8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (date of earliest event reported): August 1, 2006

Adobe Systems Incorporated

(Exact name of Registrant as specified in its charter)

Delaware	0-15175	77-0019522
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

345 Park Avenue
San Jose, California 95110-2704

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (408) 536-6000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 7 — Regulation FD

Item 7.01. Regulation FD Disclosure.

On August 1, 2006, Adobe Systems Incorporated issued a press release providing an intra-quarter business update for its third fiscal quarter ending September 1, 2006.  A copy of this press release is furnished and attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this report and the exhibit attached hereto are being furnished and shall not be deemed filed for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly stated by specific reference in such filing.

The attached press release includes forcasted non-GAAP earnings per share and forcasted non-GAAP operating margin for the third quarter of fiscal 2006.

These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Adobe believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Adobe’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Adobe’s results of operations in conjunction with the corresponding GAAP measures.

For our internal budgeting and resource allocation process, Adobe’s management uses financial information that does not include: (a) the stock-based compensation impact of SFAS 123R, (b) restructuring and other charges,  (c) amortization of purchased intangibles and incomplete technology, (d) amortization of Macromedia deferred compensation, (e) tax differences related to the timing and deductibility of the Macromedia acquisition-related charges, and (f) tax differences related to the timing and deductibility of SFAS 123R stock-based compensation.  Adobe’s management uses these non-GAAP financial measures in making operating decisions because we believe the measures provide meaningful supplemental information regarding Adobe’s operational performance and gives us a better understanding of how we should invest in research and development and fund infrastructure and go-to-market strategies.  In addition, these non-GAAP financial measures facilitate management’s internal comparisons to our historical operating results and comparisons to competitors’ operating results.  We further believe these measures are useful to investors in that they allow for greater transparency to certain line items in our financial statements.

As described above, Adobe excludes the following items from one or more of its non-GAAP measures:

A.            Stock compensation impact of SFAS 123(R).   These expenses consist of expenses for employee stock options and employee stock purchases under SFAS 123(R). Prior to the adoption of SFAS 123(R) in fiscal 2006, Adobe did not include expenses related to employee stock options and employee stock purchases directly in its financial statements, but elected, as permitted by SFAS 123, to disclose such expenses in the footnotes to its financial statements.  As Adobe applies SFAS 123(R), we believe that it is useful to investors to understand the impact of the application of SFAS 123(R) to our operational performance, liquidity and our ability to invest in research and development and fund acquisitions and capital expenditures.  While stock-based compensation expense calculated in accordance with SFAS 123(R) constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires or will require cash settlement by Adobe and because such expense is not used by management to assess the core profitability of our business operations.

B.            Restructuring and other charges.   Adobe incurred Board of Director approved restructuring charges associated with realigning its business upon the acquisition of Macromedia in December 2005.  These actions were taken to eliminate certain duplicative activities, focus our resources

on future growth opportunities and reduce our cost structure.  In connection with the worldwide restructuring plan, Adobe recognized costs related to termination benefits for former Adobe employees whose positions were eliminated and for the closure of Adobe facilities.  We also recognized costs related to the cancellation of certain contracts held by Adobe.  Adobe excludes these items because these expenses are not reflective of ongoing operating results in the current period.  It is possible, however, that additional charges related to its facility leases may be incurred for various reasons including changes in cost estimates, the date the facility is vacated, subtenant leases, etc.

C.            Amortization of purchased intangibles and incomplete technology.   Adobe incurs amortization of purchased intangible assets primarily in connection with its acquisition of Macromedia in December 2005.  Adobe also incurred a charge related to incomplete technology in connection with a small acquisition.  Purchased intangibles include (1) developed technology and (2) core technology and patents. Developed technology relates primarily to Macromedia products across all of Macromedia product lines that had reached technological feasibility as of December 2005. Core technology and patents represent primarily a combination of Macromedia’s processes, patents and trade secrets developed through years of experience in design and development of their products. We expect to amortize for accounting purposes the fair value of the purchased intangibles based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated.  Although, the intangible assets generate revenue for Adobe, we exclude this item because this expense is non-cash in nature and because we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding our operational performance, liquidity and our ability to invest in research and development and fund acquisitions and capital expenditures.

D.            Amortization of Macromedia deferred compensation.   Adobe is amortizing deferred compensation related to unvested options assumed in connection with its acquisition of Macromedia in December 2005. The deferred compensation is expected to be fully amortized by the end of fiscal 2007.  Adobe excludes this item because this expense is non-cash in nature and because we believe the non-GAAP financial measures which exclude this item provide meaningful supplemental information regarding our operational performance, liquidity, and our ability to invest in research and development and fund acquisitions and capital expenditures.

