Adobe adds online subscribers as sales top estimates
Adobe Systems Inc. added online subscribers at a faster-than-projected clip, as the company attempts to return to growth by selling Internet subscriptions for applications like Photoshop.
The jump in customers for Adobe's Creative Cloud Web-based software was 405,000, bringing the total to 1.84 million and exceeding analysts' estimates. The online subscriptions grew as sales dipped less than 1 percent to $1 billion. Profit excluding certain items dropped to 30 cents a share for the period ended in February, the company said in a data sheet published before the market close. That topped analysts' average estimate of 25 cents a share on sales of $973.1 million.
Like fellow software makers such as Microsoft Corp., Adobe is adjusting its business to attract customers who increasingly do their computing online and on mobile devices. To reignite growth, Chief Executive Officer Shantanu Narayen is shifting the largest maker of graphic-design programs away from selling desktop software to Internet sales of applications such as Photoshop, Illustrator and Dreamweaver.
"It's moving from a purchase model to a rental model -- subscriptions are essentially a rental," said Jay Vleeschhouwer, an analyst at Griffin Securities, who has a buy rating on Adobe stock. He said the shift to subscriptions will make Adobe's business more predictable because sales won't depend on customers periodically upgrading to new versions of its software.
The San Jose, Calif.-based company's software is used for building websites, mobile applications and editing photos. Profit has suffered as Adobe transitions from selling versions of the desktop software priced as high as $2,600 to subscriptions for its Creative Cloud software that cost $50 a month. The company has predicted it will have 4 million subscribers by the end of 2015.
Before the results, Adobe's sales had fallen four consecutive quarters, with analysts not predicting revenue to increase until the quarter ending in August. Net income had slid for four consecutive quarters.
The shares rose as high as $70.24 following the disclosure of its results. Shareholders have shown optimism that Adobe can make the transition to online subscriptions, with shares rising about 67 percent in the past year.