Adobe Systems Incorporated (NASDAQ:ADBE), a diversified applications package company based in San José California is one of the companies that need to adapt the shifting culture to cloud based services. Founded in 1982, Adobe Systems offers a line of software and services used by creative professionals, marketers, knowledge workers, application developers, enterprises, and consumers. Adobe Systems Incorporated (NASDAQ:ADBE) is the largest maker of graphic design software globally.
Cloud computing allows service providers and software developers to provide online support efficiently, thereby enhancing user experience. It is not only cheap for the company, but also helps companies deliver the best service and support to their customers. Other application software companies engaged in cloud computing include salesforce.com, inc. (NYSE:CRM) and Oracle Corporation (NASDAQ:ORCL).
The transition is on
Adobe Systems Incorporated (NASDAQ:ADBE)’s Creative Cloud subscriber numbers beat analyst estimates, sending the stock up 5.58% to close at $45.78 per share last Wednesday. Analysts had projected the company to report 600,000 subscribers to its creative cloud software, but the numbers announced were higher by 16.67%, after the company reached 700,000 subscribers.
Based on these numbers, the company remains on course to reach its target of 1.25 million subscribers by the end of its current fiscal year, which ends in November 2013. In other words, Adobe expects to add another 525,000 subscribers to its creative cloud package in six months. This is compared to the 700,000 subscribers the software has notched a year after its launch, which depicts a growing rate in user subscriptions.
Optimistically, Adobe Systems Incorporated (NASDAQ:ADBE) expects to reach 4 million subscribers for its creative cloud software by 2015, although it maintains that there is a potential of getting 8 million. And why not? If the company intends to convert its 12 million plus desktop subscribers from the creative design software to the cloud based system, that is very realistic.
The company’s average fees received per subscriber per month stand at about $37, compared to $50 for the full suite. Based on the current numbers, this translates roughly to about $77.7 million worth of revenues from the creative cloud software for the company’s fiscal third quarter 2013. Considering that these numbers are still growing, the company should be able to report at least $100 million from the unit in FQ3.
While this is just a fraction compared to its online marketing software, whose sales for the most recent quarter increased by 11% to $285.4 million, it is only a matter of time before creative cloud becomes one of the major revenue generators for Adobe Systems Incorporated (NASDAQ:ADBE). Consider the possibility of having 8 million subscribers; this could translate to nearly $900 million in revenue per quarter, and with improved subscription fees per month, $1 billion could be within touching distance.
The company also intends to shift a majority of its desktop packages to the online subscription-based system. Eventually, this will result in recurring revenues, with growth levels pegged to the number of new subscribers and the average subscription fees per user per month.
Adobe Systems Incorporated (NASDAQ:ADBE) faces competition from salesforce.com, inc. (NYSE:CRM) and Oracle Corporation (NASDAQ:ORCL). Oracle competes directly with Adobe for its application software business, while Salesforce.com is a dominant force in the provision of cloud-based sales and marketing software.
Adobe’s revenues matched the analyst estimate of $1.01 billion and expects to report a figure within that range for the next fiscal third quarter. Earnings per share came in at $0.36, slightly above the analyst estimate of $0.34. The company’s earnings fell by 66% from amount reported the same quarter last year, while revenues were down 8.8%.