The Real Story: Much Ado About Nothing at Adobe

There's not much going on at Adobe Systems (ADBE) these days to excite investors and customers. The world's fifth-largest software company is integrating its purchase of Macromedia and is in a lull in its product cycle; new versions of many of Adobe's popular titles aren't expected until year end at the earliest and in many cases, beginning to mid 2007.

Even so, Adobe remains a Wall Street darling.

The Consensus Story: Wall Street is excited about Adobe's upcoming product cycle, including Acrobat 8 and the new Creative Suite. Additionally, the acquisition of Macromedia in December doubles the company's sales force and should increase revenue by nearly 40%. The integration of Macromedia's products into Creative Suite should make for a more robust offering as well.

The Real Story: Adobe is planning on launching Acrobat 8 in the fourth quarter. The company will wait to release the new Creative Suite until it figures out how to enhance the performance of several applications that run slowly on the new Intel-based Macs. The release will likely not happen this year. Adobe is facing increasing competition from Microsoft (MSFT), and there are some questions about management as well: CFO Murray Demo is resigning as soon as a replacement is found; curiously, CEO Bruce Chizen does not directly own any shares of Adobe stock.

This story is all about timing. Adobe has good products that are well received, especially in the creative community, and I have no reason to suspect that when the new products are released that they won't sell well. But at this point in the product cycle and considering Adobe's lofty valuation, it doesn't make sense to tie up funds that could be better invested somewhere else.

Dem Bums

Like fans of the old-time Brooklyn Dodgers, Adobe customers will likely have to wait until next year for its new Creative Suite. One of the key issues is that Photoshop and other applications run 50% slower on the new Intel-based Macs. An optimized version of Photoshop is not expected until early 2007 and Adobe will hold off releasing its new Creative Suite until those problems are solved.