed Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 01, 2013	Mar. 02, 2012
Revenue:
Products	$ 675,789	$ 808,521
Subscription	224,266	146,230
Services and support	107,818	90,469
Total revenue	1,007,873	1,045,220
Cost of revenue:
Products	51,982	25,668
Subscription	62,580	48,780
Services and support	42,122	33,817
Total cost of revenue	156,684	108,265
Gross profit	851,189	936,955
Operating expenses:
Research and development	209,638	177,728
Sales and marketing	398,033	358,963
General and administrative	132,853	102,681
Restructuring charges	2	(2,825)
Amortization of purchased intangibles	12,439	11,429
Total operating expenses	752,965	647,976
Operating income	98,224	288,979
Non-operating income (expense):
Interest and other income (expense), net	1,246	(2,785)
Interest expense	(16,834)	(16,838)
Investment gains (losses), net	848	1,021
Total non-operating income (expense), net	(14,740)	(18,602)
Income before income taxes	83,484	270,377
Provision for income taxes	18,367	85,168
Net income	$ 65,117	$ 185,209
Basic net income per share	$ 0.13	$ 0.37
Shares used to compute basic net income per share	498,607	494,016
Diluted net income per share	$ 0.13	$ 0.37
Shares used to compute diluted net income per share	507,840	500,378

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Goodwill and Purchased and Other Intangibles

3 Months Ended

Mar. 01, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND PURCHASED AND OTHER INTANGIBLES

GOODWILL AND PURCHASED AND OTHER INTANGIBLES

Goodwill as of March 1, 2013 and November 30, 2012 was $4.221 billion and $4.133 billion, respectively. The increase was primarily due to our acquisition of Behance.

Purchased and other intangible assets subject to amortization as of March 1, 2013 and November 30, 2012 were as follows (in thousands): 

	2013							2012
	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Purchased technology	$	358,612	$	(162,882	)	$	195,730	$	366,574	$	(161,538	)	$	205,036
Customer contracts and relationships	$	324,221	$	(82,802	)	$	241,419	$	318,027	$	(74,214	)	$	243,813
Trademarks	66,551		(21,249		)	45,302		53,293		(19,171		)	34,122
Acquired rights to use technology	147,397		(61,222		)	86,175		104,402		(56,782		)	47,620
Localization	8,423		(5,369		)	3,054		8,586		(4,654		)	3,932
Other intangibles	17,646		(8,758		)	8,888		18,742		(8,229		)	10,513
Total other intangible assets	$	564,238	$	(179,400	)	$	384,838	$	503,050	$	(163,050	)	$	340,000
Purchased and other intangible     assets, net	$	922,850	$	(342,282	)	$	580,568	$	869,624	$	(324,588	)	$	545,036

During the three months ended March 1, 2013, we acquired rights to use certain technology for approximately $51.8 million. Of this cost, an estimated $25.3 million was related to future licensing rights and has been capitalized and will be amortized on a straight-line basis over the estimated useful lives ranging from five to ten years. We estimated that the remaining cost of approximately $26.5 million was related to historical use of licensing rights and was expensed as cost of product revenue.   

During the three months ended March 1, 2013, certain purchased intangibles associated with our Omniture acquisition became fully amortized and were removed from the balance sheet. Excluding the expense associated with historical use of the acquired rights to use the technology discussed above, amortization expense related to purchased and other intangible assets was $36.9 million and $33.1 million for the three months ended March 1, 2013 and March 2, 2012, respectively. Of these amounts, $26.4 million and $21.6 million were included in cost of sales for the three months ended March 1, 2013 and March 2, 2012, respectively.

As of March 1, 2013, we expect amortization expense in future periods to be as follows (in thousands):

Fiscal Year	Purchased Technology		Other Intangible Assets
Remainder of 2013	$	54,114	$	55,222
2014	66,501		66,192
2015	51,804		60,216
2016	13,140		54,621
2017	6,736		46,275
Thereafter	3,435		102,312
Total expected amortization expense	$	195,730	$	384,838

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Derivatives and Hedging Activities

3 Months Ended

Mar. 01, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND HEDGING ACTIVITIES

 DERIVATIVES AND HEDGING ACTIVITIES

In countries outside the U.S., we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities up to twelve months. We enter into these foreign exchange contracts to hedge a portion of our forecasted foreign currency denominated revenue in the normal course of business and accordingly, they are not speculative in nature.

We recognize these contracts as derivative instruments and they are classified as either assets or liabilities on the balance sheet and measured at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive income in our Condensed Consolidated Balance Sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain or loss on the cash flow hedge to revenue. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive income to interest and other income, net in our Condensed Consolidated Statements of Income at that time. If we do not elect hedge accounting, or the derivative does not qualify for hedge accounting, the changes in fair market value from period to period are recorded in interest and other income (expense), net in our Condensed Consolidated Statements of Income.

We also hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These derivative instruments hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded to interest and other income (expense), net in our Condensed Consolidated Statements of Income. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged.

The bank counterparties to these contracts expose us to credit-related losses in the event of their nonperformance. However, to mitigate that risk, we only contract with counterparties who meet our minimum requirements as determined by our counterparty risk assessment process. We monitor ratings, credit spreads and potential downgrades on at least a quarterly basis. Based on our ongoing assessment of counterparty risk, we may adjust our exposure to various counterparties. In addition, our hedging policy establishes maximum limits for each counterparty to mitigate any concentration of risk.

The aggregate fair value of derivative instruments in net asset positions as of March 1, 2013 and November 30, 2012 was $32.5 million and $13.5 million, respectively. These amounts represent the maximum exposure to loss at the reporting date as a result of all of the counterparties failing to perform as contracted. This exposure could be reduced by up to $3.3 million and $1.0 million, respectively, of liabilities included in master netting arrangements with those same counterparties.

The fair value of derivative instruments on our Condensed Consolidated Balance Sheets as of March 1, 2013 and November 30, 2012 were as follows (in thousands):

	2013				2012
	Fair Value Asset Derivatives(1)		Fair Value Liability Derivatives(2)		Fair Value Asset Derivatives(1)		Fair Value Liability Derivatives(2)
Derivatives designated as hedging instruments:
Foreign exchange option contracts(3)	$	25,521	$	—	$	10,897	$	—
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	6,945		3,251		2,616		998
Total derivatives	$	32,466	$	3,251	$	13,513	$	998

^{_________________________________________} 

⁽¹⁾  Included in prepaid expenses and other current assets on our Condensed Consolidated Balance Sheets.

⁽²⁾  Included in accrued expenses on our Condensed Consolidated Balance Sheets.

