Adobe achieved record revenue of $655.5 m for fiscal Q1 2006, compared to $472.9 m for fiscal Q1 2005. On a year-over-year basis, this represents 39 percent revenue growth. However, Adobe's Profit dropped by 31% and this is attributed to its recent Macromedia acquisition expenses .
Overall I am not too worried about weaker profits. According to Bruce Chizen, Adobe's CEO, the company expects to ship Adobe Creative Suite 3 sometime in second quarter of 2007 when the integration in Adobe's and Macromedia products would come out really strongly.
Adobe, I believe, will grow extremely strongly once the acquisition settles down and integration of products gets completed. There are few companies that serve the graphics software niche as well and as strongly as Adobe does. Adobe has a top-notch line of Creative Products in the Print and Web Graphics segments that would turn competitors like Quark, Microsoft, and Corel purple with jealousy.
I expect huge customer migrations to Adobe when an Integrated Suite is released that could have best-of-breed products like Photoshop, Flash, Illustrator, Dreamweaver, Fireworks, InDesign, and Acrobat in one box! Most creative professional customer would choose such a suite instead of taking limited offerings from Quark (QuarkXPress) or Corel (Corel Draw Suite).
Though Microsoft is preparing to release several products and technologies like Sparkle (dubbed by some as a "Flash-killer"), Metro (PostScript and PDF competitor), and Expression Studio it lacks the maturity and "Pro" image that Adobe has in the Graphics Industry.
Combined with the strength of its products, Adobe has a richly experienced Management team (under the leadership of Bruce Chizen and Shantanu Narayen) that understands Adobe's core Graphics Industry very well. What is equally important is that several members of the core management team at Macromedia (such as Stephen Elop, David Mendels, Kevin Lynch etc.) stayed on with Adobe post-acquisition and ended up on its Executive team. Few companies can boast of such a well-managed acquisition at the top management level.
Microsoft meanwhile has failed repeatedly trying to enter the Graphics segment, Quark seems to be a off-color for long, and Corel has been sold and bought over two times now! All-in-all I see a great future for Adobe.
