Please ensure Javascript is enabled for purposes of website accessibility

Adobe Paints a Pretty Picture

By Kelvin Taylor – Updated Nov 16, 2016 at 4:22PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The creator of Photoshop, Acrobat, and Creative Suite continues to impress.

If a picture is worth 1,000 words, so is Adobe Systems (NASDAQ:ADBE). I managed to keep this article below that word count, but it wasn't easy when writing about this Silicon Valley tech company. Looking over Adobe's recent earnings report, it's clear the maker of the popular Acrobat document reader and photo editing software Photoshop has painted a very pretty picture.

With improved sales of its Acrobat and Creative Suite products, Adobe on Thursday posted fourth-quarter earnings per share that rose more than 33% from a year ago, beating estimates by a couple of pennies. The software maker expects a first-quarter profit of $0.45 to $0.48 per share on $445 million in revenue, and it has reaffirmed its fiscal 2005 revenue projections of $1.9 billion.

This isn't a huge surprise. Adobe has been hitting on all cylinders throughout 2004. For the fiscal year, Adobe's sales grew 29%, while net income jumped 69%. It has been a pattern for the software maker to surprise on the upside and to raise guidance each quarter. Shareholders have been well-rewarded with a stock price gain of 60% in 2004. By comparison the Nasdaq has risen only 7% year to date.

What's the secret ingredient for this successful recipe? Well, here is some food for thought. Unlike some other bubble-era companies, Adobe took a page from Microsoft's (NASDAQ:MSFT) playbook by selling as one unit a set of applications that previously were sold separately. Adobe's growth is with integrated software wrapped not in plastic, but in a marketing strategy that's being embraced by both corporate and retail customers.

An example is Creative Suite, which costs about $1,000 and includes the company's most popular software: Acrobat, Photoshop, InDesign, Illustrator, GoLive, and Version Cue. By selling integrated applications that all work well together (think Microsoft Office), Adobe is creating a design platform that gives users the tools to create, publish, and print Web-based content. The surge in digital camera sales has also given the company a boost, as demand rises for photo imaging programs like Photoshop.

Adobe is making a bigger pitch for its Acrobat software to corporate customers like IBM (NYSE:IBM), Apple (NASDAQ:AAPL), and Cisco Systems (NASDAQ:CSCO). The idea is to create a framework for the secure and low-cost distribution of digital media to boost employee productivity and improve external communications.

The moves should open up new revenue opportunities, and if Adobe's recent history of conservative financial estimates is any indicator, annual revenues should rise above $2 billion sooner rather than later. That's quite a milestone when you consider that there are hundreds of publicly traded software companies, but fewer than 20 of them pull down more than $1 billion in annual sales. I think Adobe will continue to be the picture of success.

For more Foolish talk about Adobe, check out:

Fool contributor Kelvin Taylor uses Photoshop for all his digital imaging work, but does not own shares of any of the companies mentioned.

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$237.92 (-1.27%) $-3.06
Apple Inc. Stock Quote
Apple Inc.
AAPL
$150.43 (-1.51%) $-2.31
International Business Machines Corporation Stock Quote
International Business Machines Corporation
IBM
$122.71 (-2.08%) $-2.60
Cisco Systems, Inc. Stock Quote
Cisco Systems, Inc.
CSCO
$40.66 (-1.19%) $0.49
Adobe Inc. Stock Quote
Adobe Inc.
ADBE
$284.56 (-0.87%) $-2.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.