Adobe’s Candy Coated Earnings Report

[Craig Seeman]

Give what’s missing, comparisons with previous years revenue for Creative Suite, I’ll speculate as you know I love to do.

Adobe saw declines over time in revenue from Creative Products (keep in mind they are much more than that as a company). I suspect that was due to, in part, a decline in upgrades as new features weren’t compelling for portions of the user base. The ability to add the “everybody must have” feature probably would consume more and more R&D resources which would either increase costs or decrease resources of less sweeping features and bug fixes as well.

Since “staying the course” would do nothing more than accept continued decline in revenue from those products, they had to try something… which involved a lot of theorizing as it was unchartered territory.

The result, Creative Cloud, means everyone pays for all Creative apps and all upgrades. This means steady funding and better control over the allocation of development resources. The gamble is whether the decline is user base will be offset by the continued user base subscribing to all products with all upgrades. They had to portray that gamble as a positive outcome, hence the nature of the report.

[Aindreas Gallagher]

[Craig Seeman] “The gamble is whether the decline is user base will be offset by the continued user base subscribing to all products with all upgrades.”

the implications for a shortfall in subscriber numbers should be potentially unnerving for about anyone.
adobe are preparing to hive off around 50% of current license holders to arrive at something like a steady state of 4 million subscriptions by 2015/16. that’s their own projection.
I’m not really sure they have calculated the true effect of hiving off that many “vestigial limbs”. I personally don’t think adobe fundamentally get the implications or the damage contained there.

If CC starts to run out of steam and they miss that number by a decent margin… things are going to get potentially quite bad and confused for the company, the toolset and the remaining customers. Adobe will be quite far gone at that point.

Adobe always parcelled out the necessary upgrade components on a time chart. Look at the type tool in photoshop for god’s sake. It was ridiculous how long they held it as a non modal dialogue box.
But on this occasion you can’t escape the feeling that there was a kitchen sink applied to the last release – throwing in an entire lite version of cinema 4D into AE? that feels like the sink.

what I don’t understand is the fear that they couldn’t carry on as before. most quadrants of the suite are fairly locked in. I half think its the broad failure of the web tools post flash? Even in the optimum scenario, they only return to 2011/12 profit levels nearly four years later.

I find I don’t understand what adobe were protecting or guarding themselves against by forcing a reduced subset of their customers to subscription.

the thing that kills me is that it has potentially killed PPro as a broadly understood replacement for FCP. which it probably has.
the only thing I can think is that it was fear of loss of control over web creation tools? given the scale of the loss implied there? That it was an attempt to force the web tools into visibility and relevance through a full suite lock-in?

there’s this:

https://www.digitalartsonline.co.uk/news/creative-software/adobe-vp-on-creative-cloud/

Sharma says that there will be more emphasis on brand-new, razor-focused applications – such as the Edge line – rather than adding more and more functionality (and, some would say, bloat) to mature products.

she is speaking to the focus of the company there. realistically – their only focus is trying to regain ground online – they are trying to leverage a subscription lock-in revenue source as the basis for this.
and then there is this rather key quote.

“Star-gazing” further, Sharma made reference to ‘true cloud’ versions of its software – where desktop or tablet apps would tap into Adobe’s servers –

the one thing I do not understand is how no one is acknowledging that adobe are now baldly saying that they want to remove the functionality of desktop software. their secondary core goal is to move to true software as a service.

the degree to which adobe have been casually lying about this beggars the mind – only insofar as they trip themselves (mike chambers) up in the lie they are telling so often.

adobe are a very confused company right now, with pretty weird goals. If you think they are not already coding SAAS software components – you are kidding yourself.

the question to the customer is whether the company/board ramming the foot to the pedal on this course can broadly sustain or protect the software entrusted to them.

Isn’t this starting to feel just a little crazy?

https://www.adobe2014.tumblr.com
#adobe2014

https://vimeo.com/user1590967/videos http://www.ogallchoir.net promo producer/editor.grading/motion graphics

[David Lawrence]

[Aindreas Gallagher] “what I don’t understand is the fear that they couldn’t carry on as before. most quadrants of the suite are fairly locked in. I half think its the broad failure of the web tools post flash? Even in the optimum scenario, they only return to 2011/12 profit levels nearly four years later.”

Chris Harlan pointed me to these links. Late last year, ValueAct, a large Wall St. investment firm, purchased a 6.1% stake in Adobe valued at over a billion dollars:

https://bloom.bg/1cFnq0Z

https://www.valueact.com/cgi-bin/about.pl

One of ValueAct’s executives now sits on the Adobe board. I have no doubt Adobe’s push and strategy to maximize recurring revenue is driven by typical Wall Street thinking and this new partnership. We all know how well the Wall Street geniuses did for everyone in 2008…

_______________________
David Lawrence
art~media~design~research
propaganda.com
publicmattersgroup.com
facebook.com/dlawrence
twitter.com/dhl

[Aindreas Gallagher]

there’s a ton of core creative software involved. you’d nearly think adobe actually have to back off.

https://vimeo.com/user1590967/videos http://www.ogallchoir.net promo producer/editor.grading/motion graphics

[David Lawrence]

[Aindreas Gallagher] “there’s a ton of core creative software involved. you’d nearly think adobe actually have to back off.”

You’d think, but of course, the people at the top making these decisions don’t seem to have any idea what they actually sell or who they sell it to.

_______________________
David Lawrence
art~media~design~research
propaganda.com
publicmattersgroup.com
facebook.com/dlawrence
twitter.com/dhl

[Ricardo Marty]

ValueAct Capital concentrates on acquiring significant ownership stakes in a limited number of companies that it believes are fundamentally undervalued. The investment team seeks to identify companies that are out of favor, or may be undergoing significant transition. Such companies may be temporarily mispriced for a variety of reasons, including perceived unfavorable industry conditions, poor business performance, changes in management or ownership, reorganizations, or other external factors. These conditions can often result in fundamentally “good” businesses that are available at depressed valuations. The goal in each investment is to work productively with management and/or the company’s board to implement a strategy or strategies that maximize returns for all shareholders.

They are making adobe a commodity. They will probably sell it of in pieces if it failes projections.. I think that this is the beggining of the end for adobe.

Ricardo