Adobe Systems recently released their quarterly earnings announcement, and the numbers were very surprising. Adobe, known as the software provider of programs such as Photoshop and After Affects, announced that the company’s market capitalization is at an all time high of $33.6 billion. Within the last year they have made $4 billion in sales. Unfortunately though, their net income was only $272 million. This reflects a 8% and 65% decrease respectively from the year before.
Forbes Columnist, Peter Cohan, offered his explanation of why the company’s value increased while the overall profits went down. He believes, “That Adobe is in the middle of a CEO-led transition in its business model — from selling desktop software for $2,600 to providing $50 a month subscriptions for its Creative Cloud software.” This transition, Cohan reasons, is what’s keeping stockholders faithful to the company.
According to Google Finance, Adobe is currently listed at approximately $72.89 a share. While still a distant way off from breaching the $100 barrier, Adobe’s move to cloud storage should make the expensive software more accessible to individuals. Ergo, Adobe should expect to see greater dividends in the future. Especially since the software-as-a-service (SaaS) model has already been accepted by consumers.
Salesforce.com, a customer relationship management software vendor, is one such company that has proven success using the SaaS model. Cohan made sure to note that the company, “Is growing at 34% a year to $4.4 billion and sports a $35.5 billion market capitalization despite losing $261 million in the last year.”
Adobe reported that they gained 464,000 new members this quarter, bring the total to 2.31 million subscribers. Though some investors were nervous, the stock rose 8% after Adobe’s announcement on June 17. According to Bloomberg, the 5.7% increase in revenue to $1.06 billion was $40 million more than analysts expected. So it looks like that $100 a share benchmark might be not so far off in the future.
Photo Illustration: Adobe / Courtesy Photo
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