Investors Business Daily (via Yahoo! Finance) published an article on Adobe’s product cycle that we believe hits the main points spot on. We have written about this several times, and are happy to say that our thesis is playing out pretty much as expected. According to Investor’s Business Daily:
A big question hanging over Adobe is how much of a dip in revenue it can expect in its creative solutions unit ahead of the Creative Suite 3 launch. Some buyers looking to upgrade might decide to wait until CS3 comes out, says Ross MacMillan, a Jefferies & Co. analyst.”No one really knows quite how sharp the deceleration is going to be ahead of the (Creative Suite 3) product cycle, particularly in the January quarter,” MacMillan said. “Everybody knows it (CS3) is coming. So how do you stimulate purchases of the existing CS2 product and the other products that sit within it, like Photoshop?”
Adobe Creative Suite 2
The funny thing about this is that a bigger dip could be the most bullish scenario, as it would indicate a higher level of demand building up in anticipation of the CS3 launch. Of course, that wouldn’t be the first time Adobe’s stock reacted in unexpected ways to news.
ADBE 1-yr chart:
Disclosure: The author owns Adobe Systems Call options.