Adobe Systems is king of its hill in content creation software. No one comes close to offering all that it has—Photoshop, Acrobat and Illustrator. Its net profit margin this year will be 28.7%, predicts Value Line, better than the margin at Microsoft. Its shares are up 1,000% over the past seven years.
Why, then, is Adobe running scared? It veered off into Web analytics in 2009, paying about $1.8 billion for a firm (Omniture) that had only $296 million in revenue. Then it wanted to get into e-commerce, and after being outbid two years ago by Salesforce in the auction for cloud-based Demandware, it had to settle this year for second-choice Magento, at a cost of $1.7 billion.
The explanation for the expensive expansionism: In the rapidly changing world of software, small pieces of turf are hard to defend. There is always the risk that some larger company will either wrap a competing product into a larger suite you don’t offer or, worse, give away for free what you’re selling. That’s what doomed Lotus in spreadsheets and Netscape in browsers.Read more …
Source : Forbes