Adobe: Russian losses must be offset by rising prices

Creative software maker Adobe’s forecast for the current quarter shows the strain other tech companies should brace themselves for if they maintain their ethical stance on Russia. Adobe expects an $87 million drop in annual recurring revenue — a figure that covers business in Russia, Belarus and Ukraine.

That’s manageable. The sum corresponds to less than 0.5 percent of the forecast annual turnover. The drop in sales and resulting 9 percent drop in share price on Wednesday is an acceptable price. Adobe would have been punished far more severely by shareholders and customers if it had stayed in Russia after invading Ukraine.

The company behind the retouching tool Photoshop was once one of the names that made Silicon Valley a destination for investors. It has since lost that crown to electric vehicle and social media companies, among others. But the company’s transition from licenses and discs to cloud-based subscriptions was a success.

However, like other cloud computing companies that have risen in the pandemic, Adobe now faces unflattering comparisons. Revenue rose 9 percent in the first quarter of the year, beating expectations but marking the end of a long run of double-digit quarterly growth.

Adobe has also been guilty of relying on the network effect to balance innovation. Take last year’s package of design software for non-professional users. This was a belated response to the competition Competitor Canva.

New Chief Financial Officer Dan Durn joined from Applied Materials in October. At that time much was made of his experience in global strategy. This suggests that Adobe’s focus will remain on subscription management and not the product. A share price hike is planned later this year — the first since 2018. Until it’s clear that the hike will erase losses in Russia, there’s little reason to expect the share price to recover.

Adobe: Russian losses must be offset by rising prices Source link Adobe: Russian losses must be offset by rising prices

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