E Apple: Buy Adobe, Not Tesla

Selling software is safe, profitable, and is never hostage to short supply of components (like what the iPhone 6 Plus experienced last year). Renting out software also only requires a small team of programmers to come up with regular updates and bug fixes.

Adobe enjoys gross margin of 85%, and the company's willingness to cater to the amateur/freelance designer by renting out its software very cheaply only increases the total addressable market of its products. Adobe's flagship product, Photoshop, can be rented for just $9.99 per month.

The low subscription fees of Adobe CC software means free alternatives like GIMP or nkscape cannot compete with Adobe's monopoly of professional graphic design.

Conclusion

The electric vehicle business is crowded by many mega-cap players like Toyota, General Motors (NYSE:GM), Ford (NYSE:F), Honda, and Hyundai. Those automobile giants' penchant for price wars (even for luxury car models) will make it hard for Apple to attain leadership status in electric cars.

Compared to Tesla, Adobe offers immediate profitability, consistent growth, and a huge base of loyal customers. The design industry is devoted to Mac hardware and Adobe software. Apple can benefit from Adobe's strong revenue stream as an option against any future decline in iPhone sales.

Statista's chart below reveals Adobe's expansion as a cloud service operator is also helping that company maintain over $4 billion/year revenue success. Adobe is not only helping graphic artists design ads, it is now also a cloud-based advertising/marketing company.

(click to enlarge)

 

Acquiring Adobe gives Apple an instant foothold in the CRM and e-marketing industries. Adobe is certified as the leader when it comes to Enterprise Marketing Software Suites. You can read Forrester Research's report to understand better why Adobe is emerging as a giant digital marketing.

Getting involved in digital marketing is good for Apple. In the U.S. alone, Statista predicts that digital marketing will be worth $103.37 billion.

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Disclosure: The author is long AAPL

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Comments

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Brian Roxborough 4 years ago Member's comment

Apple will certainly not find it easy to prosper with Tesla and the Lithium battery against Hydrogen power and Toyota and other established global automotive giants. In fact, Apples'' rivals must be rubbing their hands in delight, at the prospect of the Giant being 'brought down'' by any rash decision to buy Tesla.

Levent Taskan 4 years ago Member's comment

As unlikely and nonsensical as it is, Apple buys Adobe I'm switching to Corel.

Nico Isaias Rivera 4 years ago Member's comment

Go! No one is preventing you to go. We're happy to see you switch to Corel.

Alexis Renault 4 years ago Member's comment

And support Windows? No way :)

Michele Grant 4 years ago Member's comment

I never see this happening. Adobe sells to the pro market and that's not where Apple positions itself.

Duke Peters 4 years ago Member's comment

Just an observation, but why doesn't $AAPL buy $DIS, $BBRY, $CALL and/or private company's Soundhound and Soundcloud? This way they have content, enterprise, and social/mobile with money to spare!

Moon Kil Woong 4 years ago Contributor's comment

Please Apple will not buy Adobe. First Apple waged war against Adobe, thus there is bad blood. If they did they would be investigated by the government for monopolistic practices. Then Adobe would find half it's customers switch to another solution rather than giving money to their enemy. Last Adobe is already a very overpriced stock right now.

Tesla is equally bad. Although Tesla is a early adopter of electric cars it is by far not proven to be a long term winner. Likewise, it rebuffed Apple's dances to become a rolling iTunes box as did most other car companies for good reason. And Tesla is also ridiculously expensive given they only make a profit off of government subsidies. If anything taxpayers, especially California taxpayers should buy it out to save money by cutting the numbers of cars made, not the reverse.

Rebecca Duncan 4 years ago Member's comment

Just to play devil's advocate... bad blood doesn't preclude an acquisition. By definition, isn't that what a hostile takeover is?

Moon Kil Woong 4 years ago Contributor's comment

True, however, Apple for good reason doesn't acquire companies that don't like to be taken over. I have yet to recall any instance of it. For one thing it would be terribly expensive given their market cap. For another, technology wise they would tend to lose all the people they probably want. Also, usually they create bad blood for a good reason and acquiring them would be an admission of defeat. And last, in Adobe's case they would not just lose their existing business but get swatted with anti-trust investigations which would preclude from buying them even if they wanted to.