Capital Project’s Analysis- Adobe Systems
About the paper
The paper is commissioned to comprehensively discuss the fixed asset spending and the sub-avenues in which the amount is being spent by Adobe Inc. during the past two years. In order to introduce impeccable discussion, we will be relying on multiple resources, though the primary source will be the latest annual report of the company.
In addition to the above stated discuss, we will also present our view as to whether the capital spending on the new projects is viable and whether the amount being spent is appropriate given the company’s announcement in press releases.
Latest capital spending on the fixed assets
As noted from the cash flow statement and Note of the financial statement, during 2014 and 2015, Adobe Inc. the company has spent $148.332 million and$184.936 million, respectively, on the purchase of capital assets. (Adobe, pg 61)
Latest Projects
Referring to note related to investing activities, the company have not disclosed any information relating to any new capital project approved during 2015. However, the same note disclosed that the company initiated construction projects in Oregon, San Jose and India, and also acquired Fotolia during 201. Iit was for these projects, the company made new investments. (Adobe, 2016)
-Oregon Project:
As part of its energy conservation project, Adobe Inc. opted to construct a data center in Oregon to lower its demand for energy. Oregon was selected by the company because of its low carbon mix, low climate risk location and high potential for renewable energy implementation. Completing the project in the year 2013, the company continued to purchase more fixed assets for this project and this has helped the company in achieving evaporative cooling and setting up other innovations to reduce the energy use and related carbon emissions.(Adobe, pg 61)
-San Jose Project
Post the success of Oregon Project, Adobe Inc. invested in alternative and renewable energy sources to save on-site power consumption. During 2014, the company became the only Fortune 500 company to install fully functional energy saving system.(Adobe, 2016)
-Construction Project in India:
During the past four years, India has become a significant contributor in the company’s transformation journey and has become the target destination to create the largest market for the enterprise business, lead by its digital marketing focus. Therefore, with the focus to increase its employee strength in India, Adobe has started construction projects to finally move out of leased complexes and accommodate a workforce strength of 6000 individuals compared to the current level of 3000 individuals.(John,2016)
Therefore, since past two years, the company is spending aggressively to complete its construction project in India.
-Acquisition of Fotolia
With the intend to develop a marketplace for Creative Cloud subscribers, the company also acquired Fotolia in January, 2015 for $807.5 million. The acquisition of this product will enable the delivery and purchase of stock assets in the newly launched service, Adobe Stock.(Adobe, 2015)
Important to note, Fotolia is a marketplace for royalty-free photos, images and other multimedia and this acquisition will allow Adobe to integrate more of its products into its Digital Media reportable segment
Evaluating the Capital Spending
Considering the overall capital spending of the company, we do agree that the spending closely aligns with the strategic direction of fostering sustainability in its operation, providing ace services and products to its customers and ensuring innovation .
Finally, the capital spending to build a new office in India to accommodate more workforce is also an optimistic step as this will not only allow the company to eliminate lease payments, but will also allow it to focus more on the growing Indian market and neighboring South Asian countries by employing an additional workforce. Important to note, Asia Pacific segment now contributes 16% of the global revenue of the company and is now the fastest growing region for the company. Of this, India, which is turning out to be preferred business destination as part of Adobe’s transformation journey, will be an important part of the company’s strategic decision and capital expenditure plans.(Nadhe, 2015)
Conclusion
Using the relevant information from the company’s annual report and media resources has provided us with a credible outcome that was required for this paper. Considering all the perspectives, we are assured that Adobe Systems is perfectly balancing its expenditure on capital assets and each project being undertaken is in accordance with the long-term strategies of sustainability and growth.
References
Adobe Systems,. SEC 10K. USA: N.p., 2016. Web. 1 July 2016.
"Energy Conservation | Adobe Corporate Responsibility". Adobe.com. N.p., 2016. Web. 1 July 2016.
John, Sujit. "India Building Some Of Adobe’S Biggest Products: CEO - Times Of India". The Times of India. N.p., 2016. Web. 1 July 2016.
