ALA looks good going forward, the chart has based and it loks like heading for 30$ in three months ofcourse all of this is only valid if 1192 on SP99H is maintained, this is going to be my strategy that as far as market remains above 1192 my targets will work, I will exit below 1192 if I see two closes and enter big at 1125 area, not that I expect any of these is short term possiblity but I need to take care of my lower levels more than long which I have already pinned at 1400 plus area.. Like always mine the level of 1130 was first one to be picked when market was at 890-- and so would be the new level on top but I will not run my positions if 1192 is out.. AMZN will hit 145, like Yahoo 210 is my target if things move forward the way I have envisaged. I have no -nonsense bullish bias in this market and will continue to do so as far fundamental picture does not change, I would think we will see blow out earnings as far as second quarter is concerned and market is not yet built for that...... I have this great calls on CSCO EMC NOK.A TXN INTC AMAT MSFT ASND all of them picked at near lows, when everyone else was bearish on this marekt, I have continued these core positions, and hope to do so gong forward but two stocks always at back of my mind have been ADBE and Macromedia, on this Sunday when I research and read thousnads of pages on web sites I will like to share with my firends my research..
Sectors & Trends
Adobe, Macromedia are Web-ready after slow start
Designers hesitated and new software was tardy, but now graphics tool makers are positioned with products for this hot market.
By Barbara Grady
Just as the machine-tool industry emerged as a force at the turn of this century by supplying the industrial revolution, the Web graphics software industry is poised to surge as it equips the Web revolution.
Thing is, it should have surged already since the Web phenomenon started three years ago. Instead, the Web graphics software tool market is just getting going, with its two dominant players, Macromedia (MACR) and Adobe Systems (ADBE), and niche players such as privately held Quark largely still facing the opportunity.
Macromedia is increasing its sales and earnings 44% year-over-year as of last quarter. But its resplendent 1998 was a turnaround. It lost money in 1997 on lower revenues. Adobe Systems, whose products are used by virtually all graphic artists, projects sales will grow 15% this year. But in fiscal 1998, the year of the Web, Adobe sales and earnings fell.
Where is the gold rush?
Why haven't Web authoring tool providers enjoyed the Web boom times?
Aren't they today's equivalent of those who sold picks and axes to gold miners in the 1849 California gold rush?
Until recently, most Web site designers hesitated to put animation, full-color images or video onto Web pages for fear of slowing downloads and losing viewers. Yahoo!, the most visited site on the Web, might be the best example of this. Its site is downright plain -- no photos, no illustrations other than a few icons and very few colors. But the site is lightning-quick.
This hesitation among designers hampered demand for sophisticated graphics tools. Web publishing largely meant text accompanied with simple graphics.
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Price 32 1/2
Change +1/8
1-yr Chart
Research Wizard
Then Macromedia changed that. It developed three software tools for building multimedia images for the Web with computer code that doesn't clog transmission pipes and therefore won't cause slow downloads:
Flash is software for depicting a graphic using vector mathematics instead of pixels.
Shockwave allows delivery of video in a stream of data rather than a slow download.
Dreamweaver is a Web publishing tool that's a favorite of graphic artists.
Now, developers have had a year or so to experiment with the tools, and sites are starting to change. The Web is sprinkled with sites powered by Flash or Shockwave.
Macromedia's chief executive officer Rob Burgess believes it is nothing short of the next phase of the Web revolution.
"Macromedia has over the last year created a new product area to allow a next-generation experience -- rich moving multimedia," Burgess said in an interview. "Over the last year, we got our tools in the hands of about 1 million developers. So we've enabled developers over the last year to build this stuff. Now the content is happening. We're now seeing thousands and thousands of sites moving to next-generation designs."
Financial highlights
Macromedia (Data for latest 12-month period as of 2/26/99)
Sales $136 Mil
Income $15 Mil
Revenue/Share $3.30
Earnings/Share $0.34
Click here for latest data.
Flash and Shockwave players already have become so pervasive that they have since become packaged with every major Internet browser and ship with both Windows and Macintosh operating systems.
But the real stimulus for success of Macromedia will be the acceleration in the use of broadband access to the Internet, whenever that occurs for home users, notes analyst Greg Vogel of NationsBanc Montgomery Securities.
