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By Elliott H. Gue, on Jan. 15, 2014

Shares of Adobe Systems have rallied by more than 20 percent since we added the stock to the Wealth Builders Portfolio, fueled by strong uptake for the company’s Creative Cloud suite of design programs.

Whereas customers paid a lump sum to purchase Adobe Systems’ Creative Suite programs, the rollout of Creative Cloud marks the shift to a software-as-a-service (SAAS) model where customers pay a monthly subscription fee to access these programs via the Internet. 

Adobe Systems exited its fourth quarter ended Nov. 29, 2013, with 1.439 million paid subscribers to its Creative Cloud service, exceeding management’s full-year target of 1.25 million customers. 

We’re glad to see Adobe Systems’ transition to an SAAS model gaining traction; this approach has a number of advantages.

Rather than creating new applications and functionalities and then bundling them into a new version of Creative Suite, Adobe Systems can introduce incremental enhancements to its products and immediately deliver those changes to the entire Creative Cloud user base.

In other words, every Creative Cloud subscriber will always have the newest version of Adobe Systems’ products with the most up-to-date features. In the past, not every customer would upgrade to the latest release of Creative Suite, preferring to save money and stick with older versions.

By transitioning to this new model, Adobe Systems swaps periodic, lumpy revenue for the consistency of recurring subscriptions.

The Adobe Marketing Cloud suite of products also continues to gain traction, with fourth-quarter revenue increasing by 38 percent from year-ago levels and full-year sales increasing by 26 percent. We expect this SAAS solution to continue its strong growth in 2014.

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