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Ricardo Marty
Something going on at adobe
on Oct 16, 2013 at 5:35:42 pm

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Insiders Are Selling Adobe Systems
Oct 16 2013, 13:04 | by Markus Aarnio | about:ADBE
includes:AVID, MSFT

In this article, I will feature one tech stock that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

The stock was sold by three or more insiders within one month.
The stock was not purchased by any insiders in the month of intensive selling.
At least two sellers decreased their holdings by more than 10%.

Adobe Systems Incorporated (ADBE) operates as a diversified software company worldwide.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Adobe Systems' insider-trading activity during the last 30 days by insider.
Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Mark Garrett CFO Oct 1 15,000 Yes 84,746 shares 15.0%
Shantanu Narayen CEO Oct 1 50,000 Yes 231,672 shares + 638,300 options 5.4%
James Daley Director Sep 20 25,000 No 15,086 shares 62.4%
Richard Rowley VP Sep 19 6,056 No 16,981 shares + 12,669 options 17.0%

There have been 96,056 shares sold by insiders during the last 30 days. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of Adobe's insider-trading activity by calendar month.
Month Insider selling / shares Insider buying / shares
October 2013 65,000 0
September 2013 96,056 0
August 2013 65,000 0
July 2013 813,939 0
June 2013 450,276 0
May 2013 0 0
April 2013 324,073 0
March 2013 465,962 0
February 2013 0 0
January 2013 284,177 5,000
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There have been 2,564,483 shares sold and there have been 5,000 shares purchased by insiders this year.

Financials

Adobe reported the fiscal 2013 third-quarter, which ended August 30, financial results on September 17 with the following highlights:
Revenue $995.1 million
Net income $83.0 million
Cash $3.2 billion
Debt $1.5 billion

Outlook

For the fourth quarter of fiscal 2013, Adobe is targeting a revenue range of $1 billion to $1.05 billion.

(click to enlarge)

Competition

Adobe's competitors include Avid Technology (AVID) and Microsoft (MSFT). Here is a table comparing these companies.
Company ADBE AVID MSFT
Market Cap: 25.96B 256.52M 287.30B
Employees: 11,144 1,787 99,000
Qtrly Rev Growth (yoy): -0.08 -0.23 0.10
Revenue: 4.17B 622.45M 77.85B
Gross Margin: 0.86 0.52 0.74
EBITDA: 970.08M 7.43M 30.10B
Operating Margin: 0.16 -0.03 0.34
Net Income: 447.00M -69.93M 21.86B
EPS: 0.88 -1.81 2.58
P/E: 59.28 N/A 13.37
PEG (5 yr expected): 3.34 N/A 1.54
P/S: 6.23 0.41 3.69

Adobe has the highest P/S ratio among these three companies.

Here is a table of these competitors' insider-trading activities this year.
Company Insider buying / shares Insider selling / shares
MSFT 0 60,339,723
AVID 0 0

Only Adobe has seen intensive insider selling during the past 30 days.

Conclusion

There have been four different insiders selling Adobe and there have not been any insiders buying Adobe during the past 30 days. Three of these four insiders decreased their holdings by more than 10%. Adobe has an insider ownership of 0.38%.

Adobe is trading at a P/E ratio of 59.28 and a forward P/E ratio of 33.23. The company has a book value of $13.56 per share.

Before entering short Adobe, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high P/S ratio and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Richard Herd
Re: Something going on at adobe
on Oct 16, 2013 at 8:11:35 pm

Buy low.
Sell high.

They made a lot of money.


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Ricardo Marty
Re: Something going on at adobe
on Oct 16, 2013 at 8:23:39 pm

Yup but it screems lack of confidence in the company. sort of grabbing while there is somthing to grab.

Ricardo


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Richard Herd
Re: Something going on at adobe
on Oct 16, 2013 at 9:00:11 pm

Not necessarily screams lack of confidence. I understand that construal. But it could be the opposite.

The five year low is $16.70. Assuming their compensation packages were heavily structured with stock options (and other strike price windows), now is the time to sell for sure from that 5-year low.

