Adobe Results

[shreds]

Despite the nightmare of data loss and the much debated decision to go cloud based, Adobe do seem to have made the right move?


Adobe's Creative Cloud subscriber growth impresses investors
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Reuters 15 minutes ago
By Neha Alawadhi

(Reuters) - Adobe Systems Inc, the maker of Photoshop and Acrobat software, forecast current-quarter results below analysts' estimates but reported a 22 percent jump in the number of subscribers to its Creative Cloud suite from the preceding quarter.

The company's shares rose about 8 percent after initially falling 5 percent in extended trading.

Adobe added 402,000 subscribers for Creative Cloud, which includes Photoshop, Illustrator and Flash, in the fourth quarter, up from the 331,000 it added in the third quarter.

"Investors are giving Adobe's management team credit for its progress despite the light profit to this point, and will likely continue to do so, as long as the number of new cloud subscribers continue to outpace expectations," Edward Jones' technology analyst Josh Olson told Reuters.

The company said in September it expects subscriber growth for Creative Cloud to top 331,000 due to strong demand from corporate customers.

Adobe has been shifting to web-based subscription service Creative Cloud from a licensing model since last year.

Subscription models bring in less money upfront as payment is spread over the entire period of use unlike traditional packaged software, but typically ensure more predictable recurring revenue.

Adobe said it expects revenue of $950 million to $1 billion in the first quarter.

The company forecast adjusted earnings of 22 cents to 28 cents per share.

Analysts on average were expecting earnings of 34 cents per share on revenue of $1.02 billion, according to Thomson Reuters I/B/E/S.

The company's net income fell to $65.32 million, or 13 cents per share in the fourth quarter ended November 29, from $222.3 million, or 44 cents per share, a year earlier.

Excluding items, the company earned 32 cents per share, in line with analysts' estimate.

Revenue fell 9.6 percent to $1.04 billion, slightly above the estimated $1.03 billion.

Adobe's shares were up at $57.90 in extended trading after closing at $53.99 on the Nasdaq on Thursday.

(Reporting by Sruthi Ramakrishnan and Neha Alawadhi in Bangalore; Editing by Maju Samuel and Don Sebastian)

[Colin Southern]

Thanks Ian - good to see.

Can't argue with facts like this, although I've a feeling some will try!

With regards to the data breach, I eventually "got the eMail" the impact of this for me? Well I needed a new credit card anyway, and the timing worked out pretty well. The bank kept both cards alive during the transition (pretty clever actually, as they were linked somehow), and I'll now need to sped - perhaps - an hour updating my regular accounts. No biggie.

Have to say that as time goes on, I'm enjoying the subscription model more and more; most people aren't good at budgeting (or saving) so producing the cash up-front for an initial purchase is unlikely for many, but the subscription model just makes it ridiculously easy and affordable.

[ajohnw]

Can't see why anyone would try arguing. It's pretty obvious that the approach brings in steady income and in the long term will probably encourage people to upgrade sooner as well.

John
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[DanK]

in the long term will probably encourage people to upgrade sooner as well.

Not encourage. Require. That is the whole point. They get your money on a predictable and regular basis, and you get all updates automatically when they are ready.

Unlike Colin, I don't like the subscription model, but on the scale of things to worry about, $10/month for this has to be pretty low on the totem pole. If I want to get exercised about the cost of unwanted charges in a subscription model, I just glance at my cable bill, which costs me an order of magnitude more and gets me, among other things, the kayak fishing channel and a channel that features guys in Texas bidding on junked cars. I'm just waiting for a new computer to arrive so that I only have to deal with it once.

[ajohnw]

Not encourage. Require. That is the whole point. They get your money on a predictable and regular basis, and you get all updates automatically when they are ready.

Unlike Colin, I don't like the subscription model, but on the scale of things to worry about, $10/month for this has to be pretty low on the totem pole. If I want to get exercised about the cost of unwanted charges in a subscription model, I just glance at my cable bill, which costs me an order of magnitude more and gets me, among other things, the kayak fishing channel and a channel that features guys in Texas bidding on junked cars. I'm just waiting for a new computer to arrive so that I only have to deal with it once.

I could have sworn I included a comment about terms and conditions. Oh well. Busy on and off with other things.

John
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[Mito]

Like all reports similar to this it only gives "what is" not "what isn't". I read that report as, profits down, why, less clients? Corporate interest up, what about the private user? One figure which I think Adobe could furnish is the difference between the clients they have now compared to the licences they have sold. This would give an indication of direction of the company.
This is another example of questionable statistics so prevalent today. "50% of the population drink alcohol". Does that mean half are teetotal and the other half alcoholics?
Just a thought.

