| To: Glenn Petersen who wrote (3104) | 9/19/2022 7:15:10 AM | | From: Glenn Petersen | | | | The Adobe-Figma deal is historic for tech startups — if it goes through
Protocol Pipeline
Hello, and welcome to Pipeline. I’m Biz Carson, and I’m devastated after I lost my 149-day Wordle streak to “parer” yesterday. At least I wasn’t alone.
This week in the startup world: Adobe and Figma’s historic acquisition, the silence around Launch House and founders’ favorite VC firms.
Adobe’s $20 billion acquisition of Figma is historic — if it happens Adobe’s acquisition of Figma is one for the record books. It’s the largest acquisition of a private tech startup at the time it was announced (Facebook’s WhatsApp acquisition went from $19 billion to $21.8 billion by closing, if you want an asterisk). Its 50x ARR multiple is another record in recent history for a startup at scale. For the investors, some of its earliest backers might be returning anywhere from 30x to 90x, per The Information’s calculations. Figma’s co-founders, Dylan Field and Evan Wallace, will both be billionaires based on the size of their stakes.
That’s all incredible — if the deal actually goes through.
A deal of this size is almost certain to come under regulatory scrutiny. Admittedly, my first reaction when I saw the coupling was not sticker shock but “Wait, can they even do that?”
- Antitrust regulators are certainly zoomed in on Big Tech right now and are closely scrutinizing transactions. Hindsight is 20/20, but a lot of regulators now regret letting the Facebook-WhatsApp deal happen, said Henry Su, a partner at the Bradley law firm who has worked in Silicon Valley and at the FTC. “People will be trying not to make the same mistake,” he told me.
- Take the FTC’s recent lawsuit against Meta for its acquisition of VR fitness app Within. Meta and Within aren’t seen as obvious rivals given that Meta’s core Facebook business is all about ads, not VR fitness, yet the government still sued to block the deal in July, saying it was choosing to buy market position to make itself dominant in VR. “The distance between Within and Meta is further. There’s a lot more predictions you have to do,” Su said. “Here, there’s no question that Figma is competing with Adobe.”
- The fact that they are direct competitors is going to worry regulators that this is a “killer acquisition” where the acquisition is intended to snuff out the competition — even if it is pledging to keep Figma alive as its own autonomous product. “It’s not simply, ‘Is there going to be a Figma after this?’” Su said. “It’s the killing of the competitive threat that Figma poses to Adobe.”
- The other worry is whether this could ultimately harm consumers by taking away choices. Figma’s own webpage directly comparing the two is a piece of evidence the government could use to show that the deal is taking away consumer choice when both are owned by the same company, Su said. There are other alternatives, like Sketch, but it’s much more limited in its use cases (for example, Sketch is Mac-only). If the deal hadn’t crossed regulators’ radar by now, the hordes of upset Figma users that are tagging the FTC and DOJ directly on Twitter to ask for an investigation will assuredly raise a red flag about how consumers feel about the deal and if the government feels it needs to step in to protect them.
Figma is well aware of the risk of antitrust scrutiny, but it believes the deal will be better for consumers in the long run. “We wouldn't have gone through this if we didn't think it was better for the customer,” Figma’s CEO Field told my co-worker Lizzy Lawrence.
- “We certainly believe it’s going to happen,” Kleiner Perkins partner and Figma board member Mamoon Hamid told me when I asked about antitrust scrutiny. “We expect that process to happen and at the end of it to get approval for it.”
- The argument for combining is that Figma will be able to more directly incorporate Adobe’s capabilities and potentially address new customer segments that it hadn’t targeted before. And certainly at $20 billion, Adobe is paying full price. “There was one company that accelerated our aspirations and ambitions, and that’s Adobe,” Hamid said. “It was the one thing that really made sense.” Field confirmed that Adobe’s was the only acquisition offer Figma had ever explored.
- Adobe said in a statement to Protocol that the combination will “greatly benefit consumers” and that it expects the transaction to close in 2023 subject to approvals.
- There’s protection as well: If Adobe and Figma are blocked legally from doing the deal over antitrust concerns, the merger agreement shows that Adobe will have to pay Figma a $1 billion breakup fee in cash.
Antitrust Debbie Downers aside, it’s a huge win for many in the startup community, and the LPs that stand to benefit from it. VCs are already hearing from endowments about the scholarships they’re going to be able to fund.
