In September 2009, with the stock market still in the doldrums from the Great Recession, Adobe announced plans to spend $1.8 billion for marketing software vendor Omniture, its second-biggest acquisition ever at the time.
Prior to the deal getting announced, Adobe CEO Shantanu Narayen said at a meeting that he’s “always trying to not waste a good crisis,” according to the recollection of John Mellor, who was executive vice president at Omniture and stayed on at Adobe for almost 10 more years.
There’s a similarly opportunistic sentiment in the air today. With over three-quarters of 2022 in the books, Adobe’s stock is down 43% this year and on pace for its worst year since 2008, the depths of the financial crisis. This time, the company faces an economic downturn highlighted by soaring inflation.
Last month, Adobe agreed to pay $20 billion for Figma, the largest takeover of a private software company and a sum more than four times greater than what Adobe had ever spent in an acquisition. While Narayen is still CEO, he’s not the person who spearheaded this deal. That distinction belongs to the president of Adobe’s sprawling digital media business, David Wadhwani, according to people familiar with the transaction who asked not to be named because the details were private.
Wadhwani, 51, has spent more than a decade at Adobe over two separate stints, rejoining the company in mid-2021 after six years in other Silicon Valley executive and investing roles. Wadhwani, Adobe’s third highest-paid executive after Narayen, 59, and finance chief Dan Durn, is in the driver’s seat to become the next CEO, a position strengthened internally by the Figma deal, some people close to Adobe said. A former executive told CNBC that everyone is wondering when Wadhwani will get the promotion.
In January, Wadhwani and Anil Chakravarthy, the head of Adobe’s marketing software business, were each named as presidents of the company, a title Narayen had held since 2005. Chakravarthy joined Adobe in 2020 after serving four years as CEO of Informatica.
Some sources close to the company said Wadhwani and Chakravarthy are both strong contenders but cautioned that Narayen isn’t leaving anytime soon. The business Wadhwani oversees is roughly three times the size as Chakravarthy’s in terms of revenue.
For Wadhwani, Figma represents a risky bet on growth at a time when Wall Street is telling tech companies to tighten their belts and preserve cash. Assuming the deal closes, Adobe is paying about 50 times annual recurring revenue, and a price equal to double Figma’s private valuation last year, even with cloud stocks broadly down by more than half in the past 12 months. At the time of the announcement, the purchase price amounted to about 12% of Adobe’s market cap, compared to almost 10% for Omniture 13 years ago.
Figma founder and CEO Dylan Field will report to Wadhwani. Brad Rencher, former head of Adobe’s marketing software group, said Wadhwani’s elevated status became abundantly clear to him when he first read of the acquisition.
“I was like, OK, David was the sponsor. He was the one standing up and doing it,” said Rencher, who’s now CEO of BambooHR, a startup in Utah. A move that big doesn’t happen without the CEO’s support, Rencher said.
Narayen told CNBC’s Jon Fortt last month that he and Field had held “multiple conversations” over the years. Field said at a conference recently that Adobe first reached out to Figma in 2012, days after he announced the startup. But Adobe waited a decade to pounce, giving Figma time to show that it could succeed selling its software inside large companies such as Microsoft.
The make-or-break bet
In his 15-year tenure as CEO, Narayen hasn’t been shy about dealmaking, just at a smaller size. He orchestrated several billion-dollar-plus deals, including Omniture. The biggest prior to Figma was marketing automation software provider Marketo, which Adobe bought for $4.75 billion in 2018.
Figma is different. It shows Adobe’s willingness to pay top dollar for a trendy asset and let it run independently, rather than just buying companies and integrating their capabilities into existing products. And it might be Wadhwani’s make-or-break opportunity to prove he should be CEO of the fourth-biggest U.S. business software company by market cap.
Among past and current colleagues, Wadhwani is known to be unnervingly still in meetings, speaking in a slow and measured manner and often wrapping up by summarizing the three most critical points that were discussed. Rencher said there’s a clear similarity to his boss.
