MSFT) experienced with its Office 360 subscription, analysts had doubts that Adobe would make its transition as well as it has. Microsoft was looking for a cloud-based subscription model to save on distribution costs and make it easier for users to update their software. Likewise, Adobe saw this conversion as inevitable. The only question was how long the transition would take. Not only have customers responded favorably to the subscription model, but management's acrobatic moves have brought new life to Adobe's Creative Suite franchise, which added 153,000 Creative Cloud service customers in the first quarter.
On the earnings conference call, management said the company expects to reach 1.25 million paid subscribers by the end of this year. That's an aggressive target, considering that the company ended the first quarter with 479,000 subscribers. Adobe has about 2 million users on free trial. Companies don't set goals they don't feel is really achievable. And so investors can expect roughly 775,000 additional paid subscribers by the end of the year, which amounts to roughly 260,000 per quarter. That is an important number to keep an eye on in Tuesday's earnings report. ORCL) and Red Hat ( RHT) have experienced, investors will be eager to hear what Adobe's management says. What's more, since the first-quarter report, the company's chief technology officer, Kevin Lynch, left to join Apple ( AAPL). Other questions will be answered in the second-quarter report, and so investors will learn whether the company can maintain its momentum. In the meantime, there is no debate about the quality of Adobe's management team and the direction it is taking this company. I still rate the stock a strong buy and expect shares to reach $50 in the second half of the year. At the time of publication, the author was long AAPL and held no position in the other stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.