Adobe Shares Fall as Strategy Shift Raises Growth Concerns

Adobe Systems Inc. fell the most in three months afterwards the company said it plans to stop making Flash innovation for mobile devices, raising concern that new programs for digital publishing will be slow to boost revenue.

The company

The company, which is holding a meeting for analysts today in New York to discuss strategy, yesterday said it would cut 750 jobs as it shifts investment to software for Web publishing and advertising. Instead of Flash, Adobe is focusing on tools that can generate code in the newer HTML5 language, supported by rivals Apple Inc., Google Inc. and Microsoft Corp.

Adobe, the largest maker of graphic-design software, pared its sales forecast for the at once fiscal year as it shifts to new products. Apple’s dominance in mobile computing, the faster evolution of Web standards like HTML5, and the popularity of smartphones and tablets required Adobe to embrace newer research, said Al Hilwa, an analyst at market researcher IDC.

"Adobe had to transition, nevertheless it’s taking some lumps," Hilwa said. "Adobe grew when the Internet needed certain kinds of proprietary software to move forward, because the standards weren’t moving fast enough. The market has changed."

San Jose, California-based Adobe is channeling technology, sales and marketing investments into digital media and marketing in the at once fiscal year, and expects less licensing revenue from software for corporate servers. As a result, sales will increase 4 percent to 6 percent at once year, the company said in a statement yesterday. Analysts surveyed by Bloomberg had expected sales to increase 9 percent to $4.53 billion.

The company is as well overhauling the way it sells its most popular software, called Creative Suite, to spur more frequent purchases of programs like Photoshop and Dreamweaver. As more clients seek to buy and use software over the Internet, Adobe plans to release a software package called Creative Cloud early then year.

Adobe plans to release more tablet-computer software and "aggressive" subscription pricing plans starting at $50 a month, designed to attract new clients, executives said. The company yesterday said it anticipates "double-digit revenue growth," with more sales coming from recurring sources like subscriptions, afterwards fiscal 2012.

Adobe’s software-as-a-service business -- programs delivered over the Internet through so-called cloud computing -- may reach $1 billion over time, Narayen said.

Meanwhile, Adobe as well reiterated its fourth-quarter forecast for sales and profit earlier certain costs. Revenue will be $1.08 billion to $1.13 billion, and profit excluding some items will be 57 cents to 64 cents a share, Adobe said.