Given the wild success of YouTube which uses Flash as the distribution vehicle for its videos, it is not surprising to learn that Flash is now the number one video distribution technology on the Internet (thanks Web 2.0). Given this fact, I wondered how the market is reacting to this news. Is ADBE another AAPL in the mid to long term? Is it a mature company that has found a new way to generate significant market growth?

According to all the online stock services ADBE has done relatively well since its acquisition last year of Macromedia, the company that owned the Flash technology. The stock traded in the $38 dollar range for the last week up from the mid to high 20's prior to the purchase. So, the market has noted the purchase but has it acknowledged that the Flash system is fueling the real trend towards "convergence" that companies like Emergis bet the farm on just a few years ago?

As an academic exercise, I took a few hours to check the company's fundamentals and measure them against the energetic growth of Flash. Using relatively modest five year growth given the net's feverish embrace of the company's technology - think of it as the equivalent to the iPod - and a discounted cash flow analysis, I came up with a 12 month target price of about $53. Now, I want to warn my readers that while I do have an MBA I am not a professional stock analyst, so take this target price with a grain of salt. Still, the comparison to Apple's resurgence are useful. The market, it seems, just hasn't clued in to the fact that Flash is a critical Internet standard and the process of convergence is a critical Internet standard. Flash, as I've mention here before, (...read more...)