A few years ago Adobe cardinally changed the business model for benefit of sale of an online subscription to cloud services of Adobe Creative Cloud, Adobe Document Cloud, Marketing Cloud which upgraded versions of products of the company entered. At first management fixed reduction of revenue and profit, however soon enough users got used to a new system that allowed to make up quickly for lost time. Recently Adobe steadily shows two-digit growth rates of financial performance.
Revenue of the company in the fourth quarter increased 2018 financial year by 22.8%, having reached record $2.46 billion and having exceeded the consensus forecast at the level of $2.43 billion. Receipts from a subscription to cloud services made 88.6% of total sales whereas sales of products within traditional sales channels dropped by 22%, and their share in revenue fell up to 6.1%. Sales in a Digital Media Solution segment rose by 23%, to $1.71 billion - against the background of growth of revenue of Creative Cloud service by 25.5%, to $1.45 billion.
Geographically sales in North America rose by 22.2%, in EMEA region – for 26.4%, in Asia – for 18.6%. The corrected indicator of EBITDA grew by 19.4%, having exceeded $1.06 billion, and operating margin decreased by 1.2 items – up to 43%. The adjusted earnings on an action flew up for 45.2%, up to $1.83, though fell short a little of an average score of analysts at the level of $1.88.
The company actively develops the platform of artificial intelligence and machine learning of Sensei which elements already begin to be applied in its products. Also Adobe pursues active policy M&A, having purchased in 2018 the developer of cloud solutions for Marketo marketing. Earlier the company absorbed Magento Commerce, CMS developer for online stores.
2016: Record revenue
On December 15, 2016 Adobe published the report for work in 2016 financial year. Revenue of the company grew to record level thanks to transition to cloud model of software distribution.
For the 12-month reporting period which came to the end on December 2, 2016 sales of Adobe increased by 22% in comparison with previous year and reached $5.85 billion that never was in the history of the American producer of software.
Also net profit — almost twice increased to $1.2 billion. Operating profit rose from $903 million to $1.5 billion. The vendor connects steady growth of income with increase in demand for digital products.
|All our business of Adobe showed strong results in 2016, we achieved or exceeded all our key financial objectives in a year — the executive vice president and the chief financial officer of Adobe Mark Garrett said.|
More and more income of Adobe is brought by cloud subscriptions to products. In 2016 to a fiscal year the corresponding revenue of the company reached $4.6 billion against $3.2 billion in the 2015th. Sales of boxed solutions decreased from $1.1 billion to $800 million.
In the total turnover of the company the share of subscriptions made 78% whereas five years before this share indicator it was measured by 11%.
In 2016 financial year revenue from the cloud Creative Cloud project (contains online analogs of the popular Photoshop, Illustrator and Dreamweaver programs) made $3.2 billion that is 38% more than an indicator of year prescription.
The company earned $1.63 billion from the product Marketing Cloud within which Adobe offers corporate clients tools for the analysis of processes of customer interaction and content management on social networks. It is 20% more, than was in 2015 to a fiscal year.
According to the results of the first quarter of 2017 financial year Adobe expects revenue at the level of $1.63 billion that below the average forecast of analysts ($1.65 billion) polled by Thomson Reuters I/B/E/S.
History of the company
2019: Purchase of software developer for creation 3D - textures and the materials Allegorithmic
On January 23, 2019 Adobe] announced acquisition of software developer for creation 3D - textures and the materials Allegorithmic, but the cost and other terms of transaction did not begin to open. Read more here.
Participation in an initiative of consolidation of data Open Data Initiative
Purchase of the developer of the platform for automation of marketing of Marketo for $4.75 billion
On September 20, 2018 Adobe officially announced acquisition of Marketo at private investment fund Vista Equity Partners for which the transaction was profitable. Vista purchased Marketo in 2016 for $1.8 billion, and now sells for $4.75 billion. It is going execute all formalities concerning Marketo sale in the fourth quarter 2018 financial year of Adobe. Read more here.
