Adobe (ADBE) Cuts Flash Development, Focuses on HTML5

Adobe Systems (NASDAQ:ADBE) announced late on Wednesday that that it would focus on selling tools for website developers that use an emerging set of Internet standards known as HTML5, which Apple has long promoted. Adobe announced the shift after saying late on Tuesday that it planned to lay off about 7% of its staff and warned investors that revenue growth would slow over the coming year as it shifts to a new sales model.

The job cuts, mostly in North America and Europe, will cost $87 million to $94 million before taxes, the company said in a statement yesterday. This includes $73 million to $78 million of charges in the fiscal fourth quarter, which ends Dec. 2. After costs, net income will be 30 cents to 38 cents a share, compared with a previous forecast of 41 cents to 50 cents.

Adobe, the software maker based out of San Jose, CA, said it is halting development of its popular Flash Player for use in mobile browsers after a long-running battle with Apple Inc. (AAPL). This comes as relief for tens of millions of iPhones and iPad users whose browsers are not capable of viewing content built in Flash, but it could hurt sales of Adobe’s tools for developing websites.

HTML5 has taken off since Apple refused to adopt Flash because developers who used Adobe’s proprietary technology did not want to miss out on getting their content viewed by iPhone and iPad users. The newer technology also uses open standards, which means that a single company like Adobe does not have control over the technology.

“Steve Jobs kicked the industry forward a notch toward HTML5,” said BGC Partners analyst Colin Gillis. “Open-source always wins, even it doesn’t mean innovators are going to make money on it.” Adobe conceded in a blog that HTML5 had become the preferred method for creating mobile browser content.

Adobe also reported its fourth-quarter forecast for sales and profit yesterday. Adobe Systems reported revenue will be $1.08 billion to $1.13 billion, and profit excluding certain costs will be 57 cents to 64 cents a share.

Adobe’s shares fell 12% to $26.72 at 9:32 am ET, the most since Sept. 22, 2010. The company was the worst performer in the Standard & Poor’s 500 index. The stock had declined 1.2% this year before today.

Competitors to watch: Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NASDAQ:ORCL) and Intuit Inc. (NASDAQ:INTU)

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An avid market watcher, Martin enjoys the tech arena the most with the Nasdaq being his main area of focus. A finance major, Martin is working to the goal of one day ringing the bell at the NYSE.
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