Adobe Gains 5% on Record Q4 Results, New Creative Cloud Users
Adobe (NASDAQ: ADBE) is on the rise today as investors buy into the company's current success, as well as its potential future in the cloud.
The Photoshop maker reported fourth quarter FY2012 results of $1.153 billion, exceeding the company's targeted range of $1.075 billion to $1.125 billion. Adobe also achieved record revenue for the full fiscal year, earning $4.4 billion.
While it is not yet clear if investors were moved solely by the company's earnings, the consensus is that Adobe impressed traders with the success of the Creative Cloud. That service provides users with an online version of the CS6 toolset. With monthly packages starting at $49.99 (for those who commit annually; $74.99 per month for those who wish to cancel any time), Adobe has the potential to make a lot of money from this service.
During the fourth quarter, Adobe added approximately 10,000 Creative Cloud subscriptions per week -- up from 8,000 subscriptions per week in the third quarter. By the end of the fiscal year, Adobe had amassed 326,000 paid subscriptions. This amounted to annualized recurring revenue of $153 million for the firm's Creative business.
"We beat our Creative Cloud subscription goals and established Adobe Marketing Cloud as the leader in the exploding category of Digital Marketing during fiscal 2012," Shantanu Narayen, President and CEO of Adobe, said in a company release. "In fiscal 2013 we intend to accelerate our pace of innovation, and drive integration between Creative Cloud and Adobe Marketing Cloud."
Mark Garrett, Executive VP and CFO of Adobe, added that the Creative Cloud will yield a "stronger, more predictable recurring revenue model with higher long-term revenue growth."
Indeed, Adobe needs the Creative Cloud to succeed if it wants to survive. Photoshop is one of the most pirated programs available. One study suggested that 58 percent of Photoshop users have a pirated copy of the software.
By moving to the cloud, Adobe is attempting to control the market while simultaneously raising its level of predictable revenue. The company would love to switch to an all-cloud format where users had to pay a monthly fee to use its programs. That day has yet to arrive. Until then, Adobe will work hard to convince legitimate customers that they are better off paying a monthly fee instead of the one-time fee of $2,599.
One of the advantages of the Creative Cloud is that users never have to worry about an upgrade. Instead of having to pay for every upgrade, Creative Cloud users receive the latest updates as a part of their subscription.
Despite the fall of Flash and Adobe's ongoing battle against piracy, the company has been performing quite well this year, gaining more than 24 percent year-to-date.
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