The money is staggering!

CEO sold 231,672 shares--suppose he was in on the 5-year low.

231,672*$16.70=$3,868,922.4
231,672*$51.70=$11,977,442.4

Profit=$8,108,520

I think you have it backwards: putting $8M in your pocket is the opposite of "lack of confidence." That's a job well done -- what he is compensated to do--grow NASDAQ: ADBE.

And my assumption is over 5 years, so that's $1,621,704/year, which is a tad more than what I make each year ;) He could reasonably assure himself that he's doing a good job and that more of the same is in order.


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Michael Hendrix
Re: Something going on at adobe
on Oct 16, 2013 at 9:12:14 pm

Sometimes executives can't sale stocks for a certain amount of time. If these executives were offered options at the same time, then the window to sale opened at the same time.

Many reasons why they sale, your assumptions on confidence do nothing but reflect your dislike for the company and wish that they will fail.



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Aindreas Gallagher
Re: Something going on at adobe
on Oct 16, 2013 at 9:19:33 pm

not really - some smart heads on here like joseph w. bourke have previously pointed out the amount of chatter that was occurring in the investor class as the dispute gathered steam - then adobe landed with a slam dunk early subscription number.

there's no point reading too much into stock option realisation - thats a fact of life and adobe is basically riding high right now.

fine - I liked looking at that stock option stuff trying to figure out a bloody minded post, but rationally, if we're going to have a discussion on the ramifications of nearly all of the design disciplines across photography, motion design and web being boxed into lifetime subscriptions, there's probably not much benefit to be had from poring over share sells.

It doesn't mean anything and it clouds the basis for any real engaged debate on a forum that barely exists past the same ten guys batting it back and forth.

I had a pointless go at walter soyka - and he is one of the few people still engaged in this forum that isn't one of the dozen or so people posting every three to four days.

there's plenty of debate on the CC facebook page - and tons out in the world. There should really be an awful lot more debate here on the long term ramifications to tool hire on this scale across so many core creative disciplines. virtually no one is engaged in this forum. It barely has a reason for being. thats a problem given forced adobe subscription is being discussed everywhere I go. I find it weird that its as dead as it is on the cow.

whatever way you cut it - what adobe are trying to do here has major long term implications for millions of small scale creative professionals. they are being basically led into professional lifetime tool rental. that's quite a deal if you really think it through. things haven't been like that for tools for a very long time at our scale.

we're not talking corporations here in that 3.5 million largely: we're talking single craft skill tradesmen if you actually think it through.
tool ownership, and the ability for another to remove it, has a historical tinge that i wasn't expecting internally.

in a perfect world - we need a way better represented debate with way more people involved. not even for or against - this just badly needs more people discussing their view of long term core tool rental.

http://vimeo.com/user1590967/videos http://www.ogallchoir.net promo producer/editor.grading/motion graphics


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Richard Herd
Re: Something going on at adobe
on Oct 16, 2013 at 11:12:05 pm

[Aindreas Gallagher] "lifetime tool rental. that's quite a deal if you really think it through. things haven't been like that for tools for a very long time at our scale"

It really is a big deal. There's lots of discussion regarding the top 1% income earners outpacing the rest of us. That's a context for Adobe's move, from my observations. There's more interesting observations in this book http://www.amazon.com/Plutocrats-Rise-Global-Super-Rich-Everyone/dp/1594204... For example, the super rich don't have national allegiances; their allegiance is to capital and ROI.

Here's some more interesting stuff: http://opinionator.blogs.nytimes.com/2012/08/12/the-veil-of-opulence/?_r=0

Again... like you said [Aindreas Gallagher] "if you really think it through."


