End of the Road for Adobe Flash on Tablets?

Adobe (NASDAQ:ADBE) Flash has been the most popular software for creating interactive, animated content and games for years now. It has dominated the computing segment where it competes with Microsoft‘s (NASDAQ:MSFT) Silverlight and open web standards like HTML5. It also has been available on multiple smartphone platforms including Google‘s (NASDAQ:GOOG) Android and Nokia‘s (NSYE:NOK) Symbian. However, despite its popularity, Apple (NASDAQ:AAPL) announced that it won’t support Flash on the iOS platform (the iPhone and the iPad) citing performance reasons. Instead, it stated that it would back the HTML 5 standard for creating interactive web content.

With Apple enjoying nearly 80% of the tablet market share, the presence of Flash there is almost minimal. Google supports Flash on its Android platform, but Flash on mobile devices is a drain on the battery life and offers mediocre performance.

When Microsoft unveiled the Windows 8 developer preview last week, it announced that it won’t be supporting Flash or any other plugins on the Windows 8 Metro interface. ^[1] Considering that Windows 8 could likely become one of the top 3 tablet platforms, this means that this could possibly be the end of the road for Adobe Flash on tablets.

We currently have a $35 Trefis price estimate for Adobe, which stands 35% above the market price.

Minimal Impact on Adobe’s Financials

Adobe has traditionally made money from Flash in two ways – by selling licenses for Flash to mobile device manufacturers, and by selling Flash development tools to developers. Revenues from Flash licenses are quite low compared to Adobe’s other revenue streams and accounts for less than 1% of its Trefis price estimate.

The majority of the revenues are from sales of the Creative Suite which includes Flash Professional and many other tools. We don’t expect the revenues to be affected much even in this case, as the revenues from the sales of Adobe’s HTML 5 authoring tools like Adobe Edge could easily compensate for the lost Flash sales. See a recent note we wrote titled Adobe Embraces HTML5 with Edge, Heading to $35. Additionally, Adobe also offers tools for Flash developers to port their Flash content to the Adobe Air platform, which is supported by Windows, iOS and Android.

Check out our complete analysis for Adobe.

1. Windows 8 Metro browsing will not support Flash, Adobe counters with AIR, WinRumors [↩]