Adobe Flash No Longer on the iPhone. Does it Matter for Adobe Stock?
Adobe’s (NASDAQ:ADBE) Flash software is used for developing applications and games in mobile phones, particularly smartphones. Since smarpthone users are more likely to play games and download applications, Flash becomes an important component for smartphones.
Apple (NASDAQ: AAPL) has not been using Flash on its iPhone, claiming that Flash makes the iPhone slower and creates performance issues and saps iPhone’s battery life.
We believe the absence of Flash software on the iPhone will not have any significant impact on Adobe due the small amount that Adobe earns from mobile flash and the limited number of iPhones sold. We estimate that the Adobe’s mobile Flash business constitutes less than 1% of $36 Trefis price estimate for Adobe’s stock.
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Flash for Mobile Phones is a Low Priced Software
Adobe makes money from Flash software on mobile phones by charging phone manufacturers a small fee for each mobile phone that incorporates its flash software. We estimate that Flash software pricing declined from around 40 cents per phone in 2006 to about 10 cents in 2009, and we expect pricing declines to continue.
Flash Penetration Rate is Still Low at 45%
We estimate that Flash was used in only 45% of the 1.2 billion mobile phones sold globally in 2009. This means that Flash was enabled on around 570 million mobile phones in the world. In comparison, Apple sold about 25 million iPhones in 2009 and over 40 million total since the device was launched in mid-2007.
Although Flash is more useful for smartphones, feature phones also have games and applications that consumers can download. The growth in non-smartphone feature phones will help Adobe increase Flash penetration.
We believe that Flash Penetration will increase rapidly to to reach 87% by the end of Trefis forecast period.
Even if Adobe were to increase its Flash penetration rate while maintaining its Flash software pricing at current levels, the monetary impact on Adobe’s stock of losing the iPhone is insignificant.
You can modify our forecasts for Flash Pricing and Flash Penetration Rate to see how Adobe’s stock will be impacted.
For additional analysis and forecasts, here is our complete model for Adobe’s stock.