A shift in education market to lower lower-cost netbooks and tablets could make Adobe Systems (Nasdaq: ADBE) and other software vendors scrambling to fit a slimmed configuration, an analyst at ThinkEquity said.

California-based Adobe's weakness in education markets for its Creative Solutions is most likely related to delayed or diminished spending to refresh desktops, laptops, and netbooks in K-12 markets.

"Our checks suggest substitution in favor of lower-cost netbooks and tablets is likely to intensify, especially in K-5, leaving Adobe and other software vendors scrambling to fit a slimmed configuration," analyst Daniel Cummins wrote in a note to clients.

"As long-term changes favoring low-cost hardware devices unfold, there is also the risk of more significant conflicts with Apple, also an entrenched player in educational IT spending," Cummins wrote.http:/img.ibtimes.com/www/site/us/images/1px.gif

K-12 is a designation for the sum of primary and secondary education. It is used in the United States, Canada, and some parts of Australia, whereas K-5 is an American term for the education period from kindergarten to fifth grade.

Cummins, who has a "hold" rating and $30 price target on Adobe stock, said he sense a significant shift toward lower-cost alternatives to richly configured desktops and laptops in elementary schools.

The analyst believes Adobe's overall efforts in K-12 have paid off most notably in the middle and upper grades, where hardware is typically sufficient to run the Creative Suite. Adobe's CS5, for example, can be purchased for $300-500 under student licensing, less volume discounts.

"As netbooks and now tablets eventually characterize lower grade purchasing preferences, largely due to cost, resource-intensive applications are being left out of the picture," the analyst said.

The analyst added his checks indicate that school districts with aging kit (e.g., 3+ years) are likely to continue trading down to lower-cost devices, some geared primarily to Internet-based applications.

"We believe this also presents a long-term challenge for Adobe's franchise in educational content, much of which has been written in Flash over the past decade," Cummins said.

However, there does appear to be strong interest in authoring tools and skills needed to write new or adapted educational content, and this could favor Adobe.

Meanwhile, Adobe's overall long-term role in the changeover to electronic textbooks may not be significant, as the company lacks a hardware platform strategy. In the short run, demand for traditional layout editing tools (e.g., InDesign) may come under pressure as book publishers reduce their investment in legacy businesses.

The analyst noted that Adobe has been behind the curve in two key respects this decade, with a low relative contribution of recurring, subscription-based revenue and in the adoption of software-as-service technologies.

"The latest wave of big change in computing, favoring mobile computing, has also left the company a bit stalled, in our opinion. On the outside looking in, as far as runtime platforms go, Adobe may be forced to upgrade its largely passive ticket to the "big tent," the analyst wrote.

Cummins also expects Adobe to continue acquiring selectively in enterprise technology areas, such as marketing automation.

"While Adobe is resourceful and assembling good assets, gaining enterprise mindshare will remain a tough challenge, in our opinion," Cummins said.

Shares of Adobe closed Tuesday's regular trading session at $26.28 on Nasdaq.

International Business Times, The Global Business News Leader