Photoshop creator Adobe Systems Inc. said that it intends to buy stock photography company Fotolia at an acquisition price of $800 million. The company also reported their earned revenue for the quarter and noted the key points that helped them achieve above market estimates.
Adobe plans to integrate Fotolia with its Creative Cloud as a way to provide current and future Creative Cloud users with the ability to access and purchase more than 34 million images and videos. The company plans to keep Fotolia as a standalone service.
Established in 2004, Fotolia is currently owned by Kohlberg Kravis Roberts & Co. (KKR), TA Associates and management. It has offices in Berlin, Paris and New York. Apart from operating in 23 countries, it also has websites in 14 languages.
Adobe's Creative Cloud is an online venture that offers photo editing and illustration creating. Its customer base increased to as much as 644,000 accounts which exceeded the average projected number of 534,000 by three analysts.
The acquisition deal is aimed at enhancing the company's Creative Cloud system. When it finalizes, it will be Adobe's third largest acquisition, following the acquisition of Omniture in 2009 for $1.55 billion and Macromedia in 2005 for $3.15 billion.
"This is going to make Adobe's already strong position in digital publishing even stronger," said analyst Josh Olson at Edward Jones & Co. "Digital-photo content is only going to improve any competitive advantage they already have in this space."
For its fourth quarter that ended on Nov. 28, 2014, Adobe reported a net income of $73.3 million or an equivalent of $0.14 per share. In the same quarter of the previous year, it earned $65.3 million or $0.13 per share.
The company expects an adjusted profit of 34-40 cents per share on $1.05 to $1.10 billion revenue for the upcoming first quarter which ends on Feb. 28.
It also expects that new Creative Cloud subscriptions would temporarily decline due to seasonality.
"The seasonality is very typical for software companies, because software purchasers have been trained to buy software at the end of the quarter and at the end of the fiscal year, that's when you get the best deals," said Brendan Barnicle, analyst at Pacific Crest Securities.
The acquisition, which shall be subjected to regulatory approval and other customary closing conditions, is slated to close in the first quarter of 2015.
Fotolia will put Adobe in a more competitive position against other stock photo providers such as Shutterstock, Getty Images and Corbis Corp. An increase of at least 5.9 million subscribers for Creative Cloud was forecasted towards the end of 2015.
