Will This Rocket Ever Take Off?

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The times, they are a-changin'. Adobe Systems (NAS: ADBE) is trying to keep up with one paradigm shift after another. The results are a mixed bag.

In the just-released third-quarter report, CEO Shantanu Narayen acknowledged the rapid changes up front: "Our industry is in the midst of a major transformation. We are aligning around two large initiatives: Content Authoring and Digital Marketing." And of course, he hopes to become a market leader in both categories.

Right now, the company looks nothing like the rocket-boosted growth engine it wants to be: sales flattish 2.3% year over year to just over $1 billion while GAAP earnings fell 13% to $0.39 per share. And the near future doesn't look much better: Management forecasts about 10% annual sales growth but another instance of lower earnings.

Those goals might not be terribly ambitious but still beat the Street consensus on both counts. Just remember that Adobe is jumping over a low bar here.

So Adobe's real value must lie beyond the next quarter, and rests on the two pillars of content creation and advertising that Narayen mentioned. Unfortunately, management isn't ready to talk about that longer-term promise yet. Analysts daring to ask for color on 2012 on the earnings call were swiftly batted down by either Narayan or CFO Mark Garrett with reference to the upcoming analyst day -- sometimes in sonorous two-part harmony. These guys should tour as a barbershop duo.

That said, Adobe claims to be gaining market share in the video-editing segment. That's only partly thanks to Apple's (NAS: AAPL) fumble of its latest Final Cut Pro upgrade; Adobe is also stealing former Avid Technology (NAS: AVID) customers. The addition of subscription-based upgrade plans for Adobe's Creative Suite software has helped, and should continue to do so.

And in a larger sense, Adobe is adapting to the new age of digital media. HTML5 authoring tools are being baked into the Creative Suite, you can now compile iPad apps from Adobe Air projects, and the lack of Air or Flash support on Apple products no longer looks like an insurmountable obstacle.

So if Adobe delivers on this creation-and-advertising vision, the company should do well in this increasingly mobile media era. But the fact that management won't set any firm long-term goals yet makes me a bit nervous -- ask again after that analyst day in November. If your portfolio is looking for a mobility play, those butterflies might just flutter away when looking at audio-chip expert Cirrus Logic (NAS: CRUS) , voice recognition expert Nuance Communications (NAS: NUAN) , or camera-chip builderOmniVision Technologies (NAS: OVTI) instead. Even old warhorse Dolby Laboratories (NYS: DLB) is riding the portable wave in ways that Adobe doesn't. Watch this free video report to learn more about Dolby's mobile future.

At the time this article was published Fool contributorAnders Bylundowns shares of OmniVision Technologies, but he holds no other position in any company mentioned. The Motley Fool owns shares of Apple and Cirrus Logic.Motley Fool newsletter serviceshave recommended buying shares of Apple, Nuance Communications, Adobe Systems, and Dolby Laboratories.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple as well as a diagonal call position in Adobe Systems. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. You can check outAnders' holdings and a concise bio, follow him onTwitterorGoogle+, or peruseour Foolish disclosure policy.

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