A September 24th blog post from BTIG Research’s Mark Palmer suggests that mobile payment firm Monitise Plc (LON:MONI) (OTCMKTS:MONIF)’s switch from a one-time license fee business model to a subscription-based model might eventually work out well based on Adobe Systems Incorporated (NASDAQ:ADBE)’s similar transition over the last couple of years.

Monitise has lost over one-third of its market cap over the last week as investors are bailing out over concerns about competition and the fact that Visa Inc (NYSE:V) is “considering its options” in disposing of its 5.5% stake in the firm.

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Statements from Monitise co-CEOs

New co-CEO Elizabeth Buse is excited about the move to a subscription model. “If Monitise had not changed its business model, I would not be here,” said new Buse, who came to Monitise Plc (LON:MONI) (OTCMKTS:MONIF) this summer after 16 years with Visa Inc (NYSE:V), where she was once considered a top CEO candidate. “I am here because I am so excited about the future and the ability that we have, uniquely, to capture that future.”

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Co-CEO Alistair Lukies explained the switch in business models during a conference call in July, “the move to a subscription model is a well-trodden path … businesses who are relying on sort of the old infrastructure, buck-shifting business model are struggling.”

Do it like Adobe

As Palmer points out in his blog, Buse’s comment offers some useful some perspective at a time when many  investors are worried whether the subscription model is gaining traction, reasonable concerns given the company reduced its revenue and EBITDA forecasts for fiscal 2014 and provided a lower-than-expected FY15 revenue growth projection of 25% due to the impact of the transition during its July earnings call.

Palmer also notes that other new economy tech companies such as Adobe have recently successfully switched to a subscription model. “We believe additional perspective can be provided by the experiences of other companies that made the move to a subscription-based model, including Adobe Systems.”

They key takeaway here is that Adobe Systems Incorporated (NASDAQ:ADBE)’s revenues and stock price of ADBE took a hit in the months following the announcement of the move to a subscription model, the stock price has since appreciated by 147% over the next 24 months. Of note, while the firm’s earnings still have not returned to earlier levels, last week it reported 2.81mm subscribers as of third quarter 2014. Moreover, the current analyst consensus calls for Adobe’s earnings to increase from an estimated $626 million in fiscal 2014 to $1.057 billion in fiscal 2015, a robust 69% increase.

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