[Colin Southern]

Not encourage. Require. That is the whole point. They get your money on a predictable and regular basis, and you get all updates automatically when they are ready.

Yes and no. Adobe makes updates available -- it's up to the subscriber to accept or decline the opportunity to install them. In real world terms why wouldn't one install them?

[Colin Southern]

"50% of the population drink alcohol". Does that mean half are teetotal and the other half alcoholics?

Around these parts - yep - pretty much, unfortunately.

[DanK]

Yes and no. Adobe makes updates available -- it's up to the subscriber to accept or decline the opportunity to install them. In real world terms why wouldn't one install them?

That's good to know and removes one of my remaining concerns. There have been a few times when Adobe has released new versions that were not quite ready for prime time. LR 4.0 was the worst of these, if I recall right. So it is nice to have the option to delay upgrading for a bit.

[Colin Southern]

That's good to know and removes one of my remaining concerns. There have been a few times when Adobe has released new versions that were not quite ready for prime time. LR 4.0 was the worst of these, if I recall right. So it is nice to have the option to delay upgrading for a bit.

Keep in mind though that (as I understand it anyway) they've done away with the traditional major-jump upgrades. I think it's just a process of continual improvement now.

[Simon Garrett]

I don't like rental, but I've signed up. I always upgraded LR each time, and used to upgrade Photoshop about every other version (when you could do that), and £8.78 per month (as it is in the UK) costs about the same over time.

Two negative issues, as I see it:

1. Adobe internal systems leave a lot to be desired. Some of the links in the CC app often result (for me) in error messages. Lots of people have been reporting troubles with payment (especially changing a credit card), and their accounts being suspended as a result. And, of course, they lost all our personal information. With rental, we depend on their systems working properly. I spent around 5 hours on a series of chat sessions and phone calls to sort out a problem with my account back in September. The people I was dealing with were very helpful, their systems weren't.
2. The rental model reduces the incentive for Adobe to innovate. They don't need to innovate to get our money - we have to pay just to use the software. In the bad old days they had to innovate to get recurring revenue from updates. It seems to me that we're seeing Adobe concentrating their money in areas where they face competition such as Muse or Lightroom, which have improved greatly over the last few years. Photoshop hasn't gained many new features that help me since about CS5. I'm not sure I've seen much "continual improvement" so far in Photoshop CC.

[Mike Buckley]

The rental model reduces the incentive for Adobe to innovate.

I disagree. There are other basic business factors that reduce the incentive for Adobe to innovate such as explained in The Innovator's Dilemma and The Gorilla Game but the rental model is not one of them.

[Simon Garrett]

I disagree. There are other basic business factors that reduce the incentive for Adobe to innovate such as explained in The Innovator's Dilemma and The Gorilla Game but the rental model is not one of them.

In the general, rental or sale may not be the dominant factor that determines innovation. When there is a well-functioning market, competition will help drive innovation. In fact, rental may encourage innovation as users may be able to switch to another package without high up-front software costs. (Obviously there may be other costs in switching from one software package to another, such as training and data conversion.)

However, I don't think this applies to Adobe in the case of Photoshop. They dominate the market. There are many other solutions, but Photoshop is dominant for high-end photo editing suites. Adobe used to get revenue from sales and from upgrades. Prospective purchasors had to make a purchasing decision for each upgrade. If there was no innovation in an upgrade, there would be little reason for purchasers to buy the upgrade.

But ongoing innovation is irrelevant to the decision to continue paying the rent. You have to pay simply to use the software as it is now, and it doesn't matter whether there is innovation or not. The picture changes only if (or when) there is a suitable alternative to Photoshop. For many users, I don't think that's the case at present.

You say: "there are other basic business factors that reduce the incentive for Adobe to innovate"; would you mind listing some please?

[Colin Southern]

This seems to have attracted more "conspiracy theories" than the moon landings. As I see it, Adobe are in business to give shareholders the best return possible on their investment, and the ONLY way to do that is by taking a long position; attracting & keeping customers long-term by effective marketing and by providing service and products that provide value for money.

So far they're doing an admirable job - and I plan on giving them the benefit of the doubt whilst they continue to do so.