⁽³⁾  Hedging effectiveness expected to be recognized into income within the next twelve months.

The effect of derivative instruments designated as cash flow hedges and of derivative instruments not designated as hedges in our Condensed Consolidated Statements of Income for three months ended March 1, 2013 and March 2, 2012 was as follows (in thousands):

	2013					2012
	Foreign Exchange Option Contracts			Foreign Exchange Forward Contracts		Foreign Exchange Option Contracts			Foreign Exchange Forward Contracts
Derivatives in cash flow hedging relationships:
Net gain (loss) recognized in OCI, net of tax(1)	$	21,776		$	—	$	12,581		$	—
Net gain (loss) reclassified from accumulated OCI into income, net of tax(2)	$	7,094		$	—	$	10,348		$	—
Net gain (loss) recognized in income(3)	$	(4,668	)	$	—	$	(8,245	)	$	—
Derivatives not designated as hedging relationships:
Net gain (loss) recognized in income(4)	$	—		$	1,478	$	—		$	8,150

^{_________________________________________} 

⁽¹⁾  Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).

⁽²⁾  Effective portion classified as revenue.

⁽³⁾  Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net.

⁽⁴⁾  Classified in interest and other income (expense), net

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 01, 2013

Fair Value Disclosures [Abstract]

Financial assets and liabilities at fair value on a recurring basis

The fair value of our financial assets and liabilities at March 1, 2013 was determined using the following inputs (in thousands):

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate bonds and commercial paper	$	9,513	$	—	$	9,513	$	—
Money market mutual funds	895,845		895,845		—		—
Municipal securities	1,497		—		1,497		—
Time deposits	63,956		63,956		—		—
U.S. Treasury securities	87,900		—		87,900		—
Short-term investments:
Corporate bonds and commercial paper	1,205,936		—		1,205,936		—
Foreign government securities	12,555		—		12,555		—
Marketable equity securities	194		194		—		—
Municipal securities	186,282		—		186,282		—
U.S. agency securities	508,703		—		508,703		—
U.S. Treasury securities	440,637		—		440,637		—
Prepaid expenses and other current assets:
Foreign currency derivatives	32,466		—		32,466		—
Other assets:
Deferred compensation plan assets	17,456		506		16,950		—
Total assets	$	3,462,940	$	960,501	$	2,502,439	$	—

Liabilities:
Accrued expenses:
Foreign currency derivatives	$	3,251	$	—	$	3,251	$	—
Total liabilities	$	3,251	$	—	$	3,251	$	—

The fair value of our financial assets and liabilities at November 30, 2012 was determined using the following inputs (in thousands): 

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate bonds and commercial paper	$	3,998	$	—	$	3,998	$	—
Money market mutual funds and repurchase     agreements	1,171,270		1,171,270		—		—
Municipal securities	3,895		—		3,895		—
Time deposits	45,118		45,118		—		—
Short-term investments:
Corporate bonds and commercial paper	1,070,440		—		1,070,440		—
Foreign government securities	6,952		—		6,952		—
Marketable equity securities	244		244		—		—
Municipal securities	180,525		—		180,525		—
Time deposits	20,113		—		20,113		—
U.S. agency securities	504,191		—		504,191		—
U.S. Treasury securities	330,836		—		330,836		—
Prepaid expenses and other current assets:
Foreign currency derivatives	13,513		—		13,513		—
Other assets:
Deferred compensation plan assets	15,094		436		14,658		—
Total assets	$	3,366,189	$	1,217,068	$	2,149,121	$	—

Liabilities:
Accrued expenses:
Foreign currency derivatives	$	998	$	—	$	998	$	—
Total liabilities	$	998	$	—	$	998	$	—

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Debt

3 Months Ended

Mar. 01, 2013

Debt Disclosure [Abstract]

DEBT

DEBT

Notes

In February 2010, we issued $600.0 million of 3.25% senior notes due February 1, 2015 (the “2015 Notes”) and $900.0 million of 4.75% senior notes due February 1, 2020 (the “2020 Notes” and, together with the 2015 Notes, the “Notes”). Our proceeds were approximately $1.5 billion and were net of an issuance discount of $6.6 million. The Notes rank equally with our other unsecured and unsubordinated indebtedness. In addition, we incurred issuance costs of approximately $10.7 million. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the Notes using the effective interest method. The effective interest rate including the discount and issuance costs is 3.45% for the 2015 Notes and 4.92% for the 2020 Notes. Interest is payable semi-annually, in arrears, on February 1 and August 1, commencing on August 1, 2010. In February 2013, we made a semi-annual interest payment of $31.1 million. The proceeds from the Notes are available for general corporate purposes, including repayment of any balance outstanding on our credit facility. Based on quoted prices in inactive markets, the fair value of the Notes was approximately $1.6 billion as of March 1, 2013.

We may redeem the Notes at any time, subject to a make-whole premium. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The Notes also include covenants that limit our ability to grant liens on assets and to enter into sale and leaseback transactions, subject to significant allowances. As of March 1, 2013, we were in compliance with all of the covenants.

Credit Agreement

On March 2, 2012, we entered into a five-year $1.0 billion senior unsecured revolving credit agreement (the “Credit Agreement”), providing for loans to us and certain of our subsidiaries. Pursuant to the terms of the Credit Agreement, we may, subject to the agreement of the applicable lenders, request up to an additional $500.0 million in commitments, for a maximum aggregate commitment of $1.5 billion. Loans under the Credit Agreement will bear interest at either (i) the London Interbank Offered Rate (“LIBOR”) plus a margin, based on our debt ratings, ranging from 0.795% and 1.30% or (ii) the base rate, which is defined as the highest of (a) the agent’s prime rate, (b) the federal funds effective rate plus 0.50% or (c) LIBOR plus 1.00% plus a margin, based on our debt ratings, ranging from 0.00% to 0.30%. Commitment fees are payable quarterly at rates between 0.08% and 0.20% per year also based on our public debt ratings. Subject to certain conditions stated in the Credit Agreement, we and any of our subsidiaries designated as additional borrowers may borrow, prepay and re-borrow amounts under the revolving credit facility at any time during the term of the Credit Agreement.

The Credit Agreement contains customary representations, warranties, affirmative and negative covenants, including a financial covenant, events of default and indemnification provisions in favor of the lenders. The negative covenants include restrictions regarding the incurrence of liens and indebtedness, certain merger and acquisition transactions, dispositions and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires us not to exceed a maximum leverage ratio.

