Adobe & Goldman Sachs – A Match Made In Heaven?!!

fuck_the_cloud

It’s Friday afternoon, and to close out my week-long rant against the proposed Adobe Creative Cloud, just in case there are any of you out there who still don’t believe that what Adobe is doing amounts to a straight-up money grab, I offer you this to chew on…

Quoted from a Goldman Sachs research report on the subject:

With the announced update of Adobe’s flagship content authoring tools Photoshop, Illustrator and InDesign the company rebranded them Creative Cloud instead of Creative Suite and stated that the new editions would only be available on a subscription basis. Further, the company stated that going forward all new features for these apps would also only be available with the subscription offering. Adobe will continue to sell and support CS6. While our conversations with Max attendees indicate that most found the timing of the move surprising, we view it as likely accelerating adoption of Adobe’s subscription offering…….We believe the lack of VIABLE ALTERNATIVES to the Creative Cloud apps along with the productivity enhancements in the new editions will drive the majority of CS users that are ready to upgrade to migrate to Creative Cloud despite what will likely be a vocal but small backlash.

That was followed with this little nugget:

In a report published Thursday, Goldman Sachs analyst Heather Bellini upgraded the rating on Adobe Systems from Sell to Neutral, and raised the price target from $34.00 to $48.00.

In the report, Bellini noted, “We upgrade ADBE from Sell to Neutral with a 12-month $48 price target. Since we added ADBE to the Sell List on 7/12/11, the stock is up 47% vs. the S&P up 21% (LTM ADBE is up 37% vs. the S&P up 17%). The stock’s relative outperformance comes as investors have given the stock credit for a more normalized operating model post the transition. At around $44 the stock currently trades on 30X consensus’ NTM EPS forecast vs. the three year historic average of 14X on compressed earnings (consensus is at $1.45 for FY13 vs. $2.36 in FY12).”

Adobe Systems closed on Wednesday at $44.70.

So…knowing they have the creative community by the balls because of the lack of “viable alternatives” to their applications, Adobe moves forward with the subscription only pricing scheme…and the biggest investment bank in the game upgrades their stock outlook by more than 40% on the news. And yet there are still those who think Adobe has OUR best interests at heart. If this isn’t a wakeup call, then what is?!!

Abby Joseph Cohen for The Sunday Times Magazine

For those of you who like to get an early jump on the news, here’s a portrait I did of Abby Joseph Cohen…the Senior U.S. investment strategist at Goldman Sachs…that’s running in this weekends NYTimes Sunday Magazine. And no, I’m not jumping the gun even though it’s only Friday, since they’ve already got the story up on their website!

Have a great weekend!