Purchase of CMS Magento developer for $1.68 billion
On May 21, 2018 Adobe announced acquisition of Magento for $1.68 billion. This transaction will allow the buyer to compete with market leaders of e-commerce of Salesforce.com and Oracle better. Read more here.
Average length of service of employees — 5.3 years
In Adobe employees work on average about 5.3 years. Here gyms, travel privilege on public transport, a free power supply and a sabbatical leave of times in five years are offered workers. Read more here.
2017: Adobe and Microsoft: joint format of data
On March 21, 2017 Microsoft and Adobe companies announced creation of a format of data which will be used in the corporate applications focused on the sector of B2B. Adobe Systems and Microsoft are going to combine efforts for opposition to competitors in a corporate segment.
Consolidation will consist in creation of the format of data, general for the companies. It will be compatible to a set of solutions of Adobe for digital marketing (marketing software suite) which will receive the "cloud" name Experience Cloud and a line of software applications of enterprise resource planning (ERP) and customer relationship management (CRM) of Microsoft Dynamics Adobe.
|It will allow clients to go beyond the operating software restrictions in which they are forced to act.|
Scott Guthrie, vice president of division of development and cloud computing of Microsoft
Profit increase twice
On December 10, 2015 Adobe published the report for work for 2015 financial year. The profit of the company grew more than twice due to cost reduction by restructuring and strengthenings of digital business.
According to the results of 12-month reporting period which came to the end on November 27, 2015 the net profit of Adobe was $629.6 million against $268.4 million the previous year. Revenue for this period rose by 16%, having reached record $4.8 billion. In this amount $1.1 billion against $1.6 billion in 2014 financial year fell to the share of sales of boxed software.
The most part of revenues of Adobe is created by subscriptions to software: annual revenues from them raised from $2.1 billion to $3.2 billion. In 2015 to a fiscal year the number of new paid subscribers of the cloud Creative Cloud project (contains online analogs of the popular Photoshop, Illustrator and Dreamweaver programs) increased by 2.17 million users and was 6.17 million. The volume of digital business which Creative Cloud treats during this time rose by $1.12 billion to $3 billion.
One more large source of revenues of Adobe is the product Marketing Cloud within which the company offers corporate clients tools for the analysis of processes of customer interaction and content management on social networks. In 2015 to a fiscal year of sale of Marketing Cloud reached record $1.36 billion, and the company could carry out a task of 30 percent increase in orders in this market, said in the report of Adobe.
Despite the growing sales of popular products of Adobe the cut-down expenses on restructuring became the main growth factor of net profit. In reporting year they were measured by $1.6 million, and the previous year – nearly $20 million. However total operating costs of the company in a year practically did not change.
"Strong growth reflects the impressive performance which we reached in financial 2015 in key financial indicators — the chief financial officer of Adobe Mark Garrett says. — Our long-term goals, including annual average growth rates of revenue for 20% till 2018 of a fiscal year prove that the benefit from transition to "cloud" only begins to affect".
Adobe will pay a penalty for personnel collusion to other IT companies
In the middle of January, 2015 Adobe, Apple, Google and Intel announced intention to pay compensation in $415 million for pre-judicial settlement of the class action of charge of the IT companies of personnel collusion. However, the amount of compensation turned out several times smaller that that the accusing party initially required.
In the claim submitted in 2011 on behalf of 64 thousand employees of Apple, approved by Google, Intel and Adobe that the specified employers secretly agreed not to entice each other employees, having limited for them to that a possibility of the wages rise and search of more attractive work in the competing company.
First IT giant in every possible way denied charges in the address, but in 2013 agreed to payment of $324.5 million. The district court judge in San Jose (California, the USA) Lucy Koh said that the amount should be not less than $380 million. Originally claimants demanded about $3 billion from the companies violators.
Apple, Google, Intel and Adobe punished for collusion on not enticement of employees
According to Lucie Koch, in the case of collusion to the preventing purpose to employment of workers there are enough proofs of antitrust violation therefore without pre-judicial settlement of Apple, Google, Intel and Adobe threatens a penalty at the rate from $9 billion.