On March 1, 2013, we exercised an option under the Credit Agreement to extend the maturity date of the Credit Agreement by one year to March 2, 2018. The facility will terminate and all amounts owing thereunder will be due and payable on the maturity date unless (a) the commitments are terminated earlier upon the occurrence of certain events, including an event of default, or (b) the maturity date is further extended upon our request, subject to the agreement of the lenders.

As of March 1, 2013, there were no outstanding borrowings under this Credit Agreement and we were in compliance with all covenants.

Capital Lease Obligations

In January 2013, we entered into a sale-leaseback agreement totaling $25.7 million over a period of 24 months. As of March 1, 2013, our capital lease obligations of $35.9 million includes $22.4 million of current debt.

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Restructuring Charges

3 Months Ended

Mar. 01, 2013

Restructuring and Related Activities [Abstract]

RESTRUCTURING CHARGES

RESTRUCTURING CHARGES

Fiscal 2011 Restructuring Plan

In the fourth quarter of fiscal 2011, we initiated a restructuring plan consisting of reductions in workforce and the consolidation of facilities in order to better align our resources around our Digital Media and Digital Marketing strategies.

During the three months ended March 1, 2013, we continued to implement restructuring activities under this plan. Total costs incurred to date and expected to be incurred for closing redundant facilities are $10.9 million as all facilities under this plan have been exited as of March 1, 2013.

Other Restructuring Plans

Other restructuring plans include other Adobe plans and other plans associated with certain of our acquisitions that are substantially complete. We continue to make cash outlays to settle obligations under these plans, however the current impact to our condensed consolidated financial statements is not significant. Our other restructuring plans primarily consist of the 2009 Restructuring Plan, which was implemented in the fourth quarter of fiscal 2009, in order to appropriately align our costs in connection with our fiscal 2010 operating plan.

During the three months ended March 1, 2013 we vacated approximately 21,000 square feet of sales facilities in Australia in connection with our other restructuring plans.

Summary of Restructuring Plans

The following table sets forth a summary of restructuring activities related to all of our restructuring plans described above during the three months ended March 1, 2013 (in thousands):

	November 30, 2012		Costs Incurred		Cash Payments			Other Adjustments*			March 1, 2013
Fiscal 2011 Restructuring Plan:
Termination benefits	$	1,248	$	—	$	(722	)	$	105		$	631
Cost of closing redundant facilities	9,623		—		(274		)	(3,687		)	5,662
Other Restructuring Plans:
Termination benefits	991		—		(198		)	(8		)	785
Cost of closing redundant facilities	9,688		4,328		(2,851		)	(1,423		)	9,742
Total restructuring plans	$	21,550	$	4,328	$	(4,045	)	$	(5,013	)	$	16,820

^{_________________________________________} 

^(*)  Included in Other Adjustments are foreign currency translation adjustments and goodwill adjustments of $0.5 million and $0.2 million, respectively.

Accrued restructuring charges of approximately $16.8 million as of March 1, 2013 includes $6.8 million recorded in accrued restructuring, current and $10.0 million related to long-term facilities obligations recorded in accrued restructuring, non-current on our Condensed Consolidated Balance Sheets. We expect to pay accrued termination benefits through fiscal 2013 and facilities-related liabilities under contract through fiscal 2021.

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Non-Operating Income (Expense) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 01, 2013	Mar. 02, 2012
Interest and other income (expense), net:
Interest income	$ 5,681	$ 6,193
Foreign exchange gains (losses)	(6,174)	(9,721)
Realized gains on fixed income investment	1,598	702
Realized losses on fixed income investment	(14)	(205)
Other	155	246
Interest and other income (expense), net	1,246	(2,785)
Interest expense	(16,834)	(16,838)
Investment gains (losses), net:
Realized investment gains	418	245
Unrealized investment gains	444	810
Realized investment losses	(14)	(34)
Investment gains (losses), net	848	1,021
Total non-operating income (expense), net	$ (14,740)	$ (18,602)

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Accrued Expenses

3 Months Ended

Mar. 01, 2013

Payables and Accruals [Abstract]

ACCRUED EXPENSES

ACCRUED EXPENSES

Accrued expenses as of March 1, 2013 and November 30, 2012 consisted of the following (in thousands):

	2013		2012
Accrued compensation and benefits	$	171,123	$	242,887
Sales and marketing allowances	79,081		87,916
Accrued corporate marketing	40,574		39,503
Taxes payable	16,724		26,164
Royalties payable	8,154		10,040
Accrued interest expense	5,039		20,796
Other	184,770		162,834
Accrued expenses	$	505,465	$	590,140

Other primarily includes general corporate accruals for local and regional expenses and technical support. Other is also comprised of deferred rent related to office locations with rent escalations and foreign currency liability derivatives.

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Stock-Based Compensation

3 Months Ended

Mar. 01, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Summary of Restricted Stock Units

Restricted stock unit activity for the three months ended March 1, 2013 and the fiscal year ended November 30, 2012 was as follows (in thousands):

	2013		2012
Beginning outstanding balance	18,415		16,871
Awarded	5,807		9,431
Released	(4,904	)	(5,854	)
Forfeited	(382	)	(2,147	)
Increase due to acquisition	—		114
Ending outstanding balance	18,936		18,415

 Information regarding restricted stock units outstanding at March 1, 2013 and March 2, 2012 is summarized below:

	Number of Shares (thousands)	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value(*) (millions)
2013
Restricted stock units outstanding	18,936	1.66	$	754.2
Restricted stock units vested and expected to vest	16,279	1.59	$	646.5
2012
Restricted stock units outstanding	18,350	1.90	$	618.9
Restricted stock units vested and expected to vest	15,432	1.79	$	519.6

^{_________________________________________} 

^(*)  The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively. 

Summary of Performance Shares

The following table sets forth the summary of performance share activity under our Performance Share Program for fiscal 2013 (the “2013 Program”) for the three months ended March 1, 2013 (in thousands): 

	Shares Granted		Maximum Shares Eligible to Receive
Beginning outstanding balance	—		—
Awarded	945		1,891
Forfeited	(4	)	(9	)
Ending outstanding balance	941		1,882

Effective January 24, 2013, our Executive Compensation Committee modified our Performance Share Program by eliminating the use of qualitative performance objectives, with 100% of shares to be earned based on the achievement of an objective total stockholder return measure over a three-year performance period. Performance awards will be granted under the 2013 Program pursuant to the terms of our 2003 Equity Incentive Plan. The purpose of the 2013 Program is to align key management and senior leadership with stockholders’ interests over the long term and to retain key employees. Performance share awards will be awarded and fully vest upon the Executive Compensation Committee's certification of the level of achievement following the three-year anniversary of the grant date on January 24, 2016. Participants in the 2013 Program generally have the ability to receive up to 200% of the target number of shares originally granted.

