Adobe Systems is the house that desktop publishing software built, and now it helps customers create, distribute, and manage digital content in a variety of ways. Among the company's marquee brands are Acrobat, Photoshop, Flash, and Dreamweaver. Adobe serves customers such as content creators and Web application developers with its digital media products, and marketers, advertisers, publishers, and others with its digital marketing business. It not only offers products in traditional software packages but some, such as its Creative Suite (which combines many of its digital media products), are available as cloud-based versions. Adobe operates worldwide, but the US accounts for nearly half of sales.
The US is Adobe's largest market, representing about 48% of sales. The EMEA (Europe, Middle East, and Africa) region generates nearly 30% of sales and the Asia-Pacific region, led by Japan, contributes about 20%.
While its legacy print and publishing segment (about 5% of sales) has remained intact, Adobe consolidated its several other segments into two in 2012: digital media and digital marketing. Digital media (about two-thirds of sales) includes products such as Flash, Photoshop, and Illustrator. Its digital marketing segment (30% of annual sales) includes a host of tools for creating, managing, and measuring digital advertising and marketing initiatives.
Sales and Marketing
Adobe sells directly and through distributors, resellers, systems integrators, and retailers. In addition, it licenses its technology to hardware manufacturers for integration into their products. Sales to its largest customer, Ingram Micro, which accounted for 11% and 14% of Adobe's sales in fiscal 2012 and 2011, respectively, have declined to less than 10% of net revenue, as direct sales made through Adobe's own sales force and adobe.com have grown.
Advertising expenses for fiscal 2013, 2012 and 2011 were $88.5 million, $99.4 million, and $75.1 million, respectively.
After nearly a decade of relatively strong and steady growth, Adobe's sales declined by 8% in fiscal 2013 (ended November) versus the prior year, to $4.06 billion. Net income fell 65% over the same period to $290 million. The decline in sales in fiscal 2013 was due to decreases in the company's Digital Media and Print and Publishing business segments, partially offset by an increase from Digital Marketing (up 13% year over year). Subscription sales climbed 69%, while product sales fell 26%. Sales declined across all of Adobe's geographies. The US (the company's biggest market) was the best performer, with sales down less than 2% year over year.
Adobe's Digital Marketing business is growing due to strong demand for Adobe Marketing Cloud, its suite of analytics, social, advertising, targeting, and web experience management tools.
Adobe's digital media and digital marketing strategy is focused in part on driving growth of its cloud subscription model, including converting existing licensing customers to the service. It plans to attract new cloud customers via more frequent product updates and enhancements. The company is also looking to expand into new industry verticals and geographies with its Adobe Marketing Cloud offering.
Mergers and Acquisitions
In July 2013 Adobe acquired Paris-based Neolane, which provides cross-channel campaign management technology, for about $600 million. It is the latest in a series of purchases meant to enhance the company's cloud-based digital marketing suite. The purchase came on the heels of its acquisition in May of the San Francisco-based design consulting firm Ideacodes LLC. Ideacodes specializes in the design and user experience of smart applications, digital products, and network communications.
Previously, in 2012 Adobe bought marketing management services provider Efficient Frontier. The acquisition brings ad campaign analytics and performance capabilities such as social ad buying for Facebook, as well as brand management and other multi-channel optimization functions. It also bought Behance, a social media platform Adobe plans to utilize in the cloud.