Adobe 3rd Quarter Financials

[Patricia Sheley]

http://www.adobe.com/aboutadobe/pressroom/pressreleases/201209/Q312Earnings.html

[Eric Myrvaagnes]

Sounds very upbeat and optimistic. But note that it is for the period ending before they announced termination of the "perpetual license" CS suite.
I'll be curious how the next quarter turns out. If it is just as cheerful, then we'll know that the complaining photographers on LuLa really are a tiny drop in the bucket for Adobe.

[Patricia Sheley]

Sounds very upbeat and optimistic. But note that it is for the period ending before they announced termination of the "perpetual license" CS suite.
I'll be curious how the next quarter turns out. If it is just as cheerful, then we'll know that the complaining photographers on LuLa really are a tiny drop in the bucket for Adobe.

“We’re on a path to drive millions of subscribers to our Creative Cloud offering,.....

........failure to successfully manage transitions to new business models and markets,......

[Bart_van_der_Wolf]

I'll be curious how the next quarter turns out. If it is just as cheerful, then we'll know that the complaining photographers on LuLa really are a tiny drop in the bucket for Adobe.

Hi Eric,

In my experience as a former business analyst, that's exactly the type of error that people (like Adobe's senior management) make. I'm hearing from a lot of people, that they quickly bought a final Photoshop CS6 perpetual license (BTW after searching long and hard for the link), in order to buy some time to transition away from Adobe which they decided to do. That also sends a signal to Adobe as if the change in course was a financial success, while the exact opposite is happening under the surface.

These scenarios take at least a year to show the actual impact on a company, also because the introductory discount from the inflated new rates will reveal their full effect on the subscribers.

Cheers,
Bart

[RFPhotography]

"During the quarter, the Company drove faster adoption of Creative Cloud subscriptions than originally projected."

Looks like perhaps objection to the subscription service may not be that significant.

Bart, don't put too much faith in internet histrionics.  What's being seen here at LuLa, and other places, such as the chicken little sky is falling petition at Change.org, is a very vocal minority.

You're right that it will take at least a full cycle for the full effects to be seen but to suggest that the execs at Adobe haven't given the switch careful consideration is simply wrong.  Companies don't take decisions like this lightly.  There will have been much work done in projecting results under various scenarios.  Eric has said in another thread that he'll do his best to make sure execs are apprised of the backlash here at LuLa.  I would expect that those execs have already considered and expected this type of reaction from some users.

[Isaac]

“We’re on a path to drive millions of subscribers to our Creative Cloud offering..."

That public statement was made nearly 8 months ago, when both CS and CC were available:

"During [Q3 FY2012], the Company drove faster adoption of Creative Cloud subscriptions than originally projected. As Adobe customers migrate from a legacy Creative Suite perpetual licensing model to new Creative Cloud subscriptions, revenue is recognized over time as opposed to at the time of purchase.  This over achievement in subscriptions during [Q3 FY2012] effectively transitioned approximately $29 million more perpetual revenue than expected to Creative Cloud."

"...failure to successfully manage transitions to new business models and markets..."

Also verbatim in the "Forward-Looking Statements Disclosure" paragraph of the Q3 2010 statement, and the Q3 2005 statement, and ...



Instead, you could have chosen quotes from 2 months ago, Q1 2013

-- "Adobe ended Q1 with 479 thousand paid Creative Cloud members, an increase of 153 thousand when compared to the number of members as of the end of Q4 fiscal year 2012."

[Bart_van_der_Wolf]

"During the quarter, the Company drove faster adoption of Creative Cloud subscriptions than originally projected."

Looks like perhaps objection to the subscription service may not be that significant.

Bart, don't put too much faith in internet histrionics.  What's being seen here at LuLa, and other places, such as the chicken little sky is falling petition at Change.org, is a very vocal minority.

You're right that it will take at least a full cycle for the full effects to be seen but to suggest that the execs at Adobe haven't given the switch careful consideration is simply wrong.  Companies don't take decisions like this lightly.