In the first quarter of fiscal 2013, the Executive Compensation Committee certified the actual performance achievement of participants in the 2012 Performance Share Program (the “2012 Program”). Based upon the achievement of specific and/or market-based performance goals outlined in the 2012 Program, participants had the ability to receive up to 150% of the target number of shares originally granted. Actual performance resulted in participants achieving 116% of target or approximately 1.3 million shares for the 2012 Program. One third of the shares under the 2012 Program vested in the first quarter of fiscal 2013 and the remaining two thirds vest evenly on the following two anniversaries of the grant, contingent upon the recipient's continued service to Adobe.

In the first quarter of fiscal 2012, the Executive Compensation Committee certified the actual performance achievement of participants in the 2011 Performance Share Program (the “2011 Program”). Based upon the achievement of goals outlined in the 2011 Program, participants had the ability to receive up to 150% of the target number of shares originally granted. Actual performance resulted in participants achieving 130% of target or approximately 0.5 million shares for the 2011 Program. One third of the shares under the 2011 Program vested in the first quarter of fiscal 2012 and the remaining two thirds vest evenly on the following two anniversaries of the grant, contingent upon the recipient's continued service to Adobe.

The following table sets forth the summary of performance share activity under our 2010, 2011 and 2012 programs, based upon share awards actually achieved, for the three months ended March 1, 2013 and the fiscal year ended November 30, 2012 (in thousands):

	2013		2012
Beginning outstanding balance	388		405
Achieved	1,279		492
Released	(657	)	(464	)
Forfeited	(32	)	(45	)
Ending outstanding balance	978		388

Information regarding performance shares outstanding at March 1, 2013 and March 2, 2012 is summarized below: 

	Number of Shares (thousands)	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value(*) (millions)
2013
Performance shares outstanding	978	1.32	$	38.9
Performance shares vested and expected to vest	865	1.29	$	34.4
2012
Performance shares outstanding	453	1.23	$	15.3
Performance shares vested and expected to vest	403	1.20	$	13.5

^{_________________________________________} 

^(*)  The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively.

Summary of Stock Options

There were no option grants during the three months ended March 1, 2013. The assumptions used to value option grants during the three months ended March 2, 2012 were as follows: 

	Three Months
	2012
Expected life (in years)	3.9
Volatility	34	%
Risk free interest rate	0.54	%

The expected life of employee stock purchase plan (“ESPP”) shares is the average of the remaining purchase periods under each offering period. The assumptions used to value employee stock purchase rights during the three months ended March 1, 2013 and March 2, 2012 were as follows:

	Three Months
	2013	2012
Expected life (in years)	0.5 - 2.0	0.5 - 2.0
Volatility	26 - 30%	36	%
Risk free interest rate	0.12 - 0.27%	0.06 - 0.27%

Option activity for the three months ended March 1, 2013 and the fiscal year ended November 30, 2012 was as follows (in thousands):

	2013		2012
Beginning outstanding balance	24,517		34,802
Granted	—		57
Exercised	(4,869	)	(6,754	)
Cancelled	(1,242	)	(4,692	)
Increase due to acquisition	129		1,104
Ending outstanding balance	18,535		24,517

Information regarding stock options outstanding at March 1, 2013 and March 2, 2012 is summarized below:

	Number of Shares (thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value(*) (millions)
2013
Options outstanding	18,535	$	32.56	2.76	$	139.3
Options vested and expected to vest	18,250	$	32.66	2.71	$	135.3
Options exercisable	15,495	$	33.71	2.25	$	99.4
2012
Options outstanding	32,594	$	30.97	3.14	$	148.4
Options vested and expected to vest	31,783	$	31.08	3.07	$	142.4
Options exercisable	25,490	$	32.61	2.39	$	85.2

^{_________________________________________} 

^(*)  The intrinsic value is calculated as the difference between the market value as of the end of the fiscal period and the exercise price of the shares. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively.

Summary of Employee Stock Purchase Plan Shares

Employees purchased 1.2 million shares at an average price of $25.49 and 1.1 million shares at an average price of $23.64 for the three months ended March 1, 2013 and March 2, 2012, respectively. The intrinsic value of shares purchased during the three months ended March 1, 2013 and March 2, 2012 was $14.5 million and $5.0 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.

Compensation Costs

As of March 1, 2013, there was $607.8 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based awards which will be recognized over a weighted average period of 2.4 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

Total stock-based compensation costs that have been included in our Condensed Consolidated Statements of Income for the three months ended March 1, 2013 and March 2, 2012 were as follows (in thousands):

	2013				2012
Income Statement Classifications	Option Grants and Stock Purchase Rights		Restricted Stock and Performance Share Awards		Option Grants and Stock Purchase Rights		Restricted Stock and Performance Share Awards
Cost of revenue—subscription	$	637	$	1,063	$	742	$	603
Cost of revenue—services and support	855		2,450		1,116		2,070
Research and development	5,820		25,731		7,199		18,081
Sales and marketing	6,667		23,752		8,780		16,916
General and administrative	2,514		14,707		4,500		11,574
Total	$	16,493	$	67,703	$	22,337	$	49,244

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Stockholders' Equity

3 Months Ended

Mar. 01, 2013

Equity [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Retained Earnings

The changes in retained earnings for the three months ended March 1, 2013 were as follows (in thousands): 

Balance as of November 30, 2012	$	7,003,003
Net income	65,117
Re-issuance of treasury stock	(259,631		)
Balance as of March 1, 2013	$	6,808,489

We account for treasury stock under the cost method. When treasury stock is re-issued at a price higher than its cost, the difference is recorded as a component of additional paid-in-capital in our Condensed Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a component of additional paid-in-capital to the extent that there are gains to offset the losses. If there are no treasury stock gains in additional paid-in-capital, the losses upon re-issuance of treasury stock are recorded as a component of retained earnings in our Condensed Consolidated Balance Sheets.

The components of accumulated other comprehensive income and activity, net of related taxes, for the three months ended March 1, 2013 was as follows (in thousands):

	November 30, 2012			Increase / Decrease			Reclassification Adjustments				March 1, 2013
Net unrealized gains on available-for-sale securities:
Unrealized gains on available-for-sale securities	$	14,699		$	659		$	(1,599	)		$	13,759
Unrealized losses on available-for-sale securities	(260		)	43			15				(202		)
Total net unrealized gains on available-for-sale securities	14,439			702			(1,584		)	(1)	13,557
Net unrealized gains on derivative instruments designated as hedging instruments	6,604			21,776			(7,094		)	(2)	21,286
Cumulative foreign currency translation adjustments	9,669			(4,402		)	—				5,267
Total accumulated other comprehensive income, net of taxes	$	30,712		$	18,076		$	(8,678	)		$	40,110

_________________________________________

⁽¹⁾  Classified in interest and other income (expense), net.

