Adobe closed a challenging year with a set of numbers that certainly surprised the market, including revenue that was up 11% to $4.2bn, topping its growth target of 10% for the year.
When you consider that just a month ago or so it announced it was cutting 7% of its global workforce, that it had effectively given up on Flash for mobiles in the face of widespread adoption of HTML5 (see Adobe’s mobile Flash fades out), and that it is transitioning to a cloud model, the results are unexpected. Digital media and digital marketing were called out as being boosters, particularly for Q4, and these are the products will be the foundation of Adobe as it moves forward.
So how did the numbers stack up? For the period ending December 2 2011, operating income in fiscal 2011 was $1.1bn up from $993m in fiscal 2010 but the margin remained the same at 26.1%. Net income was $833m vs. $775m.
Q4 delivered $1.5bn revenue, a 14% increase. Operating income was £246m, 21.4% of revenue, which is a fall on the 28.5% of the year ago quarter. Net income came in at $173.7. Q4 saw a $94m restructuring charge, which dented income. Fears that sales would suffer in Q4 in particular as customers waited for cloud versions of Adobe’s offerings were unfounded but the drop in operating margin needs watching especially as the company moves further into the cloud and a subscription-based revenue model.
During the results conference call Adobe president and chief executive Shantanu Narayen’s comment that “we have successfully transformed Adobe several times in the past” was interesting – a track record in managing this type of change could prove invaluable, even if it doesn’t detract from the overall risk.
Weighing up Adobe’s performance you have to say it does have a handle on the change. However, it is only forecasting revenue growth of 4% to 6% for fiscal 2012 as the move to cloud-based software and subscriptions is expected to hit licence revenue, particularly server licence revenue. 2012 will remain as challenging as 2011 in its own way.