Therefore the companies decided to pay to the employees of compensation whose size averages $5 thousand counting on one worker without the expense accounting on lawyers that is $1 thousand less than earlier offered amount.
It was opposed by one of the main initiators of the class action – the former engineer of Adobe Michael Devine. It supported the size of new compensation. Now the judge Lucie Koch should tell the word. If she for any reasons does not approve the offered Apple, Google, Intel and Adobe of a term of agreement, then proceedings on this case will be initiated on April 10.
In the protection the technology companies claim that in recent years salaries of their employees grew so even in case of any arrangements of employers the income of employees was not undermined.
2014: Revenue grew, but profit fell
On December 12, 2014 Adobe Systems reported on results of work in 2014 financial year. Revenue of the American company increased a little, but profit fell.
According to the results of 12-month reporting period closed on November 28, 2014 the net profit of Adobe was $290 million, or 51 cents counting on an action, against $253.6 million, or 58 cents on one security of the company, the previous year. Operating profit decreased to $393.2 million whereas in 2013 financial year this indicator equaled $422.7 million. Revenue made $4.147 billion against $4.055 billion a year ago.
Annual revenues of Adobe grew, but profit fell
In structure implementation of software products generated revenues Adobe about $1.6 billion, sale of subscriptions is slightly more — $2 billion. The company earned $442.7 million from different services and services of support.
Operating expenses of software maker exceeded $3.1 billion where the most part ($1.67 billion) fell on the organization of sales and marketing. Research and development — $844.4 million was the second in value item of expenditure. The total administrative costs borrowed $543 million.
If not to consider some expense types (Non-GAAP system), then the annual net profit of Adobe was $658.4 million, or $1.29 for an action, against $689.7 million, or $1.34 for an action, the previous year.
Also follows from the report of Adobe that by the end of November, 2014 the number of paid subscribers of the cloud Creative Cloud project (includes online analogs of the popular Photoshop, Illustrator and Dreamweaver programs) reached 3.454 million. By the end of 2015 the company is going to bring the size of audience Creative Cloud to 5.9 million users.
In 2014 financial year revenue of Adobe from the product Marketing Cloud (provides tools in the field of web analytics and optimization of content, allows the companies to make reasoned decisions and to provide success of the marketing companies) reached record $1.17 billion. In a Digital Media segment the company earned $2.6 billion while it expected revenue in the amount of $2.5 billion.
For reporting year of Adobe redeemed 10.9 million own shares for the amount of $689 million. By November 28, 2014 on accounts of the company about $1.1 billion in the form of money and their equivalents and also short-term investments accumulated.
2012: Adobe closed access to a forum of users
On November 15, 2012 Adobe Systems closed access to the Internet forum Connectusers.com where users communicate about use of its service of the Connect online conferences, because of leakage of user data, reports the Reuters agency.
Software products of Adobe often become targets of hackers as are widely used for processing and the publication of electronic documents. Current incident became known after on Tuesday the anonymous hacker published for the Internet these 644 accounts of the website Connectusers.com which included user names, e-mail addresses and hashes of passwords (the coded values of the password which are kept in the database of service).
According to the statement of the hacker, the complete database stolen by it includes these more than 150 thousand accounts of a forum. According to him, the purpose of cracking was to show slow reaction of Adobe to the revealed vulnerabilities.
The company admitted the fact of cracking and temporarily closed access to a forum. Besides, Adobe stated that it will reset passwords about 150 thousand users of the website Connectusers.com which could fall into the hacker's hands. According to Adobe, accounts of the service Connect and also data of other websites of the company are not compromised.
The hacker who got data access of a forum of Adobe also promised to publish the data stolen at Yahoo Internet company, the Reuters notes. Representatives of Yahoo did not comment on this information.
Date leak from the user forum Connectusers.com was revealed in a week after the Russian information security experts from Group-IB company detected in the popular program for viewing the PDF images Adobe Reader (the 10 and 11 version) earlier unknown vulnerability - so-called "vulnerability of zero day" which within two weeks cybercriminals use for distribution of bank Trojan programs.