⁽²⁾  Classified as revenue.

Stock Repurchase Program

To facilitate our stock repurchase program, designed to return value to our stockholders and minimize dilution from stock issuances, we repurchase shares in the open market and also enter into structured repurchase agreements with third parties.

We currently have authority granted by our Board of Directors to repurchase up to $2.0 billion in common stock through the end of fiscal 2015. This stock repurchase program is similar to our previous $1.6 billion stock repurchase program which we exhausted during the second quarter of fiscal 2012.

During the three months ended March 1, 2013 and March 2, 2012, we entered into structured stock repurchase agreements with large financial institutions, whereupon we provided them with prepayments of $100.0 million and $80.0 million, respectively. The $100.0 million prepayments during the first quarter of fiscal 2013 were under the new $2.0 billion stock repurchase authority while the $80.0 million prepayments during the first quarter of fiscal 2012 were under the previous $1.6 billion authority. We enter into these agreements in order to take advantage of repurchasing shares at a guaranteed discount to the Volume Weighted Average Price (“VWAP”) of our common stock over a specified period of time. We only enter into such transactions when the discount that we receive is higher than the foregone return on our cash prepayments to the financial institutions. There were no explicit commissions or fees on these structured repurchases. Under the terms of the agreements, there is no requirement for the financial institutions to return any portion of the prepayment to us.

The financial institutions agree to deliver shares to us at monthly intervals during the contract term. The parameters used to calculate the number of shares deliverable are: the total notional amount of the contract, the number of trading days in the contract, the number of trading days in the interval and the average VWAP of our stock during the interval less the agreed upon discount. During the three months ended March 1, 2013, we repurchased approximately 2.7 million shares at an average price of $37.32 through structured repurchase agreements entered into during fiscal 2012 and the three months ended March 1, 2013. During the three months ended March 2, 2012, we repurchased approximately 1.8 million shares at an average price of $30.07 through structured repurchase agreements entered into during the three months ended March 2, 2012.

As of March 1, 2013, the prepayments were classified as treasury stock on our Condensed Consolidated Balance Sheets at the payment date, though only shares physically delivered to us by the financial statement date were excluded from the computation of earnings per share. As of March 1, 2013, $32.8 million of prepayment remained under this agreement.

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Acquisitions (Details) (USD $) In Millions, unless otherwise specified	Dec. 20, 2012 Behance [Member]	Jan. 13, 2012 Efficient Frontier [Member]
Business Acquisition [Line Items]
Purchase Price	$ 111.1	$ 374.7
Purchase price allocated to goodwill	90.5	291.4
Purchase price allocated to identifiable intangible assets	28.5	122.7
Purchase price allocated to net tangible assets (liabilities)	$ (7.9)	$ (39.4)

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Stock-Based Compensation (Details Numeric) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		3 Months Ended			12 Months Ended
	Mar. 01, 2013	Mar. 02, 2012	Mar. 01, 2013 Employee Stock Purchase Plan [Member]	Mar. 02, 2012 Employee Stock Purchase Plan [Member]	Mar. 01, 2013 Performance Share Program [Member] Current Program [Member]	Nov. 30, 2012 Performance Share Program [Member] Program 2012 [Member]	Dec. 02, 2011 Performance Share Program [Member] Program 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share Price	$ 39.83	$ 33.73
Stock Based Compensation (Numeric) [Abstract]
Shares Purchased, ESPP			1.2	1.1
Average purchase price of shares, ESPP			$ 25.49	$ 23.64
Shares Purchased Intrinsic Value, ESPP			$ 14.5	$ 5.0
Maximum percentage of target shares able to receive					200.00%	150.00%	150.00%
Actual percentage achieved						116.00%	130.00%
Number of shares achieved						1.3	0.5
Unrecognized compensation cost, non-vested awards	$ 607.8
Period for recognition, unrecognized compensation cost	2 years 5 months 1 day

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Segments

3 Months Ended

Mar. 01, 2013

Segment Reporting [Abstract]

SEGMENTS

SEGMENTS

We report segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.

Our CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments, but does not review operating expenses on a segment by segment basis. In addition, with the exception of goodwill and intangible assets, we do not identify or allocate our assets by the reportable segments.

Effective in the first quarter of fiscal 2013, we moved our video server solutions products from our Digital Media segment to our Digital Marketing segment to better align the role of how Adobe can help its customers monetize their video assets with our Digital Marketing solutions. Prior year information in the table below has been updated to reflect this change.

We have the following reportable segments:

• Digital Media—Our Digital Media segment provides tools and solutions that enable individuals, small businesses and enterprises to create, publish, promote and monetize their digital content anywhere. Our customers include traditional content creators, web application developers and digital media professionals, as well as their management in marketing departments and agencies, companies and publishers.

• Digital Marketing—Our Digital Marketing segment provides solutions and services for how digital advertising and marketing are created, managed, executed, measured and optimized. Our customers include digital marketers, advertisers, publishers, merchandisers, web analysts, chief marketing officers and chief revenue officers.

• Print and Publishing—Our Print and Publishing segment addresses market opportunities ranging from the diverse publishing needs of technical and business publishing to our legacy type and OEM printing businesses.

(in thousands)	Digital Media			Digital Marketing			Print and Publishing			Total
Three months ended March 1, 2013
Revenue	$	688,400		$	267,700		$	51,773		$	1,007,873
Cost of revenue	53,709			98,279			4,696			156,684
Gross profit	$	634,691		$	169,421		$	47,077		$	851,189
Gross profit as a percentage of revenue	92		%	63		%	91		%	84		%
Three months ended March 2, 2012
Revenue	$	724,353		$	265,837		$	55,030		$	1,045,220
Cost of revenue	25,625			79,547			3,093			108,265
Gross profit	$	698,728		$	186,290		$	51,937		$	936,955
Gross profit as a percentage of revenue	96		%	70		%	94		%	90		%

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Accrued Expenses (Tables)

3 Months Ended

Mar. 01, 2013

Payables and Accruals [Abstract]

Accrued Expenses

Accrued expenses as of March 1, 2013 and November 30, 2012 consisted of the following (in thousands):

	2013		2012
Accrued compensation and benefits	$	171,123	$	242,887
Sales and marketing allowances	79,081		87,916
Accrued corporate marketing	40,574		39,503
Taxes payable	16,724		26,164
Royalties payable	8,154		10,040
Accrued interest expense	5,039		20,796
Other	184,770		162,834
Accrued expenses	$	505,465	$	590,140

Other primarily includes general corporate accruals for local and regional expenses and technical support. Other is also comprised of deferred rent related to office locations with rent escalations and foreign currency liability derivatives.

