The Software sector had mixed results this quarter with a few companies reporting marginal growth in revenue year over year. Net income was down for most of the software companies. Adobe, Intuit and VMware came out with positive revenue growth of 22%, 14% and 10%, respectively, year over year. Sequentially, all the companies reported positive revenue growth except for Symantec, which was impacted by the sale of its Veritas Storage division.
The worsening economic environment in emerging markets has had little effect on the global enterprise software spending forecast for 2016, with IT spending on pace to total US$326 billion, a 5% increase from US$310 billion in 2015.
The global business intelligence and analytics market is expected to reach US$16.9 billion in 2016 an increase of 5.2% from 2015. This represents a shift from IT-led, system-of-record reporting to business-led, self-service analytics. As a result, the modern business intelligence and analytics (BI&A) platform has emerged to meet new organizational requirements for accessibility, agility and deeper analytical insight. Organizations are transitioning to easy-to-use, fast and agile modern BI platforms to create business value from deeper insights into diverse data sources, at a rapid pace. All the software companies are seeing great demand and are seeking to capitalize on this opportunity. Creating analytics content via IT-centric reporting platforms starts with IT consolidating and modeling data in advance. By contrast, a modern BI&A platform supports IT-enabled development of analytics content.1
Meanwhile the cloud email market is still in the early stages of adoption with 13% of identified publicly listed companies globally using one of the two main cloud email vendors. About 8.5% of public companies in a recent survey use cloud email from Microsoft's Office 365 service, while 4.7% percent use Google Apps for Work. The remaining 87% of companies surveyed have on-premises, hybrid, hosted or private cloud email managed by smaller vendors. Although it is still early days for cloud email adoption, both Microsoft and Google have achieved significant traction among enterprises of different sizes, industries and geographies.2
The worldwide public cloud services market is projected to grow 16.5% in 2016 to total US$204 billion, up from US$175 billion in 2015. The highest growth will come from cloud system infrastructure services (infrastructure-as-a-service), which is projected to grow 38.4% in 2016. Cloud advertising, the largest segment of the global cloud services market, is expected to grow 13.6% in 2016 to reach US$90.3 billion.3
In company news, in October 2014, Symantec said that it was pursuing a split of its storage and security businesses into two separate companies. In August 2015, it decided to sell the Veritas storage division to the Carlyle Group for US$8 billion. Symantec had acquired Veritas in 2005 for US$10.2 billion. In January 2016, the company and Carlyle amended the terms of the purchase agreement for Carlyle's acquisition of the information management business, Veritas. Based on the amended terms, the company will receive net consideration of US$6.6 billion in cash and 40 million B common shares of Veritas. The transaction closed on January 29, 2016.4
Adobe recorded quarterly revenue of US$1.3 billion, a year-over-year increase of 22%. Digital Media Annualized Recurring Revenue (“ARR”) grew to US$3.0 billion at quarter end, an increase of US$350 million. Creative ARR grew to US$2.6 billion, an increase of US$310 million, driven by enterprise adoption and the addition of 833 thousand net new individual and team Creative Cloud subscriptions. Adobe Marketing Cloud achieved revenue of US$352 million with strong bookings growth and a stronger-than-expected shift in customer adoption to SaaS-based solutions. This led to the strong year-over-year growth in operating income of 133% and 153% in net income. The company repurchased approximately 1.4 million shares during the quarter, returning US$122 million of cash to stockholders.5
1Gartner press release, Feb 2016
2IDC press release, Dec 2015
3Gartner.com, Jan 2016
4Symantec, Feb 2016
5Adobe, Dec 2015