Adobe Ain't No Flash in the Pan

Adobe Systems (Nasdaq: ADBE  ) sees better days ahead -- and is stepping on the accelerator.

In the just-reported fourth quarter, Adobe enjoyed a 14% year-over-year revenue boost to $1.15 billion. Non-GAAP earnings came in at $0.67 per share. Most encouraging of all, operating cash flows scored a big boost to $497 million. If you're keeping score at home, that's nearly 50 cents of operating cash squeezed out of every revenue dollar.

In the wake of a very public spat with Apple (Nasdaq: AAPL  ) , Adobe is shifting its strategy away from proprietary technologies like Flash and into building a robust framework for industry standards such as HTML5. The recent acquisition of Nitobi, for example, allows Creative Suite users to build full-fledged mobile applications on cross-platform HTML technologies.

The company is also poking a tentative finger at cloud computing. Other cloud-based platforms from Amazon.com (Nasdaq: AMZN  ) , salesforce.com (Nasdaq: CRM  ) , or Microsoft (Nasdaq: MSFT  ) keeps a mix of items hosted out in the cloud. Adobe's solution hosts data on the company's servers and then lets client computers do the heavy and expensive lifting such as program execution and data analysis. This makes for a low-cost cloud service on Adobe's end. We'll see how this model resonates with Adobe's customers over the long term, but the company is off to a decent start.

The cloud is driving Adobe's momentum these days. Many other companies are driving down that hugely profitable road -- check out some ideas on how to invest in the cloud, courtesy of our Motley Fool analysts.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Amazon, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, Adobe, salesforce.com, and Amazon. We have also recommended creating bull call spread positions in Apple and Microsoft, a diagonal call position in Adobe, and shorting salesforce.com. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.


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  • Report this Comment On December 17, 2011, at 12:49 AM, demodave wrote:

    "Adobe's solution hosts data on the company's servers and then lets client computers do the heavy and expensive lifting such as program execution and data analysis."

    That's a potentially viable business model for Adobe, but it's not very customer-friendly. In an internet-enabled world where many users are seeking to use relatively dumb client boxes (even if it's a portable, it's still a "box"), pushing the lifting onto the client may not be a very viable business plan.

    I'm not saying you're wrong, just offering an alternative point of view.

  • Report this Comment On December 17, 2011, at 1:08 AM, fatmonk wrote:

    Finally, Adobe is making a better decision. They should thank Steve for that(HTML5). Cloud computing is still an early stage. Adobe should move into in MediaCloud for both professional and Consumer. If there is a software for video editing in cloud... That would take some bites out of FinalCut; Of Course, there are many opportunities with other data formats type too.

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