Computers have yet to deliver on their promise of creating an all-electronic, paperless office. If anything, they have had the opposite effect. Desktop publishing, for example, has turned personal computers into relentless personal printing presses, thanks largely to Adobe Systems Inc., whose software helps laser printers spew out waves of eye-catching paper. But now Adobe wants to turn back the tide. On Nov. 16, the company plans to unveil a new technology, code-named Carousel, that could make it practical to transmit electronically all sorts of things normally distributed on paper--from corporate sales reports to full-color magazines.
Yes, computers already routinely send the contents of business documents or newspapers. But because of incompatibilities between different types of computers and software programs, most of the photos, graphics, headlines, and varied typefaces have to be stripped out. That leaves an unappealing, unadorned electronic page of text. Carousel provides a format that, Adobe says, will make it possible someday to send a document as complex as, say, an issue of BUSINESS WEEK over a network or via diskette. Of course, readers could still make a printout. "We won't ever get to the paperless office," says Adobe Chief Executive Officer John E. Warnock, "But we want paperless transmission and storage."
If Carousel works as promised, "it will be far bigger than anything Adobe has done before," says industry consultant Jonathan W. Seybold. As president of Seybold Publications Inc., he's interested in a more efficient way to distribute publications without losing print quality.
`PRECARIOUS.' Warnock hopes the new software will give Adobe a much-needed boost. For the third quarter ended Aug. 28, profits dropped 48% from last year, to $6.7 million, the first decline in Adobe's 10-year history. Some analysts believe Adobe's 1993 revenues will be flat with 1992's $265 million. But because of Carousel and other new products, Bruce M. Lupatkin at Hambrecht & Quist Inc. says 1993 sales could hit $315 million, with profits up 36%, to $70 million. "There's a new wave of optimism about the company," adds Robertson, Stephens & Co. analyst John T. Rossi. Adobe's stock is now at 35, after falling from 68 to 25 in the past 10 months.
The volatility reflects the fuzzy picture for PostScript, its flagship program. Adobe gets a royalty of some 3% of the price of each laser printer that includes PostScript. In 1991, about 450,000 laser printers were shipped with PostScript, accounting for 19% of the laser market, says International Data Corp. That share should grow to more than 26% by 1996. But printer prices are plunging along with those of PCs, cutting royalties. And PostScript clones are making inroads. Printer makers Digital Equipment, QMS, and Lexmark, the IBM spin-off, all use clones. That puts Adobe "in a somewhat precarious situation," says IDC analyst Marc G. Boer, who says in two years clones could have 20% of the PostScript market, up from 3% now.
So, Adobe's future growth may depend on convincing corporations that Carousel could save them money. Adobe itself, says Warnock, spends $10,000 a month on paper internally--$1,000 just to print and distribute an employee phone list. A hard-disk drive that can store a billion characters and can be used for years, costs about $2,000, just half the cost of paper needed to store as much.
Displaying documents electronically is just the start. Carousel is actually a series of products to be released over the next few years. In the first half of 1993, Adobe is set to sell several Carousel programs for the Macintosh and PCs controlled by Microsoft Corp.'s Windows. One program, known as a driver, will translate a file from any word processor or desktop-publishing program into a so-called PDF, or Portable Document File. A special viewer program installed on each computer lets the user read a PDF, no matter what kind of computer it came from. A driver-and-viewer package should sell for less than $200.
Follow-on products will make it possible to edit documents and search through them using key words. To do that, Adobe plans to adopt, in part, an international technology standard known as SGML, or Standard Generalized Markup Language. Another future program will enable a desktop scanner to translate a printed page into a Carousel file. Still another will enable publishers to transmit animation and video clips.
LURKING GIANT. All of this requires heavy investment that may not pay off for years. Adobe's poor third-quarter performance, in fact, was in part due to a $6.3 million write-off it took in acquiring small companies with key Carousel technologies. Also, customers may not opt for Carousel until they see all the pieces are in place. "The value of a document delivered electronically is minimal, unless it can do things you can't do on paper," says James Stoneham, an Apple Computer Inc. product manager.
In the meantime, Adobe is certain to encounter some competition. Companies that specialize in electronic publishing, such as Frame Technology Corp. and Interleaf Inc., can deliver much of this electronic distribution technology today, although only for documents originating on their own software or filtered through translators built specially for each word-processing program on the market. Some observers also expect software powerhouse Microsoft to enter the business. "It's almost preordained that Microsoft will have its own scheme," predicts J. Paul Grayson, chairman of software company Micrografx Inc.
But Adobe can't be easily written off. Virtually every word-processing and desktop-publishing program is already compatible with PostScript, which is the underlying format for Carousel. Companies such as Lotus Development Corp. plan to have their programs automatically produce Carousel-compatible files, and some analysts expect Adobe will sign up network software leader Novell Inc. to build Carousel technology directly into its products. That should help, but Adobe knows it could take years for Carousel's electronic documents to catch on. After all, it took a decade for desktop publishing to build a mountain of paper in the first place.