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Adobe CEO eyes stock buybacks, not big M&As

TOKYO: Adobe Systems Inc is eyeing share buybacks as a way to spend its cash instead of pursuing large acquisitions like its $3.4 billion purchase of Macromedia, the company’s chief executive said on Tuesday.

“The best use of excess cash we think is stock buybacks,” Chief Executive Bruce Chizen said in an interview with Reuters in Tokyo. “Our ability to grow is not based on major M&A activity. We will do small M&A, but they tend to be some hundred million dollar deals.”

Riding on the success of products such as Acrobat and Photoshop, Adobe generates $200 million in cash every quarter. The company’s board this month approved a new stock repurchase plan for up to 20 million shares, and also authorised the spending of an extra $500 million on the existing buyback plan.

The recent changes to the stock repurchase programme are “pretty significant,” Chizen said.

Its stock has risen about 15 percent in the past year, bringing its market value to $24.5 billion, as investors have expected its new Creative Suite 3 (CS3) design software, which it started shipping on Tuesday, to be a hit.

And Chizen is confident he can keep ahead of the game amid competition from Microsoft Corp., which this month unveiled online media platform Silverlight, a rival to Adobe’s Flash.

“Fortunately, they are so late they have been talking about WPF/E (a technology used in Silverlight) forever,” Chizen said. “And the world has moved to Flash video.”

Flash is a technology Adobe got through its acquisition of Macromedia in 2005, which is said to be installed on 98 percent of the world’s personal computers.

But Microsoft is “a $50 billion monopolist with a lot of power and a lot of money, so we’re going to continue to be really good against them,” Chizen added.

Chizen also said he sees companies with new business models such as Google’s Web-advertising as rising rivals.

CS3 buzz: San Jose, California-based Adobe’s CS3 was a much-anticipated upgrade of its flagship design software, including Photoshop, which is expected to help boost sales for the coming quarters.

“There was such a huge pent-up demand, it takes us a week to fill the channel, deal with all the backlogs,” Chizen said when asked about initial shipments.

Chizen estimates that most customers will choose Design Premium, followed by Web Premium and then Master Collection, among the 19 different product configurations offered under the CS3 lineup.

In Japan, Adobe’s second-biggest market that accounts for close to 17 percent of total sales, the company aims to roll out a Japanese-language version of CS3 products from this summer.

Adobe confirmed its fiscal year earnings guidance when it reported solid first-quarter results in March, which anticipated 15 percent revenue growth this year.

“We continue to believe we can achieve double-digit revenue growth for many years to come,” Chizen said.

Asked whether the company would pursue large-scale acquisitions like it did with Macromedia, Chizen said such a deal would have to be very strategic, and one that the company sees as “digestible and absorbable.”

“At this point in time, I don’t see anything that fits those criteria,” Chizen said. “I continue to be convinced that acquisitions are very hard,” he said, but also adding that the level of integration with Macromedia has exceeded expectations. reuters

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