Tags: Adobe | Fotolia | Cloud | Revenue

Adobe to Buy Fotolia as Cloud Subscriptions Drive Revenue

Thursday, 11 Dec 2014 05:24 PM

Adobe Systems Inc. reported fiscal fourth-quarter revenue that topped estimates as the software maker pushes deeper into delivering programs via the Web, an effort bolstered by an agreement to buy stock-photography provider Fotolia LLC for about $800 million in cash.

Sales in the period ended Nov. 28 were $1.07 billion, and profit before certain items was 36 cents a share, Adobe said in a statement Thursday. Analysts on average projected revenue of $1.06 billion and profit of 30 cents.

Customers for Creative Cloud Web, an online product for editing photos and creating illustrations, grew by 644,000 accounts, exceeding the average projection by three analysts for 534,000, according to data compiled by Bloomberg. The Fotolia deal is aimed at enhancing Creative Cloud and is Adobe’s third- biggest acquisition in the past decade, after the purchase of Omniture Inc. in 2009 for $1.55 billion and Macromedia Inc. for $3.15 billion in 2005, according to data compiled by Bloomberg.

“This is going to make Adobe’s already strong position in digital publishing even stronger,” said Josh Olson, an analyst at Edward Jones & Co., who has a hold rating on the stock. “Digital-photo content is only going to improve any competitive advantage they already have in this space.”

The shares of Adobe jumped as much as 8.1 percent in extended trading. The stock declined less than 1 percent to $69.72 at the close in New York, leaving it up 16 percent this year, compared with a 10 percent gain in the Standard & Poor’s 500 Index.

Web Software

Adobe has been shifting its business away from one-time purchases of software to subscriptions for cloud-based tools. Chief Executive Officer Shantanu Narayen is betting that the new business model will deliver stable growth, with sales on track to climb this year after a decline in 2013 during the transition.

“The early changes in the model now will normalize and you’ll start to see more focus on the actual financial metrics than the subscription metrics,” said Brent Thill, an analyst at UBS AG, who has a buy rating on the stock.

Adobe was one of the first established technology companies to redesign its entire business to sell products via the Internet, Thill said. Now, three years on, the transition appears to have worked, and other software makers such as Oracle Corp. and Microsoft Corp. have since followed.

Paid subscriptions for the company’s Creative Cloud service totaled 3.5 million at the end of the fourth quarter.

Fourth-quarter net income was $73.3 million, or 14 cents a share, compared with $65.3 million, or 13 cents, a year earlier.

Cloud Subscriptions

For the first fiscal quarter, which ends in February, sales will be $1.05 billion to $1.1 billion, and profit will be 34 cents to 40 cents a share, Adobe said. Analysts’ average estimates were for revenue of $1.1 billion and profit of 39 cents a share, according to data compiled by Bloomberg.

For fiscal 2015, Adobe issued a forecast for profit, excluding items, of $2.05 a share, compared with analysts’ average estimates for $2.07.

Fotolia, owned by Kohlberg Kravis Roberts & Co., TA Associates and management, was founded in 2004 and has offices in New York, Paris, and Berlin. The New York-based stock-photo service has websites in 14 languages and operates in 23 countries. Adobe will knit the service into its Creative Cloud, letting its customers view and purchase more than 34 million images and videos, the company said in a statement. The deal is on track to close in the second half of fiscal 2015, the company said.

© Copyright 2017 Bloomberg News. All rights reserved.

   
1Like our page
2Share
Companies
Adobe Systems Inc. reported fiscal fourth-quarter revenue that topped estimates as the software maker pushes deeper into delivering programs via the Web, an effort bolstered by an agreement to buy stock-photography provider Fotolia LLC for about $800 million in cash.
Adobe, Fotolia, Cloud, Revenue
590
2014-24-11
Thursday, 11 Dec 2014 05:24 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved