Thursday, June 24, 2010

Adobe: Who's in charge here?

Sorry for making this "dump on Adobe" day, but the news that the company is porting its "zombie" audio editing application Audition, which was long ago given up for dead by most users, to Mac OSX has got me scratching my head. On Wednesday, Adobe announced much stronger revenues--up 34% from the year before, primarily from the launch of Creative Suite 5--but earnings were flat, leading investors to be concerned about future prospects for the company.

Microsoft probably has twice as many products as Adobe, but it has almost 20 times the revenues. Microsoft's profit margin is more than twice as high as Adobe's, 29.03% vs. 11.84%. (Statistics courtesy of finance.yahoo.com.) And yet, Microsoft and Steve Ballmer are coming under almost constant attack for poor management. It's true that Microsoft is milking Windows and Office, and that accounts for a good deal of its superior profit margins, but one has to look at Adobe's management as part of the problem.

There are over 90 products listed on Adobe's Product web page, and only six of them are suites (five of which are variations of Creative Suite 5.) The rest are individual software products, components, development tools, servers, and "toy apps" like Adobe Kuler. Adobe's Labs website lists 30 technologies under development, some of which are new versions or features for existing products, and some of which are entirely new products or experiments. That's a lot of products for a company with $3 billion in revenues.

Adobe could probably prune and consolidate its products, lowering the number of products offered by at least a third, while having little or no impact on revenues. The company would likely increase its profitability and dramatically improve management's ability to focus. It could start by creating two piles--one for the products in Creative Suite 5 and one for everything else, and do a bottom-up review of every product in the "everything else" pile. Then, it could look at the CS5 components themselves and determine which products can be consolidated and which add little or no value to CS5 and can be sold off or discontinued.

Right now, Adobe is like the cowboy who gets on his horse and rides off in all directions. Its inability to release a viable mobile version of Flash after years of trying, its bungling of Acrobat tools that cost the company some of its biggest eBook customers including Amazon, and now, the decision to port Audition, an all-but-dead audio editing product, to OSX, all demonstrate that there are serious problems with Adobe's management that one good quarter of CS5 sales aren't going to fix.
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