“He’s made in Shantanu’s image,” Rencher said.
Still, he can become passionate and animated. Rencher recalls a company offsite for executives a little over a decade ago at a spa resort in Carmel Valley, California, about two hours south of Adobe’s headquarters in San Jose. There was an icebreaker to try and ease the executives into conversation. But Wadhwani was ready to get down to business.
“We’ve got to change something or we’re going to be in trouble,” Wadhwani said, according to Rencher’s memory of the event.
Adobe said Wadhwani wasn’t available for an interview and the company declined to comment on succession planning.
Wadhwani is said to be a dedicated family man, with a wife, two daughters and a dog, though he allows himself one indulgence. When he travels on business, he insists on eating McDonald’s at airports. In particular, he loves the French fries, a former colleague said.
At Adobe, Wadhwani has been at the center of one of the most important shifts in the company’s 39-year history: the move from perpetual licenses to subscriptions. When Adobe revealed the grand plan for a new business model to analysts in 2011, Wadhwani was tasked with announcing the prices.
“We believe that over the course of the next few years as a result of this, we’ll attract over 800,000 new users — new incremental users to our Creative Suite — and do it in a way that’s good for the customer and good for Adobe,” Wadhwani said.
Revenue growth slowed and eventually declined as Adobe made its strategic and technological changes. But each quarter, hundreds of thousands more people signed up for Creative Cloud, a bundled subscription offering of key Adobe products such as Photoshop, Illustrator and Premiere Pro.
The revenue became more predictable and less closely associated with product releases. Investors responded by pushing the stock price above the $50 mark in late 2013 for the first time. It kept rising, and by 2016, nearly 7 million people were subscribing to Creative Cloud. In all, the stock price soared 233% over those four and a half years, compared with a 67% rise for the S&P 500.
Prior to the Creative Cloud launch, executives discussed the vision at an executive meeting at a lodge in Sausalito, California, across the Golden Gate Bridge from San Francisco.
It wasn’t a universally popular idea to bet the company on a new revenue model that was just starting to gain mass adoption in software. But Wadhwani spoke up in the middle of a disagreement and made clear that he saw real value in the effort. He showed the group early drawings of the product from company designers, said Michael Gough, a former Adobe vice president, who was in attendance.
“He was the one that was sort of rallying people to take it seriously,” Gough said. “Let’s talk about what would we actually do. What are we missing from the stack? What kind of resources would it take? He was taking the vision and creating a working plan, basically, and getting people to at least talk about the possibility of doing it.”
Jumping to a startup
By 2015, the subscription business was humming. Adobe significantly outperformed its target for paid Creative Cloud subscriptions. In June of that year, Wadhwani presented for the first time on an Adobe quarterly earnings call with analysts.
Three months later, he resigned “to pursue a CEO opportunity,” as Adobe stated in a press release. The new gig was made public a couple weeks later, when data analytics startup AppDynamics said Wadhwani would be taking over for Jyoti Bansal, a star founder in the software industry and the Bay Area.
Wadhwani told colleagues when he left that he wanted to be a CEO, said a former Adobe employee. Internally, there was chatter that he’d come to see that he wouldn’t be the next CEO of Adobe, according to a former executive.
Bansal, who’d guided AppDynamics into the billion-dollar startup club, was resistant to the idea of bringing in an outside CEO, said Steve Harrick, a partner at Institutional Venture Partners, an early backer of the company. Wadhwani eventually won over Bansal, who didn’t respond to a request for comment.
Harrick said that Wadhwani would frequently follow up with him after board meetings that ended without resolution on important matters. As CEO, Wadhwani pushed for engineers to build software in-house to broaden its offerings to existing customers, Harrick said. He also guided the company to become more dependent on revenue from subscriptions, rather than from more traditional licenses, an evolution he had advanced at Adobe.