E.             Tax differences related to the timing and deductibility of the Macromedia acquisition-related charges.   These amounts are independent and not reflective of Adobe’s ongoing operating results and are excluded on such a basis consistent with the explanations provided above.

F.             Tax differences related to the timing and deductibility of SFAS 123R stock-based compensation.   These amounts are dependent on the trading price of Adobe’s common stock and the timing and exercise by employees of their stock options. As such, they have no direct correlation to Adobe’s operation of its business.

Adobe believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Adobe’s financial results as determined in accordance with GAAP and that these measures should only be used to evaluate Adobe’s financial results in conjunction with the corresponding GAAP measures and that is why Adobe qualifies the use of non-GAAP financial information in a statement when non-GAAP information is presented.

Adobe believes that where the adjustments used in calculating forcasted non-GAAP operating margin and forcasted non-GAAP earnings per share, net of tax effect of non-GAAP adjustments, and are based on specific, identified amounts that impact different line items in the Condensed Consolidated Statements of Income that it is useful to investors to understand how these specific line items in the Condensed Consolidated Statements of Income are affected by these adjustments for the following reasons:

A.            Operating Margin.   Excluding stock-based compensation expense related to employee stock options and employee stock purchases from operating margin calculations assists investors in evaluating period-over-period changes without giving effect to these charges which are non-cash in nature. Excluding the impact from the amortization of Macromedia deferred compensation, restructuring charges

and the amortization of purchased intangibles and incomplete technology assists investors in evaluating period-over-period changes without giving effect to these charges which are a function of prior period acquisition transactions rather than the underlying operating activities of the period forcasted.

B.            Earnings Per Share, Net of Tax Effect of Non-GAAP Adjustments.   Excluding stock-based compensation expense related to employee stock options and employee stock purchases from the calculation of earnings per share assists investors in evaluating period-over-period changes without giving effect to these charges which are non-cash in nature. Excluding the impact from (a) the amortization of Macromedia deferred compensation, (b) restructuring charges, and (c) the amortization of purchased intangibles and incomplete technology assists investors in evaluating period-over-period changes without giving effect to these charges which are a function of acquisition transactions rather than the underlying operating activities of the forcasted period.

Section 9 — Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d)           Exhibits

99.1Press release dated August 1, 2006 entitled “Adobe Systems Provides Intra-Quarter Business Update.”

SIGNATURES

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

	ADOBE SYSTEMS INCORPORATED
Date: August 1, 2006	By:	/s/ RANDY FURR
		Randy Furr
		Executive Vice President and Chief
		Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release dated August 1, 2006 entitled “Adobe Systems Provides Intra-Quarter Business Update.”

EX-99.1

Exhibit 99.1

Investor Relations Contact:
Mike Saviage
Adobe Systems Incorporated
408 536.4416
ir@adobe.com

Public Relations Contact:
Jodi Warner
Adobe Systems Incorporated
408 536.2084
jwarner@adobe.com

Adobe Systems Provides Intra-Quarter Business Update

Company Reaffirms Third Quarter Financial Targets

SAN JOSE, Calif. — August 1, 2006 — Adobe Systems Incorporated (NASDAQ: ADBE) today is providing its regular intra-quarter business update for its third quarter of fiscal 2006, which ends September 1, 2006.

With approximately five weeks remaining in the quarter, Adobe announced it believes it will achieve quarterly results within the financial target ranges it provided on June 15, 2006.  The Company’s Q3 FY2006 target ranges are the following:  revenue of $580 to $610 million, GAAP earnings per share of $0.13 to $0.16, non-GAAP earnings per share of $0.25 to $0.27, a GAAP operating margin of 16 to 19 percent, and a non-GAAP operating margin of 33 to 35 percent.

The Company plans to report its third quarter fiscal 2006 results on September 14, 2006 after the market closes.

Adobe Announces Webcasts of Upcoming Investor Conference Participation

Adobe also announced it will participate in the following events with the financial community during August:

Pacific Crest Technology Forum
Vail, CO
Tuesday August 8, 2006
12:30 p.m. Eastern Time
Randy Furr, Executive Vice President and CFO

ADOBE SYSTEMS PROVIDES INTRA-QUARTER BUSINESS UPDATE
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Canaccord Adams Summer Seminar
Boston, MA
Wednesday August 9, 2006
3:00 p.m. Eastern Time
Randy Furr, Executive Vice President and CFO

CIBC Enterprise Software Conference
New York, NY
Thursday August 10, 2006
8:55 a.m. Eastern Time
Shantanu Narayen, President and COO; Randy Furr, Executive Vice President and CFO

These investor conference presentations will be Webcast from Adobe’s Web site at:

http://www.adobe.com/ADBE

Conference presentation times are subject to change at the discretion of the conference host.  An archive of each Webcast will be available for a limited time.