The representative of Adobe Wiebke Lips said that the company studies the report of Group-IB, though still did not receive from specialists in an infobezopasnost of examples of a malicious code.
1 quarter: Record sales
In the first quarter financial 2011 which came to the end on March 4 the Adobe company gained income in the amount of 1028 mln. dollars. For comparison in the first quarter 2010 income of the company was 858.7 mln. dollars, and in the fourth quarter the same year - 1008 mln. dollars. Thus, in Adobe recorded the record level of income for 20% exceeding indicators for the same period of last year. The diluted earnings per share for the first quarter of financial 2011 calculated on GAAP made 0.46 dollars that is comparable to results of the first quarter 2010 (0.24 dollars), but it is less, than in the fourth quarter 2010 (0.53 dollars). Operating profit on GAAP was in the first quarter the current year 302.3 mln. dollars or 29.4% of income of the company. The net profit calculated on GAAP was 234.6 mln. dollars.
In the second quarter 2011 of Adobe assumes reduction of income approximately on 50 mln. dollars in comparison with normal. It is connected with a situation in Japan which is the second in value sales market for Adobe. Respectively the income in the next quarter expected by the company is from 970 million to 1.02 bln. dollars.
Reduction of staff and new development strategy
In November, 2011 Adobe Systems announced reduction of investments into development of corporate business and the future dismissal of 750 employees. All this becomes as soon as possible to promote in the markets, strategic for the company: digital media and digital marketing, the company stated. These measures are only a part of long-term strategy of Adobe aimed at development of these of "explosive categories".
Adobe Connect and Adobe LiveCycle and also software for management of web content which got to the company after Day Software purchase treat number of the products of Adobe intended for corporate users. The Acrobat family in which the department of knowledge management of staff of Adobe is engaged does not belong to this category, however.
For the last quarter the department of corporate products generated Adobe less than 10% of consolidated revenues that it is much less, than the main directions of business are tools for creation of content and digital media products.
At the same time Adobe will increase investments into a line of Creative Suite and HTML 5 by means of development of Dreamweaver and Adobe Edge. In the direction of digital marketing the company is going to develop own solutions for analytics and the reporting which are especially working on mobile devices and on social networks.
The announced staff reduction will be made mainly in Europe and North America. For the end of 2010 the company had about 9.1 thousand employees so reduction will affect about 8% of employees of the company. Expenses on restructuring current quarter will make $87-94 million, mainly this money will be spent for dismissal wage payments. It will lead up to about $0.30-0.38 for an action to reduction of profit, predict in Adobe. Earlier the company predicted profit at the level of $0.41-0.50 for an action during the current quarter which will end on December 2, 2011.
The company expects quarter income at the level of $1.075 billion - $1.125 billion. Analysts give number about $1.09 billion. Changes will also influence growth of revenue of the company next financial year approximately on 4-5 percent points so its growth will be about 6%.
"We believe that, having focused on two main directions and having changed our business model, we will reach more rapid and predictable growth in 2013 and further", - the chief financial officer of the company Mark Garrett said.
Business in Russia
2014: Reduction of employees and closing of office in Russia
In January, 2014 Adobe issued the order on reduction about a half of positions in the Russian representative office, TAdviser told the source close to the company. As of the beginnings of year, according to it, the total number of the staff of the company in Russia was about 20 people.
Reduction affects not only office Adobe in Moscow, but also the employees in Kazan and Yekaterinburg, the interlocutor of TAdviser says. First of all, it extends to the employees who are responsible for work with partners and for the Digital Marketing direction providing tools for online advertizing, he adds.
According to an edition source, at the end of 2013 reduction concerned also department of Adobe on counteraction to intellectual piracy. In this case, it affected, first of all, the staff of service telesales who informs representatives of the companies on risks of use of illegal software and advantages of use of legal software.
The most Russian representative office of Adobe did not confirm and did not deny information on reduction of employees. "In this respect the company has no comments", representatives of Adobe said.
