Bulls will argue that Neolane is posting 40% revenue growth, but so what. I can give Neolane all of the credit it deserves, but it still pales in comparison to the offerings of Oracle ( ORCL) and Salesforce.com ( CRM) -- two giants with similar (and perhaps better) marketing capabilities. And the idea that this acquisition suddenly catapults Adobe as a threat to either of these companies is premature, if not entirely far-fetched.
I'm not just here beating up on Adobe. On more than one occasion, I've applauded the progress that the company has made. And given how well customers -- both current and new -- have embraced the company's new cloud platform, which now totals more than 700,000 paid subscribers, I can tell you that the transition has gone better than expected. But that's not the whole picture. There's still the issue of profitability to deal with. Let's not forget that in the June quarter, the company posted a 2% drop in GAAP gross margin, while GAAP operating income plummeted by more than 60%. The Street, meanwhile, does not seem to care. Betting that Adobe would eventually get its house in order and overcome these challenges, investors have rewarded Adobe with a P/E of 43, which includes year-to-date gains of 30%. Look, I'm not saying that this level of confidence is unjustified. But, given the many simultaneous directions in which Adobe is heading, I just don't believe there are enough data at the moment to suggest that this stock should go any higher. At the time of publication, the author was long AAPL. Follow @saintssense