Why some seem to think they're untrustworthy / evil / "the bad guys" is beyond me. As far as I'm concerned, they're the good guys - they produce fantastic products and a very reasonable price point - they win awards for how they treat their staff - and they've never done anything to break my trust. I'll be sticking with them until I have reason to do otherwise. Reason, not theorising.

The data breach was unfortunate, but Sh*t happens. They're certainly not the first to fall victim to this, but they DID have the forethought to encrypt credit card data & passwords; as I understand it the only ones that have been unencrypted were where people had (against long-standing best-practice advice) used extremely weak passwords (like "password").

I got an eMail from them yesterday, which some might find interesting:

"As we announced on October 3, Adobe discovered sophisticated attacks on our network involving the illegal access and removal of a backup database containing Adobe IDs and encrypted passwords. We are writing to let you know that your Adobe ID was in the database taken by the attackers -- but, importantly, your current password was not . As a result, we did not reset your password. We have no reason to believe that your Adobe ID account is at risk or that there has been unauthorized activity on your account. The database taken by the attackers came from a backup system that contained many out-of-date records and was designated to be decommissioned. Adobe’s authentication system of record, which cryptographically hashes and salts customer passwords, was not the source of the database that was taken.However, if you use your old passwords on any other websites, you should change those passwords. We also recommend that you follow password best practices to help ensure your current password is secure:

• Don’t reuse passwords: Your password should be unique to your Adobe ID account. Don’t reuse a password you have previously used with your Adobe ID or a password you are using on any other website.
• Make sure your password is difficult to guess: Your password should be at least eight (8) characters in length. It should contain a mix of different character sets, such as upper case letters (A-Z), lower case letters (a-z), digits (0-9), and special characters (# $ % & - _ { }). It should not use all or part of your name or your Adobe ID.

We deeply regret any inconvenience this may cause you. We value the trust of our customers and are working aggressively to prevent these types of events from occurring in the future. If you have questions, you can learn more by visiting our Customer Care page, which you will find here."

[Simon Garrett]

I'm not looking for any Adobe conspiracies, but remember that the proper role of a company is to make money for their owners / shareholders, not to be nice to customers. Obviously they have to be nice enough to customers to attract and retain them - but no nicer than that, or they may be wasting shareholders' money.

Rental is a very good idea from Adobe's point of view, as it makes it much easier to retain customers. As a customer I don't really like it, but I don't criticise it as a business decision. Say what we will about Photoshop being an old, creaky program (it certainly is), it's also the best for many photographic purposes. And when you have a product that (largely) dominates a market, you don't have to be so nice to customers as in a crowded market, or worse still: if you are trying to break in to a market dominated by someone else. That's not a criticism of Adobe, it's a statement of the bl$$ding obvious. Ask the energy companies.

I stand by my earlier comments that Adobe's customer account and billing systems are not really good enough, though I'm sure they know that. I also believe that the rental model takes the pressure off Adobe to innovate in Photoshop, and allows them to move investment to products facing more competition (e.g. Lightroom and Muse), although I might be misjudging the level of competition to Photoshop.

As for the security lapse - yes Sh$t happens, but some of the stories that have come out suggest Adobe's security working practices were not up to snuff. I don't think we should let Adobe off with a gallic shrug here: it was a pretty severe breach.

Merry Christmas all!

[Colin Southern]

I'm not looking for any Adobe conspiracies, but remember that the proper role of a company is to make money for their owners / shareholders, not to be nice to customers. Obviously they have to be nice enough to customers to attract and retain them - but no nicer than that, or they may be wasting shareholders' money.

The degree to which they'll succeed will be proportional to the degree to which the perceived value of what they're offering exceeds the price they're asking, multiplied by the effectiveness of their marketing. Obviously they're not going to "give away the farm" under the guise of "being nice to customers", but at the same time, I think it's important for people to have a clear understanding of what to expect; and I think they've achieved that. Sure, there will always be a vocal minority who don't have even the slightest concept of business reality (or any form of reality in some cases!), but that's why they say "you can never please all of the people all of the time". They don't need to anyway.

I just get irritated when people - with little to no understanding of commerce - constantly attack them - slander them - and treat them like criminals when IMO they should be saying "Well done" and "steady as she goes Captain".

Rental is a very good idea from Adobe's point of view, as it makes it much easier to retain customers. As a customer I don't really like it, but I don't criticise it as a business decision.

Yes it does make it easier for Adobe - but it also makes it easier for the customers too. In this day and age most couldn't budget or save if their life depended on it; a "little, often" makes things far less painful - and that ultimately benefits all parties (some more than others I guess).

