Sep 24, 2006

Adobe CEO is all about customers

Source: USA Today
Written by Jefferson Graham

SAN JOSE, Calif. — For Bruce Chizen, it all started at his dad’s Brooklyn appliance store.
“Getting to watch my dad, in retrospect, taught me more about business than anyone else in my life,” recalls Chizen, the CEO of software giant Adobe Systems (ADBE). “His business was all about loyalty and word of mouth. He would do anything for the customer.”

Chizen has brought that same customer focus to Adobe, where he’s been CEO since 2000. The company is known for three of the world’s most popular products: Adobe Photoshop for image editing, Adobe Reader to access PDF files, and Flash for viewing video on the Web.

Under Chizen’s leadership, revenue has doubled to $2 billion. Today, Adobe is riding high, thanks to a decision Chizen made last year that effectively doubled his customer base. He acquired rival Macromedia for $3.4 billion, bringing Flash and popular Web publishing tool Dreamweaver into the Adobe family.

Wall Street applauded the move. The company recently reported better-than-expected third-quarter results and announced that it will roll out next month a new version of its Acrobat software, which companies use to create PDFs. The stock is up 9% since the announcement.

Chizen “is a kid in a candy store right now,” says Piper Jaffray analyst Gene Munster. By combining Adobe and Macromedia, “He is CEO of a company that has the biggest growth opportunity in software.”

Adobe’s strength is in print publishing, with products such as Acrobat, Photoshop and Illustrator. Macromedia’s expertise has been with Internet publishing (using software to create the Web’s flashiest websites). Bundling them into Creative Suite 3, expected in spring, “will make such an improvement in workflow,” Munster says.

The analyst sees Adobe’s revenue growing 9% in 2006 and 15% in 2007, to top out at nearly $3 billion next year.

In combining the assets of the two companies, Chizen retired the well-known Macromedia name, kept most of the 700 Macromedia employees at its San Francisco headquarters and handed top positions to many Macromedia managers.

The task of overhauling Adobe’s Acrobat software, which represents 25% of annual revenue, was given to Tom Hale, a Macromedia executive, who added Flash technology to the program to jazz it up.

While Chizen says the merger has “gone better than I ever expected,” he didn’t keep his staff intact. Stephen Elop, the Macromedia CEO who became Adobe’s president of worldwide operations, has announced he’s leaving.

Adobe profits from high-priced, professional products. Creative Suite 2, for example, is $1,200. They are so expensive, and desirable, that many people steal the software by unauthorized copying, rather than buy it. Chizen estimates Adobe loses $2.5 billion in sales each year because of theft. He defends the pricing by saying his multilayered, complex products require hundreds of millions of dollars in investment.

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