Adobe Systems Incorporated (ADBE), Vocus, Inc. (VOCS): Be Careful With This Tech Stock

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Adobe Systems Incorporated (NASDAQ:ADBE)The marketing cloud is a hot topic nowadays. Several acquisitions made by big companies have spurred even more interest in it. salesforce.com, inc. (NYSE:CRM) recently bought ExactTarget for $2.5 billion. Adobe Systems Incorporated (NASDAQ:ADBE), which is working hard on its Adobe Marketing Cloud, purchased French marketing automation firm Neolane for $600 million. A recent IPO by another marketing company, Marketo has spurred interest. Marketo just had its first earnings call ever, and it’s time to give it a more in-depth look.

What about growth?

Marketo has never had a profitable quarter, and the second quarter was not an exception. The company finished the quarter with a $0.49 loss per share, missing analysts’ estimates. Revenue was up 62% year-over-year and up 14% sequentially.

The company’s loss totaled $9.6 million on a non-GAAP basis and $12.4 million on a GAAP basis. The difference came from $2.6 million of stock-based compensation. This is a very high number, given the company’s performance. However, this is typical for cloud companies.

Marketo expects to finish the third quarter with $23 million – $24 million in revenue. This would be a sequential growth of 2.2% – 6.7%. Not the type of growth you expect from a company that manages to lose $12.4 million on $22.5 million of revenue.

Is it enough?

The main risk for Marketo is that the company could find itself in no man’s land with no financial performance and no big company bidding for it. In this case, investors would focus on earnings power and dump the stock.

This is the story of Vocus, Inc. (NASDAQ:VOCS), a marketing cloud company. The company recently reported that revenue rose 5% year-over-year and just 1% sequentially. No wonder the stock is down 40% this year. The company is trying to find its place among the competitors.

The recent move was to raise prices and push Vocus, Inc. (NASDAQ:VOCS) into the high end of the market. The average selling price for new customers increased by 45% in the second quarter. The increase in price was offset by the drop in units sold, which resulted in very slow revenue growth.

Marketing cloud is growing healthily at Adobe Systems Incorporated (NASDAQ:ADBE). This segment posted 18% revenue growth and 25% bookings growth last quarter. Adobe Systems Incorporated (NASDAQ:ADBE) has already made its marketing cloud purchase, and it is unlikely it would need more. The company is delivering healthy results, with the growth in both marketing cloud and Creative Cloud. Following Microsoft, Adobe decided to push its products to a subscription model.

In addition, Adobe Systems Incorporated (NASDAQ:ADBE) offers synergy that other companies don’t. An Adobe Systems Incorporated (NASDAQ:ADBE)’s user could develop the marketing product with the help of the Creative Suite, and push it into the market with Marketing Cloud. This is a unique advantage nobody else has.

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