- Index Ventures is Figma’s largest outside shareholder and did its seed round in 2013. Sequoia and Andreessen Horowitz will also benefit. Greylock is another big winner: It was an investor in Figma, and its former venture partner, David Wadhwani, will be Field’s new boss at Adobe.
- For Kleiner Perkins’ Hamid, who has been overseeing the generational transition at the firm, it’s a big win and validation five years in. “It’s a top five for Kleiner Perkins in our history, and we’re celebrating 50 years,” Hamid said. Field has his own ties to the firm: He was a much-fought-over KP fellow (and a Thiel Fellow) before he started Figma.
The acquisition could also open up an appetite for more deals, whether it’s Big Tech companies looking to bolster their businesses or startup founders now willing to partner instead of going it alone. “The big companies all have their wishlist of really exciting companies that are out there that are high-quality businesses in the private market,” Hamid said. “My sense is that it’s going to be a bit more of an active M&A season.” It’s also going to mean a lot of billable hours for every antitrust lawyer from Palo Alto to Washington.
<snip>
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| To: Glenn Petersen who wrote (3105) | 2/24/2023 10:16:22 AM | | From: Glenn Petersen | | | | Adobe slips on report saying DOJ plans suit to block $20 billion Figma deal
PUBLISHED THU, FEB 23 20235:40 PM EST
UPDATED THU, FEB 23 20236:03 PM EST
Jordan Novet @JORDANNOVET
CNBC.com
KEY POINTS
-- The Justice Department is reportedly working on a case to stop Adobe from buying a rising competitor, startup Figma.
-- An Adobe spokesperson stressed that it focuses on a market that’s different from the one where Figma operates.
Adobe shares fell as much as 5% in extended trading following a report that said the U.S. Justice Department is planning a lawsuit to block the company’s $20 billion acquisition of startup Figma.
A case could come as soon as next month, Bloomberg reported, citing an unnamed source.
The deal, announced in September, would help Adobe spur fast growth to its portfolio and pick up technology that could enhance existing programs in the Creative Cloud bundle that businesses and independent designers use. Adobe has said Figma would generate over $400 million in annualized recurring revenue in 2022.
But in buying Figma, which companies use to design apps and websites and collaborate on ideas, Adobe would also be taking a rising competitor off the market. Adobe, which has offered the XD software-design tool that ha
Competition authorities in the U.S. have become more willing to take a hard line on large companies’ efforts to expand. In December, the U.S. Federal Trade Commission filed a lawsuit attempting to stop Microsoft from acquiring video game publisher Activision Blizzard for nearly $69 billion.
“The combination of Adobe and Figma will deliver significant value to consumers, advance new product categories and technologies and create new market opportunities, and we’ve been delighted to hear from customers across the design space who tell us they are excited about the benefits the transaction will unlock,” an Adobe spokesperson told CNBC in an email.
“Adobe and Figma focus on very different product areas today. Figma is a leader in interactive product design, focused on building a collaborative web platform. Adobe is a leader in the creative tools space, helping millions of users create amazing visual content. Together, our vision will help enable millions of consumers to transform their productivity with creativity. We are engaged in constructive and cooperative discussions with regulators in the US, UK and EU, among others,” the spokesperson said in the email.
David Wadhwani, president of Adobe’s digital media business and a key figure in the Figma deal, told analysts on a conference call in December that “the regulatory process is proceeding as expected.” Adobe was busy with the Justice Department’s second request process as the federal agency examined the deal, he said.
The Justice Department declined to comment.
Adobe still expects to close the Figma deal in 2023, the spokesperson said.
Adobe stock slips on report saying DOJ plans suit to block Figma deal (cnbc.com) |
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| From: Glenn Petersen | 6/21/2023 7:01:32 AM | | | | | | AI Hype Lifts Adobe Above Deal Cloud
Stock has surged since generative AI announcement, while scrutiny of Figma deal grows
By Dan Gallagher
Heard on the Street
Wall Street Journal
June 21, 2023 6:00 am ET
Artificial-intelligence hype has certainly helped Photoshop maker Adobe brighten its image, even as prospects for what would be its largest-ever acquisition remain blurred.
In less than three months, Adobe has gone from AI loser to AI winner, at least in the minds of investors. The company used its annual user conference in March to make several announcements related to generative AI, including the introduction of a tool called Firefly that can be used to generate or edit images and video content. That was followed by an announcement last month that Adobe had struck a deal with Alphabet’s Google to incorporate Firefly into the search giant’s new ChatGPT-like offering called Bard.