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Stock-Based Compensation (Details 4) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended
	Mar. 01, 2013		Mar. 02, 2012		Nov. 30, 2012	Dec. 02, 2011
Performance shares & restricted stock units outstanding
Share Price	$ 39.83		$ 33.73
Performance Shares [Member] | Prior Year [Member]
Performance shares & restricted stock units outstanding
Number of shares outstanding	978		453		388	405
Outstanding weighted average remaining contractual life (in years)	1 year 3 months 26 days		1 year 2 months 23 days
Outstanding aggregate intrinsic value	$ 38.9	[1]	$ 15.3	[1]
Number of shares vested and expected to vest	865		403
Vested and expected to vest weighted average remaining contractual life (in years)	1 year 3 months 15 days		1 year 2 months 12 days
Vested and expected to vest aggregate intrinsic value	34.4	[1]	13.5	[1]
Restricted Stock Unit [Member]
Performance shares & restricted stock units outstanding
Number of shares outstanding	18,936		18,350		18,415	16,871
Outstanding weighted average remaining contractual life (in years)	1 year 7 months 28 days		1 year 10 months 24 days
Outstanding aggregate intrinsic value	754.2	[1]	618.9	[1]
Number of shares vested and expected to vest	16,279		15,432
Vested and expected to vest weighted average remaining contractual life (in years)	1 year 7 months 2 days		1 year 9 months 15 days
Vested and expected to vest aggregate intrinsic value	$ 646.5	[1]	$ 519.6	[1]

[1] The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively.

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Goodwill and Purchased and Other Intangibles (Details) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013	Nov. 30, 2012
Finite-Lived Intangible Assets [Line Items]
Cost	$ 922,850	$ 869,624
Accumulated Amortization	(342,282)	(324,588)
Net	580,568	545,036	[1]
Purchased technology [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	358,612	366,574
Accumulated Amortization	(162,882)	(161,538)
Net	195,730	205,036
Other intangible assets [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	564,238	503,050
Accumulated Amortization	(179,400)	(163,050)
Net	384,838	340,000
Customer contracts and relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	324,221	318,027
Accumulated Amortization	(82,802)	(74,214)
Net	241,419	243,813
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	66,551	53,293
Accumulated Amortization	(21,249)	(19,171)
Net	45,302	34,122
Acquired rights to use technology [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	147,397	104,402
Accumulated Amortization	(61,222)	(56,782)
Net	86,175	47,620
Localization [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	8,423	8,586
Accumulated Amortization	(5,369)	(4,654)
Net	3,054	3,932
Other intangibles [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	17,646	18,742
Accumulated Amortization	(8,758)	(8,229)
Net	$ 8,888	$ 10,513

[1] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 01, 2013	Mar. 02, 2012
Statement of Other Comprehensive Income [Abstract]
Net Income	$ 65,117	$ 185,209
Available-for-sale securities:
Unrealized gains / losses on available-for-sale securites	702	12,864
Reclassification adjustment for gains on available-for-sale securities recognized during the period	(1,584)	(497)
Net increase (decrease) from available-for-sale securities	(882)	12,367
Derivatives designated as hedging instruments:
Unrealized gains on derivative instruments	21,776	12,581
Reclassification adjustment for gains on derivative instruments recognized during the period	(7,094)	(10,348)
Net increase from derivatives designated as hedging instruments	14,682	2,233
Foreign currency translation adjustments	(4,402)	2,198
Other comprehensive income, net of taxes	9,398	16,798
Total comprehensive income, net of taxes	$ 74,515	$ 202,007

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Fair Value Measurements

3 Months Ended

Mar. 01, 2013

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

We measure certain financial assets and liabilities at fair value on a recurring basis. There have been no transfers between fair value measurement levels during the three months ended March 1, 2013.

The fair value of our financial assets and liabilities at March 1, 2013 was determined using the following inputs (in thousands):

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate bonds and commercial paper	$	9,513	$	—	$	9,513	$	—
Money market mutual funds	895,845		895,845		—		—
Municipal securities	1,497		—		1,497		—
Time deposits	63,956		63,956		—		—
U.S. Treasury securities	87,900		—		87,900		—
Short-term investments:
Corporate bonds and commercial paper	1,205,936		—		1,205,936		—
Foreign government securities	12,555		—		12,555		—
Marketable equity securities	194		194		—		—
Municipal securities	186,282		—		186,282		—
U.S. agency securities	508,703		—		508,703		—
U.S. Treasury securities	440,637		—		440,637		—
Prepaid expenses and other current assets:
Foreign currency derivatives	32,466		—		32,466		—
Other assets:
Deferred compensation plan assets	17,456		506		16,950		—
Total assets	$	3,462,940	$	960,501	$	2,502,439	$	—

Liabilities:
Accrued expenses:
Foreign currency derivatives	$	3,251	$	—	$	3,251	$	—
Total liabilities	$	3,251	$	—	$	3,251	$	—

The fair value of our financial assets and liabilities at November 30, 2012 was determined using the following inputs (in thousands): 

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate bonds and commercial paper	$	3,998	$	—	$	3,998	$	—
Money market mutual funds and repurchase     agreements	1,171,270		1,171,270		—		—
Municipal securities	3,895		—		3,895		—
Time deposits	45,118		45,118		—		—
Short-term investments:
Corporate bonds and commercial paper	1,070,440		—		1,070,440		—
Foreign government securities	6,952		—		6,952		—
Marketable equity securities	244		244		—		—
Municipal securities	180,525		—		180,525		—
Time deposits	20,113		—		20,113		—
U.S. agency securities	504,191		—		504,191		—
U.S. Treasury securities	330,836		—		330,836		—
Prepaid expenses and other current assets:
Foreign currency derivatives	13,513		—		13,513		—
Other assets:
Deferred compensation plan assets	15,094		436		14,658		—
Total assets	$	3,366,189	$	1,217,068	$	2,149,121	$	—

Liabilities:
Accrued expenses:
Foreign currency derivatives	$	998	$	—	$	998	$	—
Total liabilities	$	998	$	—	$	998	$	—

See Note 3 for further information regarding the fair value of our financial instruments.

