Adobe reinvents itself in order to thrive in new markets

Rethink IT, March, 2005 by Peter White

At the start of the year, Adobe Systems, best known for its publishing products such as Acrobat and a history closely tied to Apple, created the new position of chief operating officer, as though to embody in a new job title its major change of focus of the past year. Adobe is no longer just about PDFs and PostScript, but is looking beyond Macs to Windows and Linux, and towards the enterprise document management sector.

The new COO, Shantanu Narayen, has been promoted to look after engineering, marketing and sales, in a move widely seen as a thank you for his critical role over the past 12 months in reinventing the software house.

"Under his leadership, Adobe has defined and implemented the product and marketing strategies that are driving our current growth. As Adobe continues expanding into the enterprise and other new market areas, I will increase my focus on the longer term strategies that will fuel the company's future growth," CEO Bruce Chizen said.

All this was a logical follow-on from a restructuring initially announced last April. Adobe folded its Advanced Technology Group into a new Office of Technology and named two chief software architects to spearhead its efforts in digital imaging, graphics and documentation, dividing the business between graphics and publishing, and intelligent docu-ments. The former, headed by Greg Gilley, is in line with Adobe's traditional base among consumer and professional graphics users. The latter, which is centered around Acrobat and the PDF format, houses the efforts to move into the booming enterprise document field.

POST RESTRUCTURING

All this was a logical follow-on from a restructuring initially announced last April. Adobe folded its Advanced Technology Group into a new Office of Technology and named two chief software architects to spearhead its efforts in digital imaging, graphics and documentation, dividing the business between graphics and publishing, and intelligent documents. The former, headed by Greg Gilley, is in line with Adobe's traditional base among consumer and professional graphics users. The latter, centered around Acrobat and the PDF format, houses the efforts to move into the booming enterprise document field.

The company aims to expand its document distribution technology, PDF (Portable Document Format), to be a multiplatform foundation for viewing and sharing corporate data. That expansion, however, brings with it the risk of more direct competition with Microsoft.

At the same time, Adobe has been increasing its reliance on Microsoft's Windows as a publishing platform. Its relationship with Apple has been chilly in recent months, with Adobe dropping Mac support for several products and Apple quietly pushing Adobe out of a few markets.

Adobe has been feeling sufficiently strong to take on the stormy waters of being both Microsoft's partner and challenger--a balancing act that also includes an increasing focus on Microsoft's most likely nemesis, desktop Linux in the enterprise. A year ago, Adobe announced a first quarter that was its most profitable in history, with revenue of $423.3m, compared with $296.9m a year earlier, and a revenue target for the year of $1.5bn.

By the end of the year, Adobe was reporting record revenue of $429.5m in the fourth quarter and a 50% revenue rise in the important Intelligent Documents unit. For the year, the company achieved record revenue of $1.667bn, up 29% on 2004, and net income was up 69% to $450m.

Adobe was founded in 1992 and had a major impact from 1985 with its PostScript printer language, which was one of the key enablers of digital typesetting and desktop publishing. Its next major breakthrough came in 1993 with PDF, and it has a string of related applications such as the Acrobat document viewer and PhotoShop.

SAGGING FORTUNES

But by 1998, with the technology boom still in full flow, Adobe was in trouble, experiencing stalled product sales and a sagging stock price. As part of a major corporate overhaul in August 1998, most of Adobe's executive management left the company, and Chizen was promoted to executive vice president of products and marketing. He led a drastic restructuring of Adobe's business, including defending the company from a hostile takeover bid by desktop publishing specialist Quark. In 2000, Chizen became CEO, and part of the reason there is high confidence in his current reorganization is the success of his first attempt, and his willingness to take new approaches and to rely on fresh blood.

Chizen is hoping to remake Adobe again, this time betting that, by combining the core electronic document capabilities of Acrobat with a new collection of server-based products, Adobe can become a major supplier of application solutions to enterprises. In a recent interview with the Wharton Business School in Pennsylvania, Chizen explained the strategy. He claimed the recovery can be sustained because the new strategy is fully embedded in the context of Adobe's history and builds on its traditional strengths, rather than attempting anything brand new and untried.