Adobe Moves Into Tablet and Cloud Markets

• Company: EMC
• Headquarters: San Jose, Calif.
• Employees: 10,000
• 2010 Revenue: $3.8 billion
• CEO: Shantanu Narayen
• What They Do: Adobe offers software for creative tasks such as editing photos and drawings, designing magazines and other printed products, and creating rich Internet applications. The company also has enterprise software for Web content management, Web traffic analysis and workflow.

The Pitch

Adobe President and CEO Shantanu Narayen says the company will focus on providing software and services for creating, managing and marketing digital media. “Every business must rethink their online presence, making it more dynamic and more social,” Narayen says.

The company already has a market-leading set of tools for digital creativity, including Photoshop, Illustrator, Dreamweaver, Flash and InDesign. Adobe’s Flash platform for rich Internet applications gets the lion’s share of media attention, but actually “the majority of [Adobe’s] revenues [come] from commercial products like Photoshop and Creative Suite,” says Charles King, principal analyst at Pund-IT.

Adobe has been aggressively moving its software onto portable platforms such as tablets and offering its software as cloud services. Adobe LiveCycle Managed Services already offers hosted workflow software, and Adobe Creative Cloud is expected to go live in early 2012.

The Catch

“Adobe is a company that is in transition in several parts of its portfolio,” says IDC analyst Al Hilwa. Perhaps the biggest challenge Adobe faces is with its Flash multimedia platform, acquired when it purchased Macromedia in 2005. Flash is installed on over 98 percent of the world’s desktop computers, but the World Wide Web Consortium has developed a set of HTML5 standards that emulate much of Flash’s functionality, allowing developers to build rich Internet applications that don’t require the Flash plug-in.

In November, the company said it would stop developing Flash for additional mobile platforms and instead focus on developing cross-platform HTML5 tools for these devices (the company will continue to develop Flash for desktops, however).

Adobe is admitting defeat with Flash, argues Jack Gold, of analyst firm J.Gold Associates. The success of Flash depends on it being available on all consumer platforms, thus allowing developers to build their apps only once. But maintaining cross-platform compatibility was easier before the current proliferation of smartphones and tablets.

As Adobe pivots from Flash to HTML5, it also must play catch-up in the enterprise market. “One thing Adobe does well is embracing design and creativity,” notes analyst Irina Guseva at Real Story Group. “One thing Adobe doesn’t yet do well is sell enterprise software.”

The Score

Despite market turmoil, Adobe is in a good position to offer premium tools for digital media. “As HTML5 takes off, Adobe is in an enviable position to leverage it with its upstream Creative Suite assets, which are used to create the graphics and images that make the Web what it is,” Hilwa notes.

Moreover, Flash is far from dead. “Flash is a mature platform, while HTML5 is still in its early stages,” King says. “Flash remains the audio-video platform of choice for browsers. That’s crucial for developers who, after all, make a living by reaching the broadest possible audience.”

On the HTML5 front, Adobe has released a preview edition of its HTML5 editor, which is called Adobe Edge. “Ultimately what matters is not the technology, but what you can do with it,” says Arno Gourdol, director of engineering for Adobe Flash. “We will have the best HTML5 tools in the world.”