Firefly lighted up Adobe’s fiscal second quarter results last week as well, as it and other generative AI topics dominated the earnings call. Adobe confirmed that it expects AI tools such as Firefly to expand both its base of users and average revenue per user over time. The company plans to announce pricing for the service later this year. Mark Moerdler of Bernstein called the quarter’s results solid and noted that “differentiated, ready for prime time, and shortly to be monetized AI is the next leg of the story” for Adobe.
Wall Street has gotten the message. Adobe, the largest company by market value on the BVP Nasdaq Emerging Cloud Index, has seen its stock price jump 34% over the past three months, which is more than double the index’s gain in that time. Perhaps even more notably, the stock is now back above the levels it enjoyed before Adobe announced plans in September to spend $20 billion to acquire Figma, a maker of cloud-based software tools for user-interface design.
That deal sparked a large selloff owing to worries that Adobe was making such a record outlay from a position of weakness. The company’s overall business was feeling the effect of an industrywide slowdown in corporate software spending, and Figma was reportedly picking up share in a slice of the market that Adobe serves. The image of a well-established software giant picking off a competitor also raised the eyebrows of regulators. Adobe’s stock shed more than a quarter of its value in the two weeks following the deal’s announcement.
Regulatory approval is still an overhang; Adobe’s shares slipped nearly 2% on Tuesday after the Financial Times reported that European Union authorities are preparing to launch a more in-depth probe of the deal. U.S. regulators are also reportedly taking a hard look; Bloomberg reported in February that the Justice Department was preparing a lawsuit to block the deal. That still hasn’t happened, but Adobe has now gone more than nine months without being able to close the transaction. Its six previous deals valued over $1 billion averaged barely two months to close, according to data from FactSet.
Adobe would say last week only that it remains confident it can close the Figma acquisition by the end of this year. Analysts are mixed, with most positive on the virtues of the deal but uncertain of its fate, given the challenging regulatory environment. “Investors are generally skeptical that the deal will close due to extended antitrust reviews,” wrote Brent Thill of Jefferies. Moerdler of Bernstein added that “we believe the Adobe story, with or without Figma, is solid.” AI seems to have made Adobe’s biggest deal ever no longer a case of need.
Write to Dan Gallagher at dan.gallagher@wsj.com
AI Hype Lifts Adobe Above Deal Cloud - WSJ (archive.ph) |
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| From: Glenn Petersen | 10/14/2023 6:31:13 AM | | | | | | Adobe May Be Tech’s Biggest AI Bet Yet
Stock’s run has outpaced Microsoft, Google and other major software names as new AI tools have revived growth prospects
By Dan Gallagher
Wall Street Journal
Oct. 13, 2023 6:30 am ET
Attendees at this week’s Adobe Max conference in Los Angeles. PHOTO: JORDAN STRAUSS/ASSOCIATED PRESS
--------------------------------------
How hot is Adobe’s artificial intelligence act right now? Hot enough that it makes financial analysts forget about finance.
The maker of Photoshop and other popular media creation tools held its annual user’s conference called Adobe Max this week, where it announced a host of new AI tools and services. The conference included a three-hour meeting for financial analysts that included deep dives into those services, but no financial reports or projections—save for Adobe’s assurance that its fiscal fourth quarter that ends in six weeks will be “another really strong quarter.”
That was a notable shift from last year’s analyst meeting, held at the same time. That meeting included a rather detailed projection of revenue and earnings for the coming fiscal year. In another shift, Adobe barely mentioned the topic of Figma—its largest attempted acquisition ever that is still slogging through the regulatory approval process 13 months after its announcement.
Wall Street didn’t seem to mind. Adobe’s share price has jumped 5% over the last two days as analysts cheered the company’s announcements, despite the lack of financial details. “While light on numbers, the analyst day was big on vision,” wrote Keith Weiss of Morgan Stanley. Brent Thill of Jefferies characterized the day as “the fastest pace of innovation we’ve seen in 2 decades,” while Alex Zukin of Wolfe Research said in a note to clients Adobe is “truly remaking the entire product suite to be AI native.”
