As Adobe dumps Flash for mobile, and 750 jobs, investors dump shares

Adobe‘s stock is taking a big hit today on the heels of two big pieces of news: It will stop developing Flash for mobile devices, it announced this morning. And it is getting rid of about 750 full-time jobs, it said Tuesday.

Shares of the San Jose software company are off more than 7 percent to about $28.25 as of this post. Earlier this morning, they were down as much as 14 percent.

Does Adobe now agree with the late Steve Jobs that Flash is no good for mobile? Steve Jobs, the late Apple founder, last year wrote a now-famous manifesto detailing why he wouldn’t allow Flash on the iPhone and other mobile devices. Among his concerns were stability and Flash’s effect on battery life. (See Jobs illuminates Apple’s Flash objections.) At the time, CEO Shantanu Narayen’s response set off, among other things, a debate about open vs. closed platforms.

In a blog post this morning explaining why it’s dropping Flash for mobile, Adobe concedes that the emerging Web-authoring standard, HTML 5, is now “universally supported on major mobile devices, in some cases exclusively.” We of course know that “in some cases” is code for Apple’s iPhone and iPad, whose market share is significant and whose mind share cannot be denied. There is no shortage of Flash detractors — according to GigaOm‘s tests, Flash’s performance on mobile was spotty — but in the end, the huge influence of Apple, and the subsequent announcement by Microsoft in September that its mobile platform, Windows 8 Metro, would not support plug-ins such as Flash proved to be too much. Why plug away (no pun intended) on Flash for mobile when a huge percentage of mobile devices won’t even allow it to run?

Adobe has hinted at major changes over the past few months, so its announcement of restructuring was no surprise. Today at the company’s financial analyst meeting, which is being webcast, Narayen referred to the “tough decisions” associated with restructuring as Adobe makes “fundamental changes” to keep up with the times. The layoffs, which amount to 7.5 percent of the company’s workforce, appear to be a way for the company to deal with one of its major transformations: its shift to the cloud.

Among the new goals Naruyen mentioned this morning include building “a billion-dollar SaaS (software as a service) business.” In an interview with GMSV last month, CTO Kevin Lynch talked about Creative Cloud, which when it launches this month will allow users to use well-known Adobe software such as Photoshop, as well as new offerings, online. “You’re going to see [software] boxes go away over time,” Lynch said during our interview.

This shift to the cloud will “hurt at first,” writes ZDNet’s Larry Dignan, who cites some analysts’ view that huge transitions such as these are tricky and will likely put a damper on short-term revenue.

Back to Flash, whose bright future Adobe executives continued to tout at today’s analyst meeting. Although Adobe is dumping Flash for mobile, the official company line is that for non-mobile browsing, the standard remains the best choice for more graphics-intensive Web content such as games and high-definition video. Now the speculation about what effect the move in mobile will have on the future of Flash as a whole begins.


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