Wadhwani was quickly poised to be CEO of a public company, after AppDynamics filed for its IPO in 2016. Early the following year, the company was set to raise almost $200 million and trade on the Nasdaq until Cisco showed up at the last minute and agreed to pay $3.7 billion for AppDynamics, more than double its expected valuation.
“They were not dual-tracking. They were not trying to be bought,” said Harrick. ”They were earnestly saying, ‘This is a public company, that’s our marching orders.'”
Wadhwani stayed at Cisco after the acquisition. With Cisco trying to expand beyond networking and telecommunications gear and into software, Wadhwani advocated for the company to do more deals, suggesting it look at Datadog and HashiCorp, according to a former Cisco executive.
Neither deal happened. Datadog went public in September 2019, followed by HashiCorp in December 2021. However, Cisco did invest in HashiCorp in 2020.
Wadhwani left Cisco in October 2019 to join venture firm Greylock Partners, an early investor in AppDynamics. Less than two years later, he rejoined Adobe to again run the digital media business, but this time with bigger aspirations.
“He missed having a group of people around him where they were doing a lot of stuff together,” said Mona Akmal, co-founder and CEO of sales software startup Falkon, which was Wadhwani’s first Greylock investment.
Akmal told Wadhwani she wanted him to stick with her even as he pursued a job elsewhere. He’s continued attending every board meeting, she said.
Akmal said she wasn’t surprised to see Wadhwani return to an operating role, as she would joke with him that he was born to be a CEO. He’s tall and handsome, and his hair is always perfect, she said. She would ask about his hair, which has turned largely white, and question why he hasn’t dyed it.
“Are we doing the white hair because we want to look more executive?” she remembered asking him. “He would give you the smile, like, ‘Maybe.'”
Wadhwani rapidly got up to speed upon his return to San Jose. He’s participated in all three of Adobe’s quarterly earnings calls with analysts this year, providing details on Creative Cloud and, more recently, the Figma deal.
Internally, his targets included reaching creative professionals who are becoming more willing to collaborate, growing Document Cloud after the pandemic boosted e-signature rival DocuSign and popularizing Adobe Express to address the low end of the market, a former executive said.
‘Really important shift’
He’s been recruiting top talent, bringing back product veteran Deepa Subramaniam and technologist Ely Greenfield, who was technology chief at AppDynamics under Wadhwani.
At Adobe’s annual Max conference in Los Angeles this month, Wadhwani took the stage for the first time since 2014, and highlighted to analysts the opportunities to expand the digital media business.
He said the company was making “a really important shift and transition,” directing people who show interest in working with PDF files toward free services and then introducing them to premium capabilities. Wadhwani said the company has taken a page from its Document Cloud business and applied it to Creative Cloud, encouraging customers to pay for additional services.
At the event, Wadhwani said Figma’s popular design collaboration tools can accelerate Adobe’s effort to get more people engaging with documents in Adobe applications, thus widening the pool of potential customers. He invited Field to join him onstage and talk about Figma’s current projects.
During a question-and-answer session later in the day, Wadhwani sat directly to the right of Narayen, who was flanked on the other side by Chakravarthy. Wadhwani and Narayen seemed to have coordinated their outfits. Both wore sneakers and sweaters over collared shirts.
Jay Vleeschhouwer, an analyst at Griffin Securities, asked the executives how Figma can help Adobe become more web oriented.
“I could probably literally spend hours on file formats versus object models in the web and what it takes,” Narayen said.
Then Wadhwani spoke up. Figma doesn’t depend on any one file format, he noted.
“One of the things that we’re really excited about,” Wadhwani said, is “working with Dylan and team to take those core capabilities, take the core platform that Dylan and team have built, and really reimagine what should the flows be.”
“Good news is David can also talk hours about the same issue,” Narayen said, referring to his file formats comment. Narayen smiled as the analysts and his fellow executives laughed.
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