Our fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers with a minimum credit rating of BBB and a weighted average credit rating of AA-. We value these securities based on pricing from pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. However, we classify all of our fixed income available-for-sale securities as having Level 2 inputs. The valuation techniques used to measure the fair value of our financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques. Our procedures include controls to ensure that appropriate fair values are recorded such as comparing prices obtained from multiple independent sources.

Our deferred compensation plan assets consist of prime money market funds and mutual funds.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We also have direct investments in privately held companies accounted for under the cost method, which are periodically assessed for other-than-temporary impairment. If we determine that an other-than-temporary impairment has occurred, we write down the investment to its fair value. We estimate fair value of our cost method investments considering available information such as pricing in recent rounds of financing, current cash positions, earnings and cash flow forecasts, recent operational performance and any other readily available market data. For the three months ended March 1, 2013, we determined there were no material other-than-temporary impairments on our cost method investments.

As of March 1, 2013, the carrying value of our lease receivables approximated fair value, based on Level 2 valuation inputs which include Treasury rates, LIBOR rates and applicable credit spreads. See Note 12 for further details regarding our investment in lease receivables. The fair value of our long-term debt was approximately $1.6 billion as of March 1, 2013, based on Level 2 quoted prices in inactive markets. See Note 13 for further details regarding our debt.

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Commitments and Contingencies (Details Numeric) (USD $)	3 Months Ended
	Mar. 01, 2013 buildings	Nov. 30, 2012
Property Subject to or Available for Operating Lease [Line Items]
Number of Corporate Headquarter Office Buildings	3
Lease Receivable Purchased	$ 207,239,000	$ 207,239,000	[1]
Capital Lease Obligations [Abstract]
Capital Lease Obligations Incurred	25,700,000
Sale-leaseback agreement period	24 months
East and West Towers [Member]
Property Subject to or Available for Operating Lease [Line Items]
Lease Receivable Purchased	126,800,000
Option to Purchase Buildings	143,200,000
Residual Value Guarantees	126,800,000
Almaden Tower [Member]
Property Subject to or Available for Operating Lease [Line Items]
Lease Receivable Purchased	80,400,000
Option to Purchase Buildings	103,600,000
Residual Value Guarantees	89,400,000
East and West Towers and Almaden Tower [Domain]
Property Subject to or Available for Operating Lease [Line Items]
Standby letter of credit	$ 16,600,000

[1] The Condensed Consolidated Balance Sheet as of November 30, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 01, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Assumptions Used to Value Option Grants

The assumptions used to value option grants during the three months ended March 2, 2012 were as follows: 

	Three Months
	2012
Expected life (in years)	3.9
Volatility	34	%
Risk free interest rate	0.54	%

Assumptions Used to Value Employee Stock Purchase Rights

The assumptions used to value employee stock purchase rights during the three months ended March 1, 2013 and March 2, 2012 were as follows:

	Three Months
	2013	2012
Expected life (in years)	0.5 - 2.0	0.5 - 2.0
Volatility	26 - 30%	36	%
Risk free interest rate	0.12 - 0.27%	0.06 - 0.27%

Stock Option Activity

Option activity for the three months ended March 1, 2013 and the fiscal year ended November 30, 2012 was as follows (in thousands):

	2013		2012
Beginning outstanding balance	24,517		34,802
Granted	—		57
Exercised	(4,869	)	(6,754	)
Cancelled	(1,242	)	(4,692	)
Increase due to acquisition	129		1,104
Ending outstanding balance	18,535		24,517

Stock Options Outstanding

Information regarding stock options outstanding at March 1, 2013 and March 2, 2012 is summarized below:

	Number of Shares (thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value(*) (millions)
2013
Options outstanding	18,535	$	32.56	2.76	$	139.3
Options vested and expected to vest	18,250	$	32.66	2.71	$	135.3
Options exercisable	15,495	$	33.71	2.25	$	99.4
2012
Options outstanding	32,594	$	30.97	3.14	$	148.4
Options vested and expected to vest	31,783	$	31.08	3.07	$	142.4
Options exercisable	25,490	$	32.61	2.39	$	85.2

^{_________________________________________} 

^(*)  The intrinsic value is calculated as the difference between the market value as of the end of the fiscal period and the exercise price of the shares. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively

Restricted Stock Unit Activity

Restricted stock unit activity for the three months ended March 1, 2013 and the fiscal year ended November 30, 2012 was as follows (in thousands):

	2013		2012
Beginning outstanding balance	18,415		16,871
Awarded	5,807		9,431
Released	(4,904	)	(5,854	)
Forfeited	(382	)	(2,147	)
Increase due to acquisition	—		114
Ending outstanding balance	18,936		18,415

Restricted Stock Units Outstanding

Information regarding restricted stock units outstanding at March 1, 2013 and March 2, 2012 is summarized below:

	Number of Shares (thousands)	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value(*) (millions)
2013
Restricted stock units outstanding	18,936	1.66	$	754.2
Restricted stock units vested and expected to vest	16,279	1.59	$	646.5
2012
Restricted stock units outstanding	18,350	1.90	$	618.9
Restricted stock units vested and expected to vest	15,432	1.79	$	519.6

^{_________________________________________} 

^(*)  The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectively. 

Performance Share Activity Current Year Program

	Shares Granted		Maximum Shares Eligible to Receive
Beginning outstanding balance	—		—
Awarded	945		1,891
Forfeited	(4	)	(9	)
Ending outstanding balance	941		1,882

Performance Share Activity Prior Years Programs

The following table sets forth the summary of performance share activity under our 2010, 2011 and 2012 programs, based upon share awards actually achieved, for the three months ended March 1, 2013 and the fiscal year ended November 30, 2012 (in thousands):

	2013		2012
Beginning outstanding balance	388		405
Achieved	1,279		492
Released	(657	)	(464	)
Forfeited	(32	)	(45	)
Ending outstanding balance	978		388

Performance Shares Outstanding

Information regarding performance shares outstanding at March 1, 2013 and March 2, 2012 is summarized below: 

	Number of Shares (thousands)	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value(*) (millions)
2013
Performance shares outstanding	978	1.32	$	38.9
Performance shares vested and expected to vest	865	1.29	$	34.4
2012
Performance shares outstanding	453	1.23	$	15.3
Performance shares vested and expected to vest	403	1.20	$	13.5

^{_________________________________________} 

^(*)  The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2013 and March 2, 2012 were $39.83 and $33.73, respectivel