Burgess is credited with pushing Macromedia to be the pioneer in making multimedia, broadband image tools for the Web.
When he joined the company as president in 1996, Macromedia's products were well known by graphics professionals making entertainment and educational software and even by film makers. But people didn't want to push those fat file formats through slim Internet connections.
Burgess pushed the company to develop code that can travel the typically narrowband pipes of the Internet without slowing things to a crawl. As part of his turnaround strategy for the company, he nixed seven of Macromedia's 10 products at the time, and reassigned the engineers from those seven to new Web products.
About 42% of Macromedia's revenues now come from new Web products. Wall Street likes this strategy. Eight of nine Wall Street analysts following Macromedia rate it a "buy." They estimate a 900% increase in annual earnings this year to 41 cents a share, according to First Call.
"Macromedia management recognized the pieces missing in the Internet market, identified them as target opportunities," and went after them, said CIBC Oppenheimer analyst Robert Fagin.
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Price 46 3/16
Change +9/16
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Adobe's foundation
Adobe Systems traditionally has supplied the workhorse tools of the print publishing industry: Photoshop, Illustrator and PageMaker. And as newspapers, magazines and others in the print world have gone online, they've continued to use familiar Adobe products such as Photoshop.
But many would argue Adobe has been slow to rise to the occasion presented by the Web. It has produced a few Web-specific tools -- ImageReady, PageMill and ImageStyler -- but mostly it has upgraded its existing products to be Web-ready instead.
In 1998, Adobe's fortunes fell victim to Asia's financial flu. Sales and earnings plummeted. This served as a wake-up call to the venerable, but a bit too comfortable, software supplier. It cut hundreds of jobs, replaced three top executives and went in search of new revenue from the Web. Last month, it acquired GoLive CyberStudio, a competitor to Macromedia's Dreamweaver.
Says Jupiter Communications analyst Seamus McAteer, "Adobe is extremely strong in the offline publishing space ... and is trying to satisfy two markets, offline print and online, and it is having a difficult time focusing on a strategy for opportunities in the Web space." But it needs to keep its large print customer base satisfied. "Trying to satisfy two audiences at once, especially given the hectic pace of life on the Web, is difficult."
Financial highlights
Adobe (Data for latest 12-month period as of 2/26/99)
Sales $895 Mil
Income $105 Mil
Revenue/Share $14.60
Earnings/Share $1.55
Click here for latest data.
Now many analysts would say Adobe is poised to reap Web benefits. Analysts on average rate Adobe a "long-term buy" and "near-term hold" as it figures out a strategy. Five analysts rate Adobe a "moderate buy," one a "strong buy" and seven a "hold," according to First Call.
"I rate Macromedia a 'strong buy' and Adobe a 'buy,' " said Jeff Goverman of Pacific Crest. "Both are probably two of the better Web plays because they both have earnings and most Web sites use both companies' tools. The problem is the number of graphic artists isn't growing that fast." So don't expect Internet-style stock performance. "Adobe will have nice high-teens ongoing growth," he said.
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The opportunities ahead
This is what analyst Ed Bierdeman of Moors & Cabot Dakin says of the market opportunity: "What we're talking about is the Internet. And it's everywhere you look. The whole attraction of Macromedia to me as an investment idea when I first rated it a 'strong buy' (in October 1998) was it was an undiscovered way to participate in the Internet phenomenon."
Adobe is also underpriced based on price-to-cash flow, price-to-earnings and price-to-sales ratios, each of which are at least 25% below the graphics software industry average.
On a price-to-cash flow basis, Macromedia also trades at a ratio some 25% below the graphics software industry average, which is why Hany Nada of Piper Jaffray says it's cheap if viewed as an Internet stock.
But the real upside for Macromedia and arguably for the whole Web graphics market, Bierdeman said, stems from the opportunities that will emerge when and if e-commerce retailers decide that fancy, broadband-style sites are the way to go. The market learned from Christmas 1998 that shoppers are buying online. If they pour marketing dollars into their Web sites, that could be a bonanza for Macromedia, Adobe and others.
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