Hi Bob,

That's what I like to believe as well. However, studies have revealed something else. If you're interested in such things, there is a interesting book called "Snakes in Suits" which explains how charismatic leaders of large corporations often suffer to a degree from psychopathic disorders, which makes them so charismatic. They can take bold decisions, because they lack the ability to be slowed down by potential negative consequences. They are perceived by others as people who achieve things, dare to take big decisions. However the achievements can also go terribly wrong (because nobody dared to warn the charismatic leader, why would they, how could he/she be wrong, such a dynamic figure?).

There will have been much work done in projecting results under various scenarios.  Eric has said in another thread that he'll do his best to make sure execs are apprised of the backlash here at LuLa.  I would expect that those execs have already considered and expected this type of reaction from some users.

Another lesson I learned, never underestimate the power of the herd. People can only oversee their direct influencers, who in turn may be following the leader .... A similar thing happens in forensics where evidence is sought to support a supposition, even if the supposition is proven wrong afterwards (too bad if the verdict is death penalty).

But, enough psychology for now.

I have a lot of respect for people like Eric, but they are victims as well. One can only hope that the voice of reason is heard.

Cheers,
Bart

[Bart_van_der_Wolf]

And on the topic of pricing, afterall that's going to define the revenue part of the profit and loss statement:
http://www.youtube.com/watch?v=78yigV0GYGQ&feature=youtu.be

Cheers,
Bart

[Bart_van_der_Wolf]

Seems to be an official governmental petition site (don't know about US politics, so I'm asking)?

https://petitions.whitehouse.gov/petition/ask-doj-investigate-adobe-systems-inc-recent-announcement-change-its-software-license-subscription/TfWzqjHQ

Cheers,
Bart

[Schewe]

Seems to be an official governmental petition site (don't know about US politics, so I'm asking)?

Naw, it's the Whitehouse petition site so it's political, not governmental. Use to generate petitions to influence the President. Note likely to generate much heat.

[Bart_van_der_Wolf]

Naw, it's the Whitehouse petition site so it's political, not governmental. Use to generate petitions to influence the President. Note likely to generate much heat.

Hi Jeff,

That's why I was wondering, as it is on a .gov domain. So if it is political, then how does that work? Bipartisan?

Cheers,
Bart

[RFPhotography]

Bart, in various former lives I've worked closely in CEO/CFO positions so am certainly aware of that mindset you reference.  But having formerly been in senior management roles (e.g., Treasurer, VP Finance level responsibilities), I also am well aware of what goes on in the planning of these types of businesses and in business model changes.  

WRT the Adobe CEO not directly answering questions about software pricing in Oz, Adobe isn't alone in that practice.  We have had similar situations here in Canada.  Up until the last couple years camera bodies and lenses were far more expensive here than in the U.S. even after factoring in exchange rate and tax differences.  I've saved literally thousands of dollars over the years buying from the U.S and having stuff shipped to Canada.  I saved $900 alone on a Sigma 100-300 f4.  Bodies are now about on par but lenses are still cheaper in the U.S.  I was looking at an Atomos Ninja 2 on B&H recently and the price is down to $695.  Here in Canada at Vistek; which is probably the best pro shop we have, it's $850.  The recorder w/ 240GB SSD is $880 at B&H and $1089 at Vistek. Makes no sense.

As far as I know, Obama set up the petition site sometime after he took office.  If a petition gets a minimum number of votes there's a requirement that it be taken to the president.  From there, the White House decides if it will take any action or not.  Wouldn't hold my breath on this one even if it does get the minimum number of signatures.  Anyone can post a petition on the site.

[Bart_van_der_Wolf]

Bart, in various former lives I've worked closely in CEO/CFO positions so am certainly aware of that mindset you reference.  But having formerly been in senior management roles (e.g., Treasurer, VP Finance level responsibilities), I also am well aware of what goes on in the planning of these types of businesses and in business model changes.  