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Ricardo Marty
Re: Something going on at adobe
on Oct 16, 2013 at 11:19:47 pm

Yes a deal for adobe and wall street

ricardo


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Aindreas Gallagher
Re: Something going on at adobe
on Oct 17, 2013 at 12:39:16 am

again - brilliant point. maybe lets just pause that stuff and engage on the debate issues surrounding the subscription.

http://vimeo.com/user1590967/videos http://www.ogallchoir.net promo producer/editor.grading/motion graphics


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Aindreas Gallagher
Re: Something going on at adobe
on Oct 17, 2013 at 12:35:45 am

you might think society is kind of baseline distorting since 2008 - london nearly broke apart a few summers ago including right on my road - it was very weird to watch.

mind you - the lack of national allegiance in the new wealthy is weirdly meritocratic in a way tho - I can dig it out - there is a good longreads essay on it - they aren't rockafeller children, they are specific sudden individuals, and anyway, you me and anyone galavanting as an editor is a senator of rome - we are all the one percent large scale there.

but why is there now a drive to craft forced rent within the advanced societies? how does that look? is this not starting to get a little bit too visibly nineteenth century?

why is the availability of tool ownership at the low scale being removed here? If it actually starts to look to most people like western society is visibly retarding, and political engagement is dying - and that's getting weird - Cameron looks like Boehner these days - quite a few political bodies are coming apart at the seams.


absolutely nothing odd or distorted at all is occurring in the core advanced societies.

not to mention the deep societal ordering instincts of Shantanyu Narayan.

http://vimeo.com/user1590967/videos http://www.ogallchoir.net promo producer/editor.grading/motion graphics


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Ridley Walker
Re: Something going on at adobe
on Oct 17, 2013 at 2:16:09 am

Aindreas, I'm dismayed at the state of things as well but I don't think this "debate" is a catalyst to productively change the state of affairs. I've not bought into CC, not have many of my colleagues. This may be entirely moot since Adobe may have the numbers to sustain the CC model without the need to appease the grumblers.

I agree that this belies a larger and potentially more sinister issue, relinquishing control of our tools and our product to almighty ADBE.

Really, what viable options are available to us now? Join CC? Look for alternatives? Stay with CS6 until we can't use it any longer?

Time for a good single malt. Or a Campari with Rainer (I note the bottle in his avatar).


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Chris Pettit
Re: Something going on at adobe
on Oct 17, 2013 at 3:59:18 pm

[Ridley Walker] " This may be entirely moot since Adobe may have the numbers to sustain the CC model without the need to appease the grumblers."

That's the whole question isn't it? If they have the numbers I suspect this discussion is over. If they don't?... Well that's a different matter.

They only made their quota giving out discounts like free candy. I think there is every reason to question whether that's sustainable over time or not


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Ridley Walker
Re: Something going on at adobe
on Oct 17, 2013 at 4:24:13 pm

[Chris Pettit] " I think there is every reason to question whether that's sustainable over time or not
"


Fair enough. I hope its not sustainable and Adobe has to alter how they sell their product. Nothing would make me happier.

How long a wait will this be? In the meantime options are limited.


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Chris Pettit
Re: Something going on at adobe
on Oct 17, 2013 at 4:58:35 pm

[Ridley Walker] "How long a wait will this be? In the meantime options are limited."

I have no particular inside knowledge about how long it would take for Adobe to modify the offering ,if ever. But I've heard that there are divisions of opinion, even at Adobe, and an awareness that introductory discounts aren't going to get them there.

My guess is it will be a year or 2 for them to determine if they need to modify their offerings, but I'm guessing. For me, and almost everyone I've talked to, that means staying with CS6 for now, which should remain relevant for that duration of time at least, all the while keeping an eye new offerings from other companies eager to take advantage of Adobe's bad PR.

The only people I know (in my little corner of the pond) that are jumping on board CC are 2 big enterprises locally and the people I already work with that bought in last year because they couldn't afford the tools to begin with (and it remains to be seen how long-term those new users ultimately are)


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David Lawrence
Re: Something going on at adobe
on Oct 17, 2013 at 6:53:06 pm

[Chris Pettit] "My guess is it will be a year or 2 for them to determine if they need to modify their offerings, but I'm guessing. For me, and almost everyone I've talked to, that means staying with CS6 for now, which should remain relevant for that duration of time at least, all the while keeping an eye new offerings from other companies eager to take advantage of Adobe's bad PR. "

Agreed. It's still way too early to call this model successful. The first-year discounts and giveaways simply pump short-term numbers. What happens next year when those deals expire and the cost doubles for thousands of subscribers? The information on subscriber churn won't be apparent for at least another year or two.

