Adobe (NASDAQ:ADBE) acquired Omniture, a web analytics company in September 2009 for $1.8 billion, a 24% premium above the market price. Omniture web analytics software competes with Google (NASDAQ:GOOG) Analytics (DoubleClick), Microsoft’s (NASDAQ:MSFT) aQuantive and Yahoo’s (NASDAQ:YHOO) IndexTools.
We estimate Omniture constitutes 8% of the $38 Trefis price estimate for Adobe’s stock, or about $1.6 billion of value for Adobe. Below we explain what value Omniture brings to Adobe and how we estimate its significance for Adobe’s stock based on forecasting Omniture’s revenues and Adobe’s margins.
Web Design Meets Web Analytics
Adobe provides software tools used to design rich web content. The acquisition of Omniture’s web analytics software will allow Adobe to integrate analytics into its existing suite of web products (Flash and LiveCycle).
Omniture’s web analytics software is useful to a variety of customers of Adobe including:
1. Advertisers and advertising agencies: In the past, advertisers used Adobe Flash to produce rich ads but had to use a different analytical tool to understand the click-through rates of ads in real time for better positioning of the ads and negotiating on ad pricing with the content providers.
2. Media companies and content providers: Web analytics helps media companies understand which content is performing best and attracts most traffic to their website. The software helps the companies in positioning and placement of content, helping to drive higher ad revenues.
3. Web developers: By closely integrating design elements with web analytics, Adobe can help web developers and designers choose the best elements to drive the desired user engagement on a website.
Omniture Adds $1.6 Billion of Value to Adobe
Omniture’s revenues for 2009 were $350 million. We believe Adobe’s integration of the web analytics software into its existing product suite could drive Omniture’s revenues to around $800 million by the end of Trefis forecast period.
In addition to revenue synergies, we believe integrating Omniture software into Adobe’s product will also produce cost synergies. We estimate that Omniture’s margins will rise from 59% in 2009 to around 69% by the end of Trefis forecast period.
You can modify our forecasts above to see how Adobe’s stock would be impacted if Omniture’s revenues and margins were to increase at a faster rate than we forecast.
