Adobe Systems CEO Touts 'Textbook Transition' To Cloud
Adobe Systems (ADBE) has earned rave reviews for its successful transition to a cloud computing business model from the legacy business model of selling perpetual-license software.
Under CEO Shantanu Narayen, Adobe has evolved from a provider of mostly desktop software for creative professionals (think Photoshop and Illustrator) to a full-service provider of digital media and marketing software and services.
San Jose, Calif.-based Adobe is a key player for consumer-facing companies working to digitally transform their businesses. Adobe brings together content-creation tools with data insights — allowing companies to determine such things as which online marketing and advertising campaigns work best and how people are engaging with their content.
After a five-year run-up to a record high of 111.09 on Oct. 24, Adobe stock has plateaued the past two months. It's stayed above its 200-day moving average since March, but has been tested at the 50-day support level since early November. Adobe stock closed Friday at 102.95, down a fraction.
Narayen recently spoke with IBD about industry trends and his thoughts on the year ahead:
IBD: How is Adobe helping companies digitally transform their operations?
Narayen: When people think about digital transformation, among the things they think about is what's the customer journey and how do we map out that customer journey across all of the channels?
Once we map out all of that customer journey across all of the channels, what's the segmentation of the customers that we're trying to target? And what are the campaigns we have to run in order to attract these customers? What's the experience they get when they interact with us?
On the digital marketing side: enabling all of those digital experiences across all touch points — web, mobile apps, in-store devices. All of that is being delivered through digital marketing. But all of that content is being created through digital media.
One of the things we say is: We're helping people make, manage, measure, monetize and mobilize that experience. The digital media side helps with the making and the managing in many ways, and the digital marketing helps in the monetization, measurement and mobilization of that experience.
IBD: Is Adobe becoming more of a business intelligence company, helping enterprises make better decisions using all the data available nowadays?
Narayen: We definitely believe that data is going to be more important. If you go back and look at why we bought Omniture in 2009, we said, "We're going to be the Big Data company for marketers."
A big part of our technology agenda is all about: How do we normalize this data? How do we get insights from the data? How do we make it actionable for the enterprise to use that data in a pleasing manner for their customers?
IBD: Where does Adobe's recently completed acquisition of advertising software platform provider TubeMogul fit in?
Narayen: We have always been very bullish about video. For many years we have been saying that video is going to completely move to IP(internet protocol)-based networks.
Adobe already has a leadership role on the video-content creation side with products like Premiere and After Effects. And we have a product called Primetime for the delivery and monetization of video content.
IBD'S TAKE: The good news, Adobe ranks No. 1 in its industry group. The bad news, it's group ranks low. See what else you can learn about Adobe, or any stock, at IBD Stock Checkup.
TubeMogul beefs up Primetime in that it becomes more of a one-stop shop for publishers and advertisers to monetize their video assets.
IBD: You must be proud of the successful transformation of Adobe over these past few years.
Narayen: I have to acknowledge and thank the incredible execution effort by Adobe employees. Externally, it has been written up as the textbook of transitions. Everybody now is trying to use our playbook. But it's the execution that sometimes gets taken for granted.
We always had the right motivation, which is: How can we innovate at a faster pace? How can we aggressively acquire new customers and how can we continue to build a more predictable and recurring revenue stream?
Customer satisfaction for our creative products is significantly higher because people know that as soon as there's a change in the environment Adobe is going to do it now rather than the traditional 12- or 18-month cycle (for the release of a new version of perpetual license software).
As a product company focused on delivering innovation, as long as we can continue to have innovation front and center, everything else takes care of itself.
We're in rarefied atmosphere in terms of companies that have the kind of top-line growth and bottom-line profitability and cash flow that we have.
IBD: What can Washington do to support the tech industry?
Narayen: The two things that would be top of mind for me are continued promotion of R&D and innovation, and looking at corporate competitiveness and taxation globally.
We've had a history in this country of promoting R&D and innovation. As long as we can continue to promote R&D and innovation, that would be a good thing from the new administration.
The second issue that's important to me is competitiveness, for ourselves and as a country, and corporate taxation. We continue to be one of the more heavily taxed countries. Like many tech companies, we have a lot of our funds offshore. So bringing that back and using that to drive more innovation and jobs in our country is near and dear to our heart at Adobe.
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