Adobe Flash To Be Available On Mobiles As Smartphone War Heats Up

After a long wait, Adobe Systems Incorporated (NASDAQ:ADBE), the leading maker of creative applications with annual revenue of $3.58 billion, is releasing the Adobe Flash for mobile phones in October of this year. While the new Palm webOS, Symbian S60, Android, and Windows Mobile operating systems should benefit from this popular application becoming available on mobiles, iPhone and BlackBerry users will be left out of an amazing web experience. Let’s take a closer look.

Adobe and Apple used to have a great collaborative relationship — Adobe created a suite of killer apps that made the Mac platform widely popular among creative professionals. But now there seems to be no love lost between them as Apple has a set of products that compete directly with Adobe’s. Adobe had been working on Flash for the iPhone, but disappointingly did not get the go-ahead from Steve Jobs. Adobe would be losing out more than either RIMM or Apple, the smartphone market leaders. However, with Flash soon available on its phones, Palm’s webOS can be expected to grab market share. And Adobe seems to be betting on just that.

Adobe is also releasing major product upgrades, including new versions of Acrobat and Creative Suite 5 next year. Ahead of these releases, the company’s shares have picked up considerably, and it has been upgraded from Hold to Buy by Kaufman Bros. analyst Barbara Coffey. Last month, Adobe announced the start of paid subscription services at Acrobat.com, including PDF creation, web conferencing with Adobe ConnectNow, and increased storage capacity.

Let’s now take a look at the company’s second quarter results, reported on June 16. Q2 revenue was down 20% to $704.7 million. Net income was $126.1 million or $0.24 per share compared to $214.9 million per $0.40 per share last year. Recent coverage is available here.

During the quarter, cash flow from operations was $262 million and Adobe ended the quarter with cash and short-term investments at $2.7 billion, compared to $2.4 billion at the end of last quarter. It repurchased 900,000 shares for about $19.7 million. The number of employees at the end of Q2 had increased to 7,437 from 7,173 in the first quarter with most recruitment being done in R&D at low-cost locations.

By segment, Creative Solutions revenue was $411.7 million, down 22%. Business Productivity solutions revenue was $209.7 million, down 17% with Knowledge Worker revenue down 21% at $156 million and Enterprise revenue down 1% at $53.7 million. Platform revenue was down 30% to $36.8 million. Print and Publishing revenue was $46.5 million, down 14%.

For Q3, Adobe is expecting revenue in the range of $665 million to $715 million. CEO Shantanu Narayen said during the earnings call that:

“Our areas of focus continue to be investing in our core Creative and Acrobat businesses to grow our market position and revenue; building out our LifeCycle, Dynamic Media, Acrobat Connect, and Scene 7 businesses where we see substantial growth opportunities over the next several years; and advancing the Flash platform, which provides a basis for these and other Adobe businesses to thrive and grow, and gives Adobe distinct competitive advantages in a cross-platform, cross-device, multiple screen, always connected world.”

The stock is currently trading around $30 with market cap of about $16 billion. It hit a 52-week high of $31 on June 11.