Even with recent unpopular changes to its CS licensing, Adobe Systems (NASDAQ:ADBE) remains confident in its ability to attract subscribers to its Creative Cloud. In fact, the company ended its fiscal year with subscriptions nearing 1.5 million, even after their latest version became a subscription-based business model. As expected, after closing in excess of 1,000 Creative Cloud enterprise contracts (normally a 3-year agreement) users suggested Adobe make adjustments. This is according to studiodaily.com's Bryant Frazer.
Adobe responded by saying the Creative Cloud offering will "continue to grow." Adobe President and CEO Shantanu Narayen said during a conference call to investors "customer satisfaction (with Creative Cloud) is high based on our surveys." "In addition to paid members, we currently have millions of customer in the pipeline who are trying out the service."
But Adobe's competitors are making moves to expand their customer base by providing Adobe's possibly concerned customers with an easy alternative. According to Keeley Byrnes at teachucomp.com, Corel began offering former Adobe subscribers exactly what they were missing in hopes of gaining their business loyalty. Corel's general manager, Neil Davies said "we've put in place our outreach program to users saying "hey, come try us." While Adobe was making not so popular changes, Corel kept its eye on blogs and forums, reading the complaints of Adobe's customers. They even went so far as to setup a special page for former Adobe users.
The software company, Xara, saw an opportunity to gain Adobe customers as well. Their current promotion offers $100 off for Adobe Creative Suit customers, which drops the total price of Xara Design Pro to $199. Xara's expectations are that this, combined with a new upgrade set to be released soon is enough to persuade some of Adobe's customers over to their side. More proof is their marketing director Charles Moir's statement "people taking up the cross-grade offers roughly doubled in May compared to previous months."
Quark also seized the opportunity, they set out to make their digital publishing software more attractive to Adobe's professional customers. Quark's vice president of marketing Gavin Drake said "I was somewhat taken aback by the size and swiftness of the backlash." "Adobe has been doing all sorts of things for a number of years and customers seem to have gone along with that, but this time there's loud opposition."
So where does Microsoft (NASDAQ:MSFT) fit into the picture? Maybe nowhere, but in a good way. According to Mark Hachman at pcworld.com Microsoft reported record first-quarter revenue in excess of $18.5 billion, which surprised even Microsoft. Their chief financial officer, Amy Hood said that number was better than the company originally expected. Like Adobe, Microsoft charges for its applications, namely their Office 365 which is comparable to Adobe's Creative Cloud.
If Microsoft has its sights set on Adobe's unhappy customers, they have certainly been quiet about it. In the face of all this, it doesn't appear as though Adobe is worried, not about their competitors actions or their own initial loss of customers. This, even as their net income for the 2013 fiscal year fell to $290 million (on revenue of 4.1 billion) from $833 million (on revenue of 4.4 billion) in the previous year.
Of course Adobe has expressed confidence that many more subscribers will soon come onboard, and their revenue will take a turn for the better. Adobe's financial goals for 2014 are conservative, projecting flat revenue for the coming fiscal year. Adobe's experts weren't so conservative when talking about Creative Cloud, predicting its subscriptions will more than double to 3 million by the end of 2014.
Fool contributor Tyrone Cousin has no position in any stocks mentioned. The Motley Fool recommends Adobe Systems. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.