Considering that Adobe’s stock price is now up more than 66% since the start of the year, such a reaction was certainly not guaranteed. That performance is nearly double the gains of Microsoft, a much larger software company that has also aggressively embraced generative AI. And it comes as Adobe’s traditional business has come under the same pressure as its larger peer, as major corporate customers have grown more cautious in their spending. Microsoft’s revenue grew only 7% in its fiscal year ended June, which is less than half the 18% growth rate seen in the prior year. Adobe is expected to show 10% revenue growth for the fiscal year ending in November—its slowest annual growth in nearly a decade.
Can generative AI help lift the company out of that slump? It is certainly possible. Unlike some of the more speculative AI visions put forth by nearly every company in tech, Adobe benefits from some of the clearest use cases that could prove especially popular with its user base. The Firefly image generation tool that was just put into beta trials earlier this year is now on its second generation, with new versions announced this week for audio, video and 3-D image creation. New AI features in Photoshop are designed to cut hours from the editing process. And the company now even offers a “conversational” version of its Acrobat software, which can read, analyze and create PDF documents. Mark Moerdler of Bernstein noted that Adobe’s AI tools should result in users “saving hours of repetitive and mundane work.”
The trick now is getting enough customers to pay for it—while also not eroding Adobe’s profit margins, which are among the highest in software. Despite the hype that has fueled tech stocks this year, generative AI is still a largely unproven business concept. With the exception of chip makers such as Nvidia who are supplying the necessary components to power these services, the services themselves have yet to make a major financial impact. Microsoft told investors in its last earnings call that the financial contribution of AI services such as its Copilot chatbot “will be gradual,” with the impact weighted toward the back half of its current fiscal year.
Adobe said its fiscal fourth-quarter results in December will include a projection for the next fiscal year, which should provide some sense of how the new AI services are expected to perform. Wall Street currently expects revenue growth of about 12%—or 2 percentage points better than what is projected for the current year.
Analysts also expect Adobe’s adjusted operating margins to remain above 45% despite the high cost of powering AI services. Adobe is using a credit system for tools such as Firefly, where more frequent users of the service will pay more for the privilege. Adobe Chief Financial Officer Daniel Durn said Tuesday that “we expect to deliver stable, consistent operating margins through this investment cycle.”
With its stock up so much, the Photoshop maker can’t afford to tarnish that image.
Write to Dan Gallagher at dan.gallagher@wsj.com
Adobe May Be Tech’s Biggest AI Bet Yet - WSJ (archive.ph) |
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| From: Sr K | 11/28/2023 7:36:00 AM | | | | | | Adobe’s $20B Purchase of Figma Would Harm Innovation, U.K. Regulator Provisionally Finds
By
Joseph Hoppe
Updated Nov. 28, 2023 7:26 am ET
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PHOTO: GABBY JONES/BLOOMBERG NEWS
The U.K. Competition and Markets Authority said it has provisionally found Adobe’s planned $20 billion acquisition of collaboration-software company Figma would likely harm innovation for software used by the vast majority of U.K. digital designers.
The regulator said Tuesday that, following a detailed Phase 2 investigation, it provisionally found that the deal would eliminate competition between two main companies in product-design software, reduce innovation and the development of new competitive products, and remove Figma as a threat to Adobe’s flagship Photoshop and Illustrator products.
Exc. |
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| From: Sr K | 12/13/2023 7:58:48 PM | | | | | | Adobe Says Significant Costs, Penalties May Arise Out of FTC Investigation
wsj.com
The software maker says it has been cooperating with FTC staff since June 2022
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Denny Jacob
Dec. 13, 2023 5:22 pm ET
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Adobe on Wednesday also reported its fourth-quarter results and gave guidance for the current quarter and fiscal year. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
Adobe said it could face significant costs or penalties tied to a Federal Trade Commission probe into its disclosure and subscription cancellation practices.
The software maker said on Wednesday that it has been cooperating with FTC staff since June 2022 seeking information tied to its practices as it relates to the Restore Online Shoppers’ Confidence Act, according to a regulatory filing.
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| From: Thomas M. | 6/6/2024 11:15:14 AM | | | | | | Adobe joins Microsoft in admitting it's now basically spyware
Adobe is facing a privacy firestorm after users spotted changes to its terms of use, last updated February 2024, that highlight the company's right to “access your content through both automated and manual methods.”
It defines "content" as "any text, information, communication, or material, such as audio files, video files, electronic documents, or images, that you upload, import into, embed for use by, or create using the Services and Software."
[continued ...]
thestack.technology
Tom |
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