We estimate that Adobe’s (NASDAQ:ADBE) Creative Suite software which includes Photoshop, accounts for about 56% of the $36 Trefis price estimate for Adobe’s stock.
In addition to Photoshop, Creative Suite includes well-known Adobe products such as:
- Dreamweaver for web design
- Flash Professional for interactive rich content
- InDesign for print layouts and digital publishing
Software Pricing and Share Crucial
Adobe commands premium pricing and dominant market share within $5.9 billion market for creative software where the primary customers are graphic designers, production artists, web designers, photographers, animators, publishers and writers. Based on our pricing, market share and market size forecasts, we estimate that Adobe will have creative software revenue of $2.2 billion in 2010 and that this will increase to $3.9 billion of revenue by the end of our forecast period.
Premium Pricing
We estimate that the average pricing for Adobe Creative Software has increased from $384 in 2005 to $715 in 2008, representing an annualized increase of 23%. Adobe commands a premium price over many alternative creative software suites and we expect Adobe’s pricing to continue to increase as it introduces new features with each new version of its software.
You can modify our forecast for Adobe’s Creative Software Pricing below to see how it impacts Adobe’s stock.
Dominant and Cyclical Market Share
Historically, Adobe’s market share has fluctuated around 50% due to the timing of software product release cycles. Creative Suite 3, which was released around Q1 2007 was especially successful because of Adobe’s acquisition of Macromedia allowing it to add Flash and Dreamweaver for the first time ever. Creative Suite 4 is currently the latest version offered and Creative Suite 5 is expected to introduced in the first half of 2010. As shown in the chart below, we’ve already estimated a slight increase in 2010 share as result of the introduction of Creative Suite 5.
You can modify our forecast for Adobe’s Creative Software Market Share below to see how it impacts Adobe’s stock.