Total Stock-Based Compensation Costs

Total stock-based compensation costs that have been included in our Condensed Consolidated Statements of Income for the three months ended March 1, 2013 and March 2, 2012 were as follows (in thousands):

	2013				2012
Income Statement Classifications	Option Grants and Stock Purchase Rights		Restricted Stock and Performance Share Awards		Option Grants and Stock Purchase Rights		Restricted Stock and Performance Share Awards
Cost of revenue—subscription	$	637	$	1,063	$	742	$	603
Cost of revenue—services and support	855		2,450		1,116		2,070
Research and development	5,820		25,731		7,199		18,081
Sales and marketing	6,667		23,752		8,780		16,916
General and administrative	2,514		14,707		4,500		11,574
Total	$	16,493	$	67,703	$	22,337	$	49,244

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 01, 2013	Nov. 30, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	$ 0
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	0
Fair Value, Liabilities, Level 1 to Level 2 Transfers, Amount	0
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount	0
Fair Value, Measurements, Recurring [Member]
Assets:
Foreign currency derivatives	32,466	13,513
Deferred compensation plan assets	17,456	15,094
Total assets	3,462,940	3,366,189
Liabilities:
Foreign currency derivatives	3,251	998
Total liabilities	3,251	998
Fair Value, Measurements, Recurring [Member] | Corporate bonds and commercial paper [Member]
Assets:
Cash equivalents	9,513	3,998
Short-term investments	1,205,936	1,070,440
Fair Value, Measurements, Recurring [Member] | Money Market Funds [Member]
Assets:
Cash equivalents	895,845
Fair Value, Measurements, Recurring [Member] | Money Market Mutual Funds and Repurchase Agreements [Member]
Assets:
Cash equivalents		1,171,270
Fair Value, Measurements, Recurring [Member] | Foreign government securities [Member]
Assets:
Short-term investments	12,555	6,952
Fair Value, Measurements, Recurring [Member] | Marketable equity securities [Member]
Assets:
Short-term investments	194	244
Fair Value, Measurements, Recurring [Member] | Municipal securities [Member]
Assets:
Cash equivalents	1,497	3,895
Short-term investments	186,282	180,525
Fair Value, Measurements, Recurring [Member] | Time deposits [Member]
Assets:
Cash equivalents	63,956	45,118
Short-term investments		20,113
Fair Value, Measurements, Recurring [Member] | U.S. agency securities [Member]
Assets:
Short-term investments	508,703	504,191
Fair Value, Measurements, Recurring [Member] | U.S. Treasury securities [Member]
Assets:
Cash equivalents	87,900
Short-term investments	440,637	330,836
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Foreign currency derivatives	0	0
Deferred compensation plan assets	506	436
Total assets	960,501	1,217,068
Liabilities:
Foreign currency derivatives	0	0
Total liabilities	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate bonds and commercial paper [Member]
Assets:
Cash equivalents	0	0
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money Market Funds [Member]
Assets:
Cash equivalents	895,845
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money Market Mutual Funds and Repurchase Agreements [Member]
Assets:
Cash equivalents		1,171,270
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) | Foreign government securities [Member]
Assets:
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) | Marketable equity securities [Member]
Assets:
Short-term investments	194	244
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) | Municipal securities [Member]
Assets:
Cash equivalents	0	0
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) | Time deposits [Member]
Assets:
Cash equivalents	63,956	45,118
Short-term investments		0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. agency securities [Member]
Assets:
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury securities [Member]
Assets:
Cash equivalents	0
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2)
Assets:
Foreign currency derivatives	32,466	13,513
Deferred compensation plan assets	16,950	14,658
Total assets	2,502,439	2,149,121
Liabilities:
Foreign currency derivatives	3,251	998
Total liabilities	3,251	998
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) | Corporate bonds and commercial paper [Member]
Assets:
Cash equivalents	9,513	3,998
Short-term investments	1,205,936	1,070,440
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) | Money Market Funds [Member]
Assets:
Cash equivalents	0
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) | Money Market Mutual Funds and Repurchase Agreements [Member]
Assets:
Cash equivalents		0
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) | Foreign government securities [Member]
Assets:
Short-term investments	12,555	6,952
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) | Marketable equity securities [Member]
Assets:
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) | Municipal securities [Member]
Assets:
Cash equivalents	1,497	3,895
Short-term investments	186,282	180,525
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) | Time deposits [Member]
Assets:
Cash equivalents	0	0
Short-term investments		20,113
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) | U.S. agency securities [Member]
Assets:
Short-term investments	508,703	504,191
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) | U.S. Treasury securities [Member]
Assets:
Cash equivalents	87,900
Short-term investments	440,637	330,836
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3)
Assets:
Foreign currency derivatives	0	0
Deferred compensation plan assets	0	0
Total assets	0	0
Liabilities:
Foreign currency derivatives	0	0
Total liabilities	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) | Corporate bonds and commercial paper [Member]
Assets:
Cash equivalents	0	0
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) | Money Market Funds [Member]
Assets:
Cash equivalents	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) | Money Market Mutual Funds and Repurchase Agreements [Member]
Assets:
Cash equivalents		0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) | Foreign government securities [Member]
Assets:
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) | Marketable equity securities [Member]
Assets:
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) | Municipal securities [Member]
Assets:
Cash equivalents	0	0
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) | Time deposits [Member]
Assets:
Cash equivalents	0	0
Short-term investments		0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) | U.S. agency securities [Member]
Assets:
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) | U.S. Treasury securities [Member]
Assets:
Cash equivalents	0
Short-term investments	$ 0	$ 0

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Non-Operating Income (Expense)

3 Months Ended

Mar. 01, 2013

Other Income and Expenses [Abstract]

NON-OPERATING INCOME (EXPENSE)

 NON-OPERATING INCOME (EXPENSE)

 Non-operating income (expense), net for the three months ended March 1, 2013 and March 2, 2012 included the following (in thousands):

	Three Months
	2013			2012
Interest and other income (expense), net:
Interest income	$	5,681		$	6,193
Foreign exchange gains (losses)	(6,174		)	(9,721		)
Realized gains on fixed income investment	1,598			702
Realized losses on fixed income investment	(14		)	(205		)
Other	155			246
Interest and other income (expense), net	$	1,246		$	(2,785	)
Interest expense	$	(16,834	)	$	(16,838	)
Investment gains (losses), net:
Realized investment gains	$	418		$	245
Unrealized investment gains	444			810
Realized investment losses	(14		)	(34		)
Investment gains (losses), net	$	848		$	1,021
Non-operating income (expense), net	$	(14,740	)	$	(18,602	)