To get some sense of how fast this market is growing, I talked to Roger Lanctot, the director of research at PC Data, which is a market research company that tracks sales for virtually every computer-related product. According to Roger, this most recent quarter was one of flat and even negative growth for the vast majority of packaged software product categories. There is a lot of other useful information on PC Data's website , some of which we will use in our analysis of companies we will be looking at later on in our software study. If you're interested in the software sector, you might enjoy perusing their site. So, while Adobe has what looks like a hammerlock on the document management and photo-editing markets, Macromedia represents stiff competition in the Web design segment.
Gross margins are tremendous at both companies.
Net income was six times larger at Adobe. Additionally, Adobe really shines in the cash flow categories. With a 0.43 Flow Ratio , Adobe's Flowie was half that of Macromedia's. While I don't yet have full-year cash flow data for Macromedia, my guess is that the company will essentially have zero free cash flow for the most recent fiscal year. Meanwhile, Adobe will have generated as much in free cash flow as Macromedia did in sales over the past 12 months.