Bangalore: Each time you fire up a video on YouTube or watch an episode of your favourite sitcom on Hulu, it uses software made by Adobe Systems Inc. which claims that 98% of all personal computers use at least some software made by it. The company’s president and chief executive Shantanu Narayen is one of the highest ranking executives of Indian origin in the Silicon Valley. The 46-year-old Narayen, who grew up in Hyderabad, runs a company that ended 2009 with revenue of $2.94 billion (Rs13,759.2 crore), a market value of $17.18 billion and which announced in late 2009, the acquisition of Web analytics company Omniture Inc. for $1.8 billion.
Adobe has been facing challenging times and in the quarter ended November, lost $32 million on revenue of $757 million as customers cut back on licensing and purchase of its software as well as services. In November, it reduced its global workforce by 9% or 680 people. The firm has also been at the receiving end of criticism from Apple Inc.’s iconic founder Steve Jobs who refused to put Adobe’s Flash software on iPhone and iPad, and reportedly called Adobe lazy and and its software buggy. Flash is the defacto standard on the Web, holding in excess of 75% market share for serving up animation and video applications. Microsoft Corp. with its Silverlight software, Oracle with Sun’s Java Fx and Google with its advocacy of HTML5 are also chipping away at Adobe’s domination. Narayen, who started his career at Apple, in an in-depth interview responds to Jobs’ comments and talks about why he thinks Adobe will continue to be successful. Edited excerpts:
Well-positioned: Narayen says that emerging countries such as China and India will be big markets for Adobe. Hemant Mishra / Mint
The last quarter was tough for most players including Adobe. Has the environment improved?
I am coming here from Davos (after attending the World Economic Forum) where some of our customers were also present. The general consensus is that markets are stable at least, if not improving. Economic growth will come more from emerging markets. Particular to Adobe’s business almost from the middle of last year, revenues from North America were fairly stable. Japan tends to be strong. It is too early to predict where first quarter (in March) will end. But we are optimistic and as a company, which is still producing a lot of cash and very profitable, we will use this opportunity to get even stronger. We made an acquisition of Omniture. We are very well positioned for the economic recovery.
Were you disappointed that iPad, like the iPhone does not run Flash. And what’s your response to Jobs’ comments on Adobe?
First let me give you some facts. You cannot talk about providing a complete Internet experience without supporting Flash. If you think of rich advertising on the Web, it is Flash. If you think of video on the Web (like on) Hulu, YouTube, Rediff and I am sure even on (Live)mint, it will be on Flash. Casual gaming, social media sites like Facebook, they use Flash. B2B (business to business) or B2C (business to consumer) it will be either Flash or Flex (editor’s note : Flex is another Adobe product). If you want to provide a complete browsing experience, you have to support Flash.
If you look at the adoption rate of Flash, it is faster than any software in the world. When we release a newer version of Flash within a year, 90% of the world’s computers including Macintosh (an Apple product) upgrade to it. It is the result of the ecosystem that we have built where content drives ubiquity and new features drive new enterprising content.
We announced open screen project a few years ago and we changed the business model. We don’t charge royalty for Flash on a client. So that addresses the speculation in the press that whether (royalty payment) is the cause for the rift between Adobe and other partners. 19 of the top 20 OEMs (original equipment manufacturer) in the world have committed to using Flash on their smart phones.
Apple has chosen not to allow us to deliver Flash on their devices. The real reasons for not allowing us, you will have to ask Steve (Jobs). (Apple’s) customers are not well served if they are not allowed to browse sites, which have Flash.
It is not just Apple, even Google is pushing the adoption of HTML5… which could eventually make Flash redundant.
What is interesting is that for the last 12 years that I have been at Adobe, I have had to respond to questions on software, which apparently would be the death knell of Adobe. Here we are, still selling billions of dollars worth of software. Specific to HTML: Flash and it have co-existed forever. There are things, which HTML does well, and there are some others, which Flash does well. So I don’t think one will replace the other. There is speculation that it will be only by 2022 that all browsers will support HTML5. If Adobe stands still, shame on us.
So would Adobe itself launch a browser?
No plans to build a browser.
What about the charge that increasingly Adobe’s products are bloated and that security is an issue?
We take security very seriously. Especially if we distribute the amount of software as we do, we will be a target. But we have responded?very well and?addressed vulnerabilities. We put in features that our customers ask for.
How are you doing here?
We employ around 1,600 people in India (little more than a quarter of the firm’s global workforce). India is both a resource base for our R&D (research and development) as well as a market. Piracy, however, is a big issue. Our revenue here is a fraction of the usage of our software here. Increasingly, emerging countries like China and India will be big markets for Adobe.