Adobe Earnings Preview: What We’re Watching
Adobe (NASDAQ:ADBE) will report its Q4 FY11 earnings on December 15. We take a quick look at few key items that we think will drive Adobe’s results this quarter. Adobe recently restructured its business to focus on two particular areas – digital media and digital marketing. It was also on an acquisition spree in the last quarter, acquiring four companies to further its lead in Creative software, and aid its efforts to rule the digital marketing and advertising space. In this earnings call, we will be looking at Adobe’s strategy of growing in the digital media and marketing space, as well as assess the status of its latest acquisitions. Adobe competes with Apple (NASDAQ:AAPL), Quark and Corel in creative software, and Google (NASDAQ:GOOG) Analytics in web analytics.
We have a $35 Trefis price estimate for Adobe, which stands nearly 25% above the current market price.
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Digital Marketing & Web Analytics
Adobe recently acquired Auditude, a video ad management and monetization company, to enter the growing online video advertising market. It also acquired Efficient Frontier, an ad buying and optimization platform, which will be integrated with its web analytics offering. We expect Adobe’s revenue from Web analytics and digital marketing to grow steadily over our forecast period. We should get more information about Adobe’s plans in the digital marketing space in this earnings call.
Digital Media & Creative Software
Digital Media, which comprises Adobe’s Creative software business, is another area the company plans to focus on. It acquired Typekit and PhoneGap to bolster its web design and HTML 5 development offerings. It also launched multiple Creative apps for tablet platforms like Google’s Android and Apple’s iOS, and also unveiled Creative Cloud, a cloud storage and synchronization solution for Creative Suite users. In addition, it added support for the popular Kindle Fire tablet to its digital publishing suite.
Creative Software accounts for nearly 50% of Adobe’s $35 Trefis price estimate, while Web Analytics software accounts for around 9%. These two divisions will be the major contributors to Adobe’s revenue growth going forward.
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