The interlocutor of TAdviser connects the begun reductions in the Russian state of Adobe with sales reduction of the company in emerging markets: so, in 2013 Adobe reduced also offices in Dubai (UAE) and Istanbul (Turkey), he says. Earlier, in 2012, Adobe announced also closing of sales office on Taiwan.
It should be noted that at the end of 2011 in Russian Adobe stated high sales growth in the country and called Russia and also Turkey, South Africa and the Middle East, some of the focal markets for the company.
Then Adobe spoke about intentions in 2012-2013 to increase investments into Russia into 2-3 times and to direct them, including, to expansion of the state, and geographical presence in the country. According to the source TAdviser close to the company, expansion of the state really took place, but afterwards came to naught as on places of the people leaving the company practically ceased to take new.
In September, 2014 it became known that Russian "subsidiary" of Adobe company — Adob sistems LLC — submitted on September 16, 2014 the notification on liquidation of the legal entity to the Federal Tax Service, follows from information on the website of service. On September 24 the company was struck off tax accounting. Informatsiyayu that Adobe leaves Russia the employee of the Buman Media PR agency which presents Adobe at the Russian market, Matvei Kireev confirmed.
Adobe is in process of complete liquidation of representation in Russia, however users will still be able to buy products and services of Adobe via the website of Adobe.com company and resellers, Kireev told. Adobe actively developed Creative Cloud and Marketing Cloud services for the last several years, having passed from model of the perpetual license to a cloud subscription, he explains. The company adjusts the activity in Russia and is focused on sale of products using the Russian partners and the website of the company, Kireev noted. Tell whether introduction of a cloud technology affected work of branches of the company in other countries, Kireev could not.
At the same time also it became known that Russian authorities are going to create special fund for development of domestic software in which they want to oblige producers of programs to transfer up to 10% of revenue of sales of software licenses in Russia. Kireev refused to speak whether liquidation of office in Russia will allow to pay money to this future fund. According to the source in the ministry, not all parts are worked out so far and there is no complete clarity as well as from whom exactly means in new fund will be levied. But the idea is in imposing with charges only electronic licenses for software products which in Russia are not assessed with the VAT.
The Creative Cloud service provides to the user cloud access to products of the company — Photoshop, Lightroom, Illustrator. Access to this service can be got, having paid on the website a monthly subscription to a packet of products which cost — from $10 to $50 depending on a configuration (in official shop Adobe the latest version of Photoshop costs about $800). On the computer of the buyer the application to which once a month is required Internet access for verification of the license and downloading of updates is installed. Also the service offers users from 2 GB of storage in a cloud of Adobe. Recently the company was praised by how quickly Creative Cloud gains popularity. Only for the II quarter 2014 its audience increased by 464,000 clients — to 2.308 million. And by the end of 2015 of Adobe the number of its users expects to increase up to 4 million.
The market participant assumes that withdrawal of Adobe from Russia is connected not only with cloud computing: because of sanctions at the company several transactions broke in Russia, besides, Adobe was not ready to entry into force of amendments in the law "About Personal Data Protection" which prohibit personal data processing of Russians abroad since September 1, 2016. In September, 2014 in the company dismiss people — the first wave passed in January, after it at office there were 12 people, he says.
2013: Arseny Tarasov leaves the company, Key keepers - the chief representative
As the head Russian Arseny Tarasov worked out Adobe till summer of 2013 then he passed to work into the Russian office Microsoft to a position of the director of the department of work with the large organizations and partners. At the time of its leaving the company to a position of the new chief representative of Adobe it was not nominated.
2011: The new CEO - Arseny Tarasov
In 2011 in RussiaArseny Tarasov before heading Siemens Enterprise Communications across Russia and the CIS was appointed the CEO of Adobe. In December, 2012 it was raised to the area manager of Adobe across Russia, the CIS, Turkey and the Middle East.