WRT the Adobe CEO not directly answering questions about software pricing in Oz, Adobe isn't alone in that practice.  We have had similar situations here in Canada.  Up until the last couple years camera bodies and lenses were far more expensive here than in the U.S. even after factoring in exchange rate and tax differences.  I've saved literally thousands of dollars over the years buying from the U.S and having stuff shipped to Canada.  I saved $900 alone on a Sigma 100-300 f4.  Bodies are now about on par but lenses are still cheaper in the U.S.  I was looking at an Atomos Ninja 2 on B&H recently and the price is down to $695.  Here in Canada at Vistek; which is probably the best pro shop we have, it's $850.  The recorder w/ 240GB SSD is $880 at B&H and $1089 at Vistek. Makes no sense.

Hi Bob,

I can even understand some of it from the standpoint of requiring a local service organization, dealer or other reseller discount structure, taking care of a warranty structure and e.g. spare-parts for a 10-year lifecycle, training of technicians who work at local rates, and replacement products for high key / gold-card members, distribution cost at higher petrol prices, Value Added Tax or State Tax, you name it.

But for a downloadable software product? Do they translate the Australian help files to colloquial language, like "hey mate, since you won't bugger off, here's something to keep you informed", or what?

It seems like Adobe have dug themselves another hole ...

European pricing is also not a simple calculation of exchange rate (+ 23% Value Added Tax, if not a registered company). I wonder what will happen next, after e.g. a €497 million (US $794 million or £381 million) fine plus obligations to amend policies, for Microsoft ...

Maybe that explains the price increase, the cost of maintaining a virtual monopoly, including sanctions?

Cheers,
Bart

[Alan Klein]

“We’re on a path to drive millions of subscribers to our Creative Cloud offering, as well as build a billion dollar SaaS business in Digital Marketing,” said Mark Garrett, executive vice president and CFO of Adobe.  “This will drive higher long-term growth and create a large recurring revenue stream.”

They're "driving" us towards a "recurring revenue stream".  Like a heard of cattle to market.  Feel used?  Anyway, what's SaaS?

[Schewe]

That's why I was wondering, as it is on a .gov domain. So if it is political, then how does that work? Bipartisan?

Bipartisan? In the USA? naw, it's whatever party controls the Whitehouse...

Just as not all .org sites are not for profit, not all .gov sites are governmental. There is nothing bipartisan on the whitehouse.gov site...although people from either political party can draw up petitions. And, I believe the site is payed for by the government, not by a political party.

[RFPhotography]

Alan, SaaS=Software as a Service.  True cloud computing follows the Saas model.  No software is resident on the client's computer, it's hosted by the vendor and accessed via the web.  In the 'old' days of servers it used to called a 'zero-client' or 'thin client' model.  The software was all on the server and accessed via the wired network.  SaaS is not what Adobe is doing with the Creative Cloud.

[Isaac]

They're "driving" us towards a "recurring revenue stream".  Like a heard of cattle to market.  Feel used?

No, it's business-school-speak.

Adobe are free to offer or not-offer whatever products or services they think will work for them, and we're free to accept or decline what they offer.

Many people did decline Adobe's previous PS upgrades -- should Adobe feel used? ;-)

[RSL]

No, Isaac, Adobe shouldn't feel used, but once they launch their new approach with Photoshop I suspect they'll find that in a free market people vote with their feet. One problem they're going to have is the fact that CS6 already contains so much capability that for most of us it's enough. For a very long time, just on principle, I've been keeping up with Photoshop upgrades as they come out even though I don't really need the new features. I'm now going to have to revisit that decision. I see that Thom Hogan is facing the same conflict. It'll be interesting to see which way he flops. I suspect a lot of people will flop with him.

[RFPhotography]

No, Isaac, Adobe shouldn't feel used, but once they launch their new approach with Photoshop I suspect they'll find that in a free market people vote with their feet. One problem they're going to have is the fact that CS6 already contains so much capability that for most of us it's enough. For a very long time, just on principle, I've been keeping up with Photoshop upgrades as they come out even though I don't really need the new features. I'm now going to have to revisit that decision. I see that Thom Hogan is facing the same conflict. It'll be interesting to see which way he flops. I suspect a lot of people will flop with him.

Because they're such simpering, wimpering puddles of indecision?

[Isaac]

even though I don't really need the new features

Sounds like revisiting that decision would be A Good ThingTM for you.