Adobe Counting On Digital Marketing Growth

| About: Adobe Systems (ADBE)

In a survey of 253 marketers for U.S.-based companies earning more than $500 million in annual revenues, Gartner found that digital marketing budgets accounted for 2.5% of their revenues. These marketers were looking to increase their digital marketing budgets for this year to 9% of revenues. Digital publishing company Adobe (NASDAQ:ADBE) is focusing on this digital marketing growth.

Adobe’s Financials

Adobe’s Q4 revenues fell 10% over the year to $1.04 billion, ahead of the market’s projections of $1.03 billion. EPS of $0.32 was in line with the market’s projected earnings for the quarter.

Adobe’s subscription-based revenue grew 85% to $359.7 million as they added 402,000 paid creative cloud subscriptions over the quarter to 1.4 million. Product sales fell 33% to $567.2 million.

The company ended the year with revenues of $4.06 billion compared with $4.40 billion a year ago. EPS of $0.56 also fell from $1.66 a year ago.

For the current quarter, Adobe expects to earn revenues of $0.95-$1.00 billion with an EPS of $0.22-$0.28. The market was expecting revenues of $1.02 billion and EPS of $0.33. Adobe projects to end the fiscal 2014 with revenues of $4.06 billion and earnings of $1.10 per share. The market was looking for revenues of $4.35 billion and EPS of $1.61. For fiscal 2015, Adobe projected earnings of $2.00-$3.00 per share compared with analyst forecasts of $2.30-$3.48 per share.

Adobe’s Marketing Offerings Grow

Adobe continued its digital marketing expansion through acquisitions. It recently announced the acquisition of Atlanta-based Search Discovery’s tag management software business, Satellite. Satellite’s tag management software enables organizations to track and manage their website thus helping marketers to install third-party software to personalize websites, analyze traffic and take steps needed to improve sales and traffic. Through the acquisition, Adobe will be able to extend the tag management solution to its suite of marketing software including analytics and content management systems. Analysts believe that the addition of Satellite is also helping Adobe expand their marketing services offerings. Terms of the deal were not disclosed.

Recently, Adobe also released additional capabilities for Adobe Analytics to expand the Adobe Marketing Cloud’s offerings. The upgrades will help marketers and data analysts to better understand data and thus take measures to improve business results. The upgrades include features like the predictive analytics which helps marketers and data analysts to uncover critical insights by detection of anomalies, advanced real-time reporting to help marketers visualize data at a granular level on a real-time basis, Data Visualization Upgrades that enables marketers to filter streams of data to isolate key metrics and mobile analytics to analyze mobile device–based marketing offerings.

Overall, the market is pleased with Adobe’s continued adoption of the cloud. It is always tricky to go from a licensed revenue business model to a subscription-based cloud services model. Adobe is doing a reasonable job with this transition. The stock is trading near 52-week high levels of $60.89, with a market capitalization of $30.55 billion.