A SaaS roll-up has been triggered by Oracle’s recently acquisition of SaaS vendor RightNow for $1.5 billion. In 2009, Adobe acquired SaaS web analytics vendor Omniture for $1.8 billion and since then has been making small acquisitions to sharpen their focus on digital marketing. Adobe recently reported fourth-quarter results that beat estimates. The company also announced changes in their reporting structure to accommodate recent activity in digital marketing.
Adobe’s Financials
Adobe (NASDAQ:ADBE) last month reported fourth-quarter revenue of $1.152 billion, up 14%. The company had forecast fourth-quarter revenue of $1.075 billion to $1.125 billion, and analysts estimated revenue of $1.09 billion. Net income declined to $173.7 million or $0.35 per share from $268.9 million or $0.53 per share. Non-GAAP EPS was $0.67, beating analyst estimates of $0.60.
For the full fiscal year 2011, Adobe reported revenue of $4.216 billion, up 11% over $3.8 billion in 2008 and exceeding the company’s growth target of 10%. Net income was $832.8 million or $1.65 per share, up from $774.7 million, or $1.47 per share. Non-GAAP EPS was $2.35, up from $1.93 last year. Adobe repurchased 21.8 million shares for $695 million during the year and ended the year with $2.9 billion in cash and short-term investments.
Creative and Interactive Solutions segment revenue was $437.2 million compared to $404.8 million in Q4 fiscal 2010 and $417.9 million last quarter. Digital Media Solutions revenue was $186.4 million compared to $165.9 million last year. Digital Enterprise Solutions revenue was $342.4 million compared to $273.3 million last year. Within Digital Enterprise Solutions, Knowledge Worker revenue was $201.7 million compared to $169.9 million last year.
Enterprise segment revenue was $140.7 million compared to $103.4 million last year and $95.8 million last quarter. In the Omniture segment, revenue was $131.1 million compared to $109 million reported last year and $118.2 million last quarter. Mobile and tablet device traffic remains the fastest-growing part of the Omniture business, with the number of transactions from mobile devices increasing to 13% of total transactions in Q4, up from 11% last quarter.
Print and Publishing revenue was $55.1 million compared to $55 million last year and $55.6 million last quarter. In terms of region, Adobe experienced strong demand in all major areas where they do business.
Adobe expects first-quarter revenue in the range of $1.025 billion to $1.075 billion. Non-GAAP EPS is expected to be $0.54 to $0.59. Analysts estimate non-GAAP EPS of $0.58 on revenue of $1.05 billion. The company expects 4% to 6% revenue growth in FY12. FY12 annual GAAP EPS is expected to range from $1.70 to $1.83 per share, and non-GAAP EPS is expected to range from $2.37 to $2.47. The stock is trading around $29 with market cap of about $14.41 billion. It hit a 52-week high of $35.99 on May 11, 2011.
Adobe’s New Reporting Structure and Focus Areas
Adobe announced that they will be focusing on two key areas: Digital Media and Digital Marketing. They have restructured segments to align with this strategy and are merging the Creative and Interactive, Digital Media and Knowledge Worker segments into one reported segment called Digital Media Solutions. The goal of Adobe’s Digital Media business is to revolutionize the creative process.
Adobe is also merging the Omniture segment with its Enterprise segment into a new reported segment called Digital Marketing Solutions. In Digital Marketing, Adobe said their goal is to be the standard for the way digital marketing and advertising is created, managed, executed and optimized.
Late in the fourth quarter, Adobe announced plans to acquire Efficient Frontier, a leader in digital ad buying and optimization. The $400 million acquisition is expected to add multi-channel ad campaign forecasting, execution and optimization capabilities to the existing Digital Marketing Suite.
Digital Marketing has been a key area of focus for Adobe’s acquisition strategy for some time now. As mentioned above, the company’s biggest acquisition in recent times was the $1.8 billion purchase of SaaS web analytics company Omniture in 2009. Early this year they acquired Demdex, which gives them a data management platform that provides real-time audience segmentation and connects that audience data to systems advertisers use to buy inventory. In November, Adobe acquired video advertising company Auditude to expand their monetization capabilities, especially in the high-growth video advertising segment. They also announced their Creative Cloud offering, which aims to deliver a comprehensive set of creative tools, applications and services. Adobe seems to have successfully built up their enterprise SaaS strategy since its Omniture acquisition, which many industry observers deemed odd and overpriced. But it seems to have finally paid off in providing them an alternative business that doesn’t put them on a war path with Apple.