A big bet on flash
Adobe's strategy has kept the wind in its sails for over 15 years.
(Fortune Magazine) -- The software business is littered with the corpses of highfliers that crashed. But Adobe Systems, which made the Fastest-Growing list in 1991, has avoided that fate. In fact, thanks in part to its $3.4 billion acquisition of Macromedia in December, the Silicon Valley icon is looking positively sprightly.
Long known for the professional content- design tools such as Photoshop, Illustrator, and Acrobat that powered it through the 1990s, Adobe has hitched its future growth in large part to Macromedia's Flash. Flash consists of an editing tool, a server, and the ubiquitous Player, now installed on almost all personal computers in the U.S. as well as on a growing number of cellphones. All those people checking out videos on YouTube and MySpace -- they're using Flash. As the media world continues to go digital and production tasks for print, web, film, and television increasingly overlap, Adobe hopes to weave Flash together with its existing titles to create the essential toolkit for professional designers across all media platforms.
There's evidence the strategy is working. The first two quarters were the best ever for the company's video division -- sales of its software were up 50% -- and downloads of the most recent version of Flash are running at around five million a day. Revenues for the first six months of fiscal 2006 were $1.3 billion, up 33% over the prior year. But because that number fell short of the company's prediction, the closely followed stock is off 18% from its high this year. Still, earnings were on target, and the stock is up 26% over the past 12 months. If content is once again king, then graying Adobe, like Merlin, could prove the new kingmaker.
At a Glance