Adobe Courts Cash-Strapped Designers With Cheaper Tools
April 11, 2011, 4:29 PM EDTBy Aaron Ricadela
(Updates share prices in final paragraph.)
April 11 (Bloomberg) -- Adobe Systems Inc., seeking to boost sales to thrifty graphics and Web designers, will introduce an update to its flagship Creative Suite software in May that lets users pay for the product as they go.
Creative Suite 5.5 will be a collection of Adobe’s Photoshop, Dreamweaver, InDesign and other software that lets users pay for the products monthly or yearly at prices much lower than for unlimited use of the full suite. The cheaper rental cost may keep people buying even if they’re unwilling to purchase a comprehensive package, company executives said.
Creative Suite brings in more than half of the revenue for Adobe, the largest maker of graphic-design software. The programs can prove expensive for less regular users, said Dave Burkett, a vice president in Adobe’s Creative Suite group.
“It creates a barrier for many of our customers,” Burkett said last week in a presentation to reporters.
Adobe’s Creative Suite products include Photoshop, the software for photo editing; Dreamweaver, the tool for website design, and InDesign, the software for publishing.
Many Adobe consumers who work as freelance designers and move among jobs can’t afford the full Creative Suite, Adobe Chief Financial Officer Mark Garrett said last month in an interview.
Subscription Prices
Customers will be able to download subscription-priced versions of Photoshop for $49 a month or $420 a year, and Dreamweaver for $29 a month or $228 a year, according to a price list provided by Adobe. Buyers can rent the full Creative Suite Design Premium edition for $139 a month or $1,140 a year.
By contrast, an unlimited-use license for Design Premium 5.5 will sell for $1,899, Adobe said today in a statement.
Version 5 of Photoshop for Windows users who already own older versions of the product sold for $194 on Amazon.com Inc.’s website on April 8.
The subscription pricing could attract some of the millions of Adobe customers still using older versions of its software and entice them to buy full versions of Creative Suite in the future, said Brent Thill, an analyst at UBS in San Francisco.
“Now they can take it for a couple of months, and it gets their appetite whet to buy the whole thing,” said Thill, who has a “buy” rating on Adobe shares.
Slowing Growth
San Jose, California-based Adobe is dealing with slowing sales growth and a reduced profit forecast for its second quarter, which ends in May. Sales may grow 8 percent to $4.1 billion this year, compared with 29 percent growth last year, according to the average estimate of analysts surveyed by Bloomberg. On March 22, Adobe pared its second-quarter sales forecast by $50 million because of disruption from the earthquake and tsunami in Japan, which is the company’s second- largest market after the U.S.
Creative Suite provides a revenue surge for Adobe each time a new version comes out. Creative Suite 5 debuted last April and version 6 is due next year, Chief Executive Officer Shantanu Narayen told analysts last month.
To bridge the gap, Adobe now plans to release interim versions of the software between major releases. The updates will ensure users have access to Adobe’s latest technologies, said Burkett. Version 5.5 will include new tools in Dreamweaver for creating websites using the HTML5 programming language, new ways of selecting colors in Photoshop and software for stabilizing shaky video footage in the Premier Pro editing program. Creative Suite 5.5 is due to arrive in May, Burkett said in an interview.
Interim Versions
Adobe’s move to releasing interim versions of its flagship product could help the company smooth out revenue between major releases, said Thill.
“It removes the big peaks and troughs in the product cycle,” he said. The risk for Adobe is whether customers will wait for more features in version 6 next year instead of buying 5.5. “Everyone wonders whether release 6 will be the Big Kahuna,” he said.
Adobe climbed 23 cents to $34.38 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 12 percent this year.
--With assistance from Katie Hoffmann in New York. Editors: Donna Alvarado, Romaine Bostick
To contact the reporter on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net
To contact the editor responsible for this story: Thomas Giles at tgiles5@bloomberg.net