This is a long game. Stick with CS6.

_______________________
David Lawrence
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Ridley Walker
Re: Something going on at adobe
on Oct 18, 2013 at 12:13:00 am

[David Lawrence] "The information on subscriber churn won't be apparent for at least another year or two."

So plenty of time for several single malts.


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Chris Pettit
Re: Something going on at adobe
on Oct 18, 2013 at 1:33:33 am

[Ridley Walker] "So plenty of time for several single malts."



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Ridley Walker
Re: Something going on at adobe
on Oct 18, 2013 at 2:03:47 pm

Lovely, thanks Chris!


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Walter Soyka
Re: Something going on at adobe
on Oct 18, 2013 at 2:08:41 pm

[Ridley Walker] "Lovely, thanks Chris!"

Ridley & Chris, I know we may disagree on CC, but I hope you don't mind if I join you here!

Walter Soyka
Principal & Designer at Keen Live
Motion Graphics, Widescreen Events, Presentation Design, and Consulting
RenderBreak Blog - What I'm thinking when my workstation's thinking
Creative Cow Forum Host: Live & Stage Events


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Chris Pettit
Re: Something going on at adobe
on Oct 18, 2013 at 2:12:16 pm

[Walter Soyka] "Ridley & Chris, I know we may disagree on CC, but I hope you don't mind if I join you here!"

You're always welcome Walter! We'll call it virtual scotch.


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Ricardo Marty
Re: Something going on at adobe
on Oct 18, 2013 at 12:32:09 am

They did not make the target they where close to 100kunder. target was 1m 125k they made about 1M.30

Ricardo


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Richard Herd
Re: Something going on at adobe
on Oct 17, 2013 at 8:56:17 pm

[Aindreas Gallagher] "but why is there now a drive to craft forced rent within the advanced societies? how does that look? is this not starting to get a little bit too visibly nineteenth century?

why is the availability of tool ownership at the low scale being removed here?"


My answers to those (rhetorical?) questions is "how an individual interacts with a group." These individuals meet each other here and there and share their common woes and joys. Presto. They're a clique.


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Al Bergstein
Re: Something going on at adobe
on Oct 30, 2013 at 12:26:21 pm

It's very simple to me. Adobe at five year high. These folks are cashing in for diversification oftheir wealth. Likely has zero to do with how they feel about the company. It's standard wealth management, nothing negative about it at all. I have always felt people read to much into insider trading.

Al


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Richard Herd
Re: Something going on at adobe
on Oct 30, 2013 at 7:54:13 pm

[Al Bergstein] "It's standard wealth management"

Wait a minute! Really am not trying to troll anyone, but cashing in a on major investment as a CEO or other highly compensated employee is about as far away from "standard wealth management" as the words mean. It is is "elite wealth management." Not saying it's good or bad, but let's not be blinded by the veil of opulence.


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Al Bergstein
Re: Something going on at adobe
on Nov 3, 2013 at 5:27:36 pm

Well, define it as you wish. Whether an executive cashes in some portion of their shares, or a lower level employee does (which are not reported), it's just diversification. I've looked into whether executive compensation sell offs mean something, and yes, sometimes when a company is headed down, they can show a last minute jumping off of the rats, (remember this is always a historical look back, not current selloff), but in looking at Adobe's share price runup, it certainly looks like typical behavior of someone not wanting to have all their eggs in one basket. Taking some chips off the table. Adobe, at the end of the day, is highly affected by other market factors, and a selloff of the market as a whole probably affects Adobe more than many companies. As the Fed decides to stop buying bonds, the market will go down. (next quarter?) I'd be more concerned about the P/E ratio of 59 than a few execs selling. Just sayin'..

Al


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