For Macromedia, the Future Belongs to Non-PCs http://knowledge.wharton.upenn.edu/article/1059.cfmSo Macromedia played a leading role in CD-ROMs and the Internet. And now we see a huge new trend happening in which we're very involved - which is making products for "non-PCs." A lot of people are calling that the "mobile" market - including us - but it's so much more than mobile. It involves TV sets and DVDs and game machines and educational toys - as well as phones and PDAs. We just had NTT DoCoMo in here this morning. The Japanese mobile telecom company is one of our biggest customers. Some 13% of Japan's population today has a Flash-based phone, and we got going with them just a year and a half ago. DoCoMo ships almost a million phones a month - all of their two-and-a-half G and 3G phones. ...DoCoMo was the first major mobile operator to make Flash part of its strategy. They had Java in their phones, and then they decided to differentiate with Flash. Since then we've signed up more than a hundred partners. KDDI is the second service in Japan, and they've now launched with Flash. T-Mobile in Europe has launched a mobile news and information service based on Flash. So it's starting to come across the globe. And in a few years North America will be operating as well. ...For the first decade of our existence, we supplied leading tools for designers and developers to create these [rich] experiences. And now we are broadening how we enable better experiences to both business users and consumers. And that's our growth strategy for the future. ...We've grown the designer/developer to be a $300 million business in the last seven years. When we got here it was about $100 million a year and now it's nearly $100 million a quarter. We have almost quadrupled the size of the business over that period of time - but mostly in the designer/developer market. When I look at the consumer market as an example, there are about a billion and a half phones out there today. Maybe 20 million of them have Flash - or any kind of sophisticated multimedia capability. In five years, there will likely be 5 billion phones out there - and most of them will be multimedia. So I feel like we're at the very beginning stage of that market. Over five years, Macromedia could have an opportunity to have businesses in consumers and business users that are at least as large as the designer/developer business is for us now. ...The principal risk, I think, is around execution. I mentioned that we quadrupled our business in the last seven years. We've also tripled our staff. That is where the increased profitability comes in. But operating a company of this size and pursuing new markets primarily involves execution risk. ...While there is competition in some of our fields - web conferencing in particular - the fact is that there's not a lot of competition out there for Flash at the moment. Flash has achieved ubiquity in terms of PCs - 98% of PCs have Flash. We have more than a million developers. Those are really the two assets that people want in a multimedia runtime. So, the major issue for us is not competition as much as it is effectively executing on the market opportunity.
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