Say what we will about Photoshop being an old, creaky program (it certainly is), it's also the best for many photographic purposes.

Old and creaky? Whaaaaat? Surely you jest. I don't find it "old and creaky" in the slightest - I find it cutting edge. Yes - it is complicated - yes, it does take an investment of time to learn it ... but that's to be expected with something that powerful and versatile. You can't make a vehicle capable of interplanetary travel as simple to use as a toaster.

And when you have a product that (largely) dominates a market, you don't have to be so nice to customers as in a crowded market, or worse still: if you are trying to break in to a market dominated by someone else. That's not a criticism of Adobe, it's a statement of the bl$$ding obvious. Ask the energy companies.

It dominates some markets and has done for a long time. In other markets it has competition. People often say that this offers up potential for them to abuse their monopolies; but in my mind, that's just "stinkin thinkin" - it's an accusation that they can't defend themselves against. How about folks nail them for that WHEN it happens - and stop holding it against them only because of what "energy companies" or others may have done in the past.

I stand by my earlier comments that Adobe's customer account and billing systems are not really good enough, though I'm sure they know that.

Can't say I've ever had any problems with it. I needed to re-activate a copy of Photoshop once and I was able to do that via an online chat with an agent; process is a little clunky, but only took about 15 minutes. Wanted to kill an old Adobe ID so I could rename a current one - couldn't do that on that occasion because the database was offline for maintenance (just unfortunate timing for me, but no biggie). Will need to change my credit card number shortly - will see how I go with that.

I also believe that the rental model takes the pressure off Adobe to innovate in Photoshop, and allows them to move investment to products facing more competition (e.g. Lightroom and Muse), although I might be misjudging the level of competition to Photoshop.

Again, great-sounding theory, but it's not fair to use that as a weapon against them until we see the evidence of this occurring. They're not stupid - have done an admirable job to date - and I wouldn't be at all surprised if they put far more pressure on themselves to innovate than we put on them. As as example, I know that instead of resting on their laurels, they're currently working on technology to synchronise edits done to RAW images on mobile devices like iPads and have those changes pushed through to the same data set on your PC. Not seeing anyone else doing that.

As for the security lapse - yes Sh$t happens, but some of the stories that have come out suggest Adobe's security working practices were not up to snuff.

A lot of stories come out about a lot of things - and often a lot of those stories come with a lot of incorrect assumptions from people who have ZERO knowledge of what happened. Obviously it occurred - and I'm guessing that Adobe are pretty pissed off about it. As to how it was able to happen, I really don't know a lot about their inner security workings, and I probably know as much as just about everyone else who's publishing the stories. I do know that at the end of the day, there are probably always going to be slip ups; humans make mistakes and the bad guys think of something in a way that the good guys didn't cover first - that's why we need additional layers of security like encryption and 2 factor authorisation (both of which I'm a big fan of). If everyone had chosen strong passwords then the info the bad guys got in this situation would have been pretty much worthless to them (and even now I'm not aware that what they got was of any commercial value) (which makes for a somewhat crazy risk/reward dynamic, but I digress).

I don't think we should let Adobe off with a gallic shrug here: it was a pretty severe breach.

Yep, it was a dooooozy. What impact did it have on me or anyone else though? In my case, virtually nothing - in the case of others - probably the same. The core breached captain, but the other safety measures held.

[Mike Buckley]

I just get irritated when people - with little to no understanding of commerce - constantly attack them - slander them - and treat them like criminals when IMO they should be saying "Well done" and "steady as she goes Captain".

Adobe ignores those people. You should too.

[Colin Southern]

Adobe ignores those people. You should too.

I'm working on it. Gets harder as I get older.

[Simon Garrett]

Colin, I think you misunderstand my posts when you say things like "...constantly attack them - slander them - and treat them like criminals...". That simply does not represent what I said.

Ad hominem comments like "...people - with little to no understanding of commerce..." do not enhance your points.

Clearly we're not going to agree, and we're not even going to agree about what I actually said, so let's park it.

Cheers, and a Happy Christmas!

[Colin Southern]

Colin, I think you misunderstand my posts when you say things like "...constantly attack them - slander them - and treat them like criminals...". That simply does not represent what I said.

I wasn't referring to what you said.

Ad hominem comments like "...people - with little to no understanding of commerce..." do not enhance your points.

Again, not directed at you. It's directed at people with the attitude of "all software should be free" - "Adobe charge too much" - "Adobe rip people off" - "How DARE they make a profit".