Forward Looking Statements Disclosure

This press release contains forward looking statements, including those related to revenue, operating margin and earnings per share, which involve risks and uncertainties that could cause actual results to differ materially.  Factors that might cause or contribute to such differences include, but are not limited to: adverse changes in general economic or political conditions in any of the major countries in which Adobe does business, delays in development or shipment of Adobe’s new products or major new versions of existing products, introduction of new products by existing and new competitors, failure to successfully manage transitions to new business models and markets, difficulty in predicting revenue from new businesses, failure to anticipate and develop new products in response to changes in demand for application software, computers and printers, intellectual property disputes and litigation, inability to protect Adobe’s intellectual property from unauthorized copying, use, disclosure or malicious attack, failure to realize the anticipated benefits of past or future acquisitions and difficulty in integrating such acquisitions, changes to Adobe’s distribution channel, disruption of Adobe’s business due to catastrophic events, interruptions or terminations in Adobe’s relationships with turnkey assemblers, risks associated with international operations, fluctuations in foreign currency exchange rates, changes in accounting rules and regulations, impairment of Adobe’s goodwill or intangible assets, unanticipated changes in or interpretations of tax rates, Adobe’s inability to attract and retain key personnel, and market risks associated with Adobe’s equity investments. For further discussion of these and other risks and uncertainties, individuals should refer to Adobe’s SEC filings. Adobe does not undertake an obligation to update forward looking statements.

ADOBE SYSTEMS PROVIDES INTRA-QUARTER BUSINESS UPDATE
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About Adobe Systems Incorporated

Adobe revolutionizes how the world engages with ideas and information — anytime, anywhere, and through any medium.  For more information, visit www.adobe.com.

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© 2006 Adobe Systems Incorporated. All rights reserved. Adobe and the Adobe logo are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries.

ADOBE SYSTEMS PROVIDES INTRA-QUARTER BUSINESS UPDATE
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Third Quarter Non-GAAP Financial Targets

The following table shows Adobe’s non-GAAP financial targets reconciled to GAAP financial targets included in this release.

	Third Quarter Fiscal 2006
	Low			High
GAAP operating margin	16		%	19		%
Amortization of purchased technology	6			6
Amortization of purchased intangibles	3			3
SFAS 123R stock-based compensation	6			5
Amortization of Macromedia deferred compensation	2			2
Restructuring and other charges	—			—
Non-GAAP operating margin	33		%	35		%
Diluted net income per share:
GAAP net income per share	$	0.13		$	0.16
Amortization of purchased technology, net of tax	0.04			0.04
Amortization of purchased intangibles, net of tax	0.02			0.02
SFAS 123R stock-based compensation, net of tax	0.04			0.03
Amortization of Macromedia deferred compensation, net of tax	0.02			0.02
Restructuring and other charges, net of tax	—			—
Non-GAAP net income per share	$	0.25		$	0.27
Shares used in computing diluted net income per share	607.0			607.0

Adobe continues to provide all information required in accordance with GAAP, but it believes that evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures.  Accordingly, Adobe uses non-GAAP financial information to evaluate its ongoing operations and for internal planning and forecasting purposes.  Adobe’s management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.  Adobe presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Adobe’s operating results in a manner that focuses on what Adobe believes to be its ongoing business operations.  Adobe’s management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes the stock compensation impact of SFAS 123R,

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restructuring and other charges, amortization of purchased intangibles and incomplete technology, amortization of Macromedia deferred compensation, tax differences related to the timing and deductibility of the Macromedia acquisition-related charges and SFAS 123R stock-based compensation, and the non-GAAP measures that exclude such information in order to assess the performance of Adobe’s business and for planning and forecasting in subsequent periods.  Whenever Adobe uses such a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure.  Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above.

Adobe’s GAAP financial targets include the stock compensation impact of SFAS 123R, restructuring and other charges, amortization of purchased intangibles and incomplete technology, amortization of Macromedia deferred compensation, and tax differences related to the timing and deductibility of the Macromedia acquisition-related charges and SFAS 123R stock-based compensation.  These charges are otherwise unrelated to Adobe’s ongoing business operations and are excluded from its non-GAAP financial targets.