Adobe Flashes Resilience: Best in Class
SAN JOSE, Calif. (TheStreet) -- Apple (AAPL) - Get Report may have publicly shunned Adobe's (ADBE) - Get Report Flash technology by deciding not to offer it on the iPad and iPhone, but Adobe still has plenty of fans on Wall Street. How many people go a day without using at least one of Adobe's technologies?
Hot on the heels of
, the multimedia specialist unveiled its new
Creative Suite (CS) 5
technology last week, and is getting plenty of analyst love.
Wall Street expects Adobe to bring in revenue of $3.72 billion and earn $1.83 a share this fiscal year, although at least one analyst thinks this could be a conservative estimate.
"We think
CS 5
will help Adobe generate more revenue and earnings than the consensus currently expects," wrote Pat Walravens, an analyst at JMP Securities, in an email to
TheStreet
. "Adobe can generate these results despite the spat with Apple."
Apple, which supports Flash on its Macs, has
repeatedly voiced its concern about the prospect of Flash on iPhones
, questioning the
software's performance
. Steve Jobs himself reiterated this stance during the recent launch of the new iPhone OS, apparently nixing the possibility of Adobe and Apple living happily ever after.
Adobe did not respond to
TheStreet's
request for comment on this article, although a recent SEC filing by the company acknowledged that Apple's decision around iPads and iPhones could damage its business. CEO Shantanu Narayen nonetheless played it cool during a recent Adobe earnings call.
"It's an Apple issue and I think you'll have to check with them on that," he said, in response to an analyst's question. "We are committed to bringing Flash to any platform on which there is a screen, and it has nothing to do with technology -- I think you've seen demonstrations of Flash running on smartphones from multiple vendors."
Apple, of course, wants to steer developers towards its own application base, although its strategy could actually work in Adobe's favor.
"Jobs' 'my way or the highway' attitude has provided some of Apple's most formidable competitors (
Microsoft
(MSFT) - Get Report
,
(GOOG) - Get Report
,
Hewlett-Packard
(HPQ) - Get Report
,
Dell
(DELL) - Get Report
and many others) a chance to differentiate their products by supporting Flash as they've always done," wrote Charles King, an analyst at Pund-IT, in an email to
TheStreet
. "And it's a great day for any vendor to have some of the biggest names in the business rally voluntarily to its support."
H-P, for example, has already trumpeted the Flash capabilities of its forthcoming
and Adobe is working with a slew of mobile operating systems, including
Android
and Windows Phone 7.
Named after the Adobe Creek in Los Altos, Calif., Adobe made its name with the PostScript printer language back in the early 1980s, but is now synonymous with rich media Internet apps. In addition to Flash, other popular Adobe technologies include Portable Document Format (PDF), Dreamweaver and Acrobat.
Last year technology research firm ComScore reported that Flash is installed on more than 98% of Internet-enabled desktops and said that around 75% of online videos are viewed using the technology. More than 90% of creative professionals use the company's Photoshop software on their desktops, according to Adobe.
"Adobe is very clearly positioned as a leader in technology for the long term," Joel Fishbein, an analyst at Lazard Capital Markets, told
TheStreet
. "Adobe has created the standard
for multimedia software -- most enterprises have adopted Flash."
The firm beat Wall Street's first-quarter estimates last month and gave bullish guidance, suggesting that there is more upside ahead. Adobe's Acrobat and
Omniture
products helped drive its growth and Narayen noted more stable demand for the company's creative offerings.
"I think they are an extremely well-run organization," said Lazard's Fishbein. "They have got a good recurring revenue base, strong revenue growth, and deliver significant cash flow, which are all characteristics of companies that people like to invest in."
During the first quarter, Adobe enjoyed 9% year-over-year revenue growth, and generated $260 million of cash from operations. The software maker, which has a market cap of $17.9 billion, also exited the quarter with $2.7 billion in cash and investments.
Recent Adobe
suggests that investors see limited near-term upside, although the firm has been cited as a long-term play.
Adobe's stock has risen just over 35% during the last 12 months, and is trading around $33.50. While Adobe has not experienced the meteoric share growth of, say, Apple, it does have a healthy P/E ratio of almost 50. Microsoft, and Apple, in contrast, have P/E ratios of 17 and 23.68, respectively.
"I do like
Adobe's long-term positioning in the market, but I think that patient investors could get a better entry point," said Lazard's Fishbein, adding that Apple may eventually offer Flash on iPhones and iPads. "My personal belief is that Apple will at some point be forced to adopt Flash -- I think that the market will demand it."
-- Reported by James Rogers in New York
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