Adobe Systems Earnings Call Insights: Subscribers Outlook and Competitive Advantages
Walter Pritchard – Citigroup: I’m wondering just two questions about subscribers. I don’t have access to presentation here, but I didn’t hear you update your goal for fiscal ’15 around the number of subscribers which I believe was $4 million and then secondarily we’re used to seeing an uptick from Q3 to Q4 in your perpetual business when it was (modeled solely) I think you noted in the past when you were setting expectations for this year, you would expect to see a bump from Q3 to Q4 in terms of ads and how you are staying sort of relatively flat. I’m wondering did you sort of pull forward some of that demand that you expected incrementally in Q4 or what else would account for much more level sequential increase?
Shantanu Narayen – President and CEO: So a couple of things on the Q3 to Q4 uptick for seasonality to be honest with you as we move more and more to this ratable model through ETLAs and subscribers that seasonality starts to get muted and I think that’s what you are seeing in our guidance. There is a little bit in there for digital marketing obviously there’ll be a bump in that business, but that’s less seasonal that’s a SaaS based model, but the typical seasonality we’re not just going to see like we used to in the perpetual business especially as more and more people are moving off of perpetual on to the subscription model. In terms of FY ’15, let me back up a minute and talk about ’14 a little more which will then kind of give you some color into ’15 as well. As we said on the call, we’ve had a really successful move to subscriptions and ETLAs. And as Shantanu and I both articulated customers are moving even sooner than we had anticipated. We’ve had success in the individual and team and the ETLAs and as a result of that we do see this mix shift to greater ARR and less perpetual revenue. So, what you see in Q3 and Q4 of this year is going to be representative of what you’re going to see through the beginning of 2014. We’re going to see a more rapid subscription in ETLA adoption. So, there is going to be a quicker decline in reported perpetual revenue and then a steeper return in reported revenue as we ramp up the subscribers. We expect that the creative product family revenue is going to begin to increase sequentially by the middle of next year and the health of the business through this transition as we’ve said for a while now is best measured by ARR. To your point on the FY ’15 targets, our long-term targets are unchanged for Creative we still believe we’ll hit $4 million subs by the end of 2015. We still believe we’ll grow reported revenue on a CAGR of over 15% from 14% to 16%. We still believe total Adobe revenue and earnings grows in ’14 and beyond. So, none of those long-term metrics have changed, things are just happening faster which is exactly what we want. The other thing to keep in mind on that $4 million target as Shantanu alluded to the fact that some of the team subscribers are moving to ETLAs, and as a result of that they don’t show up in the subscriber count that we published. So that 4 million would be bigger where it not for the fact that some team people are now moving to ETLAs, but we’re still are confident in the 4 million.
Walter Pritchard – Citigroup: Just, Walter, maybe a little bit more color on Q3 to Q4 transition. We do see strength in the pipeline as it relates to both Digital Marketing as well as enterprise ETLAs, which is why we’ve said Digital Marketing we expected to grow 35% at the midpoint and ETLAs also is a very healthy pipeline.