Ahead of Earnings, Are Critics Too Quick to Shun Adobe Systems Incorporated?


We are in a weird time for technology, particularly when it comes to something that seem simple on the surface -- ownership.

As time goes on, we are seeing increasing restrictions on our use of products.

Case in point:

Microsoft Corporation ( MSFT ) is requiring Xbox One consoles to "check in" with the mothership every 24 hours. Apple Inc. ( AAPL ) is making it practically impossible to upgrade memory on certain iMac models. And Google Inc ( GOOG ) has placed restrictions on reselling or even giving away Google Glass.

So while we can buy what we want, we are facing more rules than ever after the purchase is made.

I hope I don't sound too gloomy because the consumer technology experience has never been better, even with seemingly unfriendly restrictions like those I just listed.

With the exception of video games, which peaked with the release of Tecmo Bowl in 1988, virtually everything works better and is way cheaper than it used to be.

Now, one particular company that is pushing the boundaries of consumers' capacity to accept change when it comes to the issue of ownership is Photoshop-maker Adobe Systems Incorporated ( ADBE ), which recently made the decision to move to a subscription-only model under its Creative Cloud name .

In the future, Adobe will not sell boxed versions of its Creative Suite products like Photoshop and Illustrator.

Buyers will have to purchase subscriptions, meaning that you can only use software as long as you keep paying for it. When a subscription lapses, the software becomes disabled.

This is a massive paradigm shift for the software industry, and quite a controversial one.

Cloud-based subscription software is nothing new, but this is the first instance of a transition of a major existing product to such a model.

Thus, I don't think it's the policy itself as much as the jarring change away from the "buy once, use forever" tradition (even though no software gets used forever) that is causing all the controversy.

Of course, the fact that Adobe is effectively hitting many customers with a significant price increase isn't helping.

Today after the close, we're going to get the first bit of financial feedback since Adobe announced it was throwing the switch: The company is delivering its second-quarter earnings report. And incidentally, today is the day when the new cloud apps are being released.

Generally speaking, it seems like the only fans of Adobe's move are 1) power users that use multiple Adobe products and eagerly embrace new features and 2) people that sell training for Adobe software products.

I emphasize the word "seems" because on the Internet, there's always a risk that a vocal minority is outweighing the sentiment of a silent majority. There's a lot of bellyaching over Adobe's switch, but as investors, we must be concerned about how the dollars and cents add up. It's entirely possible that fewer people use Adobe products and the company ends up making far more money. We just don't know yet.

Remember, we have all seen plenty of people publicly announce that they're quitting Facebook Inc ( FB ) because of privacy issues or interface changes or supposedly intrusive advertising:

Yet that company is growing just fine:

Click to enlarge

So let's wait and see what happens before throwing Adobe under the bus.

Twitter: @Minyanville


This article appears in: Investing , Earnings , Technology

Referenced Stocks: AAPL , ADBE , FB , GOOG , MSFT



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