I listened to two analyst conferences last week. Each was interesting in its own way. Adobe (ADBE) had its conference on March 17, 2009, for its 1st quarter of fiscal 2009, ending February 27, 2009. Oracle (ORCL) had its conference on the 18th, for its third quarter of fiscal 2009, ending February 28.
You can read my extensive notes on the conferences, including the questions asked by analysts, at:
Adobe analyst conference summary for Q1 2009
Oracle analyst conference summary for Q3 2009
Neither company was acting much like a growth stock in the latest quarter, but both did pretty well considering how the global economy has tanked. Oracle revenues were up 2% from the year-earlier quarter. But that flatness hides the fact that Oracle was doing better in mid 2008, so it appears to have come off the top of a wave.
Oracle management talked a lot about exchange rates, how they did really well in the quarter if you ignore the effects of exchange rates. They explained that they manage the company based on constant U.S. dollars. Which sounds something like fiction when the tale is told to an American investor. Maybe my memory is weak, but I don't recall them putting such emphasis on exchange rates when the dollar was low, and so caused them to have strong quarters from Euros and Yen being converted into dollars. The reality is if the Euro is low, they could compensate by jacking up prices in Europe. Probably it is better to keep the customers happy, that is what I would try to do, but I would not pretend I had a great quarter when my receipts from outside the U. S. were down so much, no matter what the cause.
Mind you, Oracle is a great company. When they saying they are taking market share from SAP, IBM, and Microsoft, they are not kidding. They have found a way to build on their success of their database products. No competitor has been able to match their strategy of buying companies that have technologies that can be sold as add ons to current Oracle customers. They claim there is much interest in new products like Fusion middleware and the Exadata system.
Adobe is another great company, but they have been hit harder by the economy than Oracle. Revenues were down 12% from a year ago despite the introduction of CS4, which in normal times would probably be selling far better.
Adobe has always charged a premium price for premium products. Enterprise demand remained strong, they said. But the little guys apparently decided that in these uncertain times Creative Suite 3 was good enough for now. The cost of buying Adobe products, or even of upgrading them, is significant for professionals. The software costs more than the computers that run it.
But you know what will happen. The amateurs may find a way to make do, but all the pros will want CS4. They know that if they don't pay to upgrade to CS4, eventually they will fall behind their competitors and lose their right to upgrade to CS5. To the extent that this economic shake out causes people to leave the computer graphics business, Adobe will be hurt. But the most likely scenario is that the need for graphics professionals will grow, and sooner or later they will budget the money for upgrades. So I expect that as soon as the economy shows some life, Adobe will recapture any money it did not make last quarter. The world can no longer live without Photoshop, Acrobat, and Flash.