2010: The prices for Russia are higher
The Russian users noticed long ago that the prices of the same software products in Russia and in the USA often differ for several hundred dollars not in our advantage. CNews decided to understand the reasons of so considerable difference on the example of Adobe company – producer of the popular programs Photoshop, Acrobat, Illustrator, etc.
For comparison electronic versions of Adobe Photoshop CS5 Extended and After Effects CS5 were taken. The cost of each of them, upon purchase through the official site of Adobe in the USA, is $999 (30,369 rub at a current rate). Russia is not listed the countries which residents have an opportunity to purchase products on the official site of Adobe as here the company is not engaged in direct sales, and works through partners. At one of resellers, Softkey company, the cost of these licenses is 38,379 rub. Thus, the difference in the prices between Russia and the USA reaches 27%.
The CEO of Adobe in Russia and the CIS countries Alexander Potapov reported to CNews that this difference consists only of a margin of the partner channel - distributors and resellers.
The chain looks as follows, Felix Muchnik, the CEO of Softkey explains: the developer sets the recommended price for the distributors, and those, in turn, considering taxes and an expected margin of the partners, set it for sellers. "It is incorrect to claim that the final price for the end buyer is set by the partner – i.e. we", - he concludes.
Alexander Potapov confirms: Adobe gives to distributors entry cost, and they, in turn, determine the price for resellers. But the profit got by distributors, according to the head of the Russian office Adobe, is minimum.
Distributors at Adobe in Russia three: Mont, DNA Soft and DynaSoft. The last CNews said that the prices in the specific country are set by Adobe, and suggested to check it, having come, for example, on the British or French version of the website of the company. Really, in Great Britain After Effects CS5 is on sale at the price in 873 pounds sterling (41,292 rub).
"In the USA, Russia and the European Union absolutely different distribution price lists work therefore to compare the prices at us and in the USA - it is absolutely incorrect and senseless: they initially by determination cannot be identical or even relatives", - Boris Arzhakov, the specialist in licensing of products of Adobe of DynaSoft company claims.
But, according to Alexander Potapov, between Russia and the USA own price of Adobe differs not so considerably: on average no more than 1-2%.
The source in one of the companies distributors says that their margin on products of Adobe does not exceed 10%. Thus, the cost of Photoshop CS5 Extended taking into account a margin of the distributor can be about 33,405 rub. If this is so, then nearly 5000 rub from sale of each product of Adobe remain at reseller – the shop performing sale of software directly to the buyer.
Resellers agree that their margin should be more, than at distributors. But, according to Victor Algazin, the sales director of Softline company, the classical scheme assumes that the distributor has 3-5%, and in practice this digit can differ many times. The margin of Softline in relation to products of Adobe, according to him, makes 8-10%.
The situation with the prices in Russia could exchange if Adobe opened own trade mission in Russia. Thus, from a chain of formation of final cost two links would disappear. But, according to Alexander Potapov, yet the company has no such plans. "Through partners practically all software supplier companies work, - he says. - Adobe Systems is not an exception, such is the business model accepted in the world such is business reality now. We hope that it will change soon".
2009: Dismissal of the CEO Pavel Cherkashin
On September 24, 2009 it became known that Pavel Cherkashin, the CEO of Adobe Systems in Russia, Ukraine and the CIS, leaves the post. Temporarily its duties will be fulfilled by Alexander Potapov holding a position of the sales director. Adobe of CNews told that the new chief representative will be appointed, most likely, after the candidacy of the company executive in all region of EMEA is approved (Europe, the Middle East and Africa). It should occur "in the nearest future", the decision will be made at the level of the European office.
- ↑ Q4 FY2016 earnings press release
- ↑ and Microsoft will integrate software in fight against SAP and Oracle
- ↑ Adobe Reports Record Quarterly and Annual Revenue
- ↑ Apple, Google Agree to of $415 Million in Antitrust Hiring Deal
- ↑ Adobe Reports Strong Q4 and Fiscal 2014 Financial Results
- ↑ Adobe extends and opens vacancies in Russia
- ↑ Adobe liquidates representation in Russia
Stock price dynamics
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