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Follow UsLisa Baertlein
PALO ALTO: Publishing software maker Adobe Systems Inc. on Thursday posted an
11 per cent drop in fiscal second-quarter net earnings and warned current
quarter revenues would fall short of Wall Street expectations.
The company's outlook -- which called for third-quarter results that would be
flat to slightly lower sequentially -- sent Adobe's stock to a four-month low of
$33.50 in after-hours trade on Instinet, down sharply from its Nasdaq close of
$36.19.
"People were looking for positive revisions," Prudential Securities
analyst John McPeake said. Instead, analysts said, the company slightly lowered
its fiscal 2002 guidance to call for total revenue of about $1.2 billion, rather
than the $1.3 billion it had earlier forecast, although some analysts said the
change was not material.
"That's nothing, it's absolutely nothing," said Robertson Stephens
analyst Aleksandar "Sasa" Zorovic.
While software makers such as Oracle Corp., PeopleSoft Inc. and Siebel
Systems Inc. have seen revenues shrink by 15 per cent to 30 per cent as they
fight to close six-figure corporate deals, analysts said Adobe has been somewhat
insulated because its products cost a couple of hundred dollars and sell to a
variety of different customers.
Acrobat flat, PhotoShop strong
Excluding restructuring and other charges, the San Jose, California-based
software shop had a second-quarter pro forma net income of $67.4 million, or 27
cents per share, down from $84.5 million, or 34 cents, a year earlier.
Net income was $54.3 million, or 22 cents per diluted share, compared with
net income of $61.3 million, or 25 cents, a year ago. Revenue was off nearly 8
per cent to $317.4 million from $344.1 million.
Adobe's own estimate had called for earnings of 24 cents to 27 cents a share
on revenue of $305 million to $325 million and analysts' average forecast was
for a profit -- minus charges -- of 25 cents per share on total revenue of
$316.3 million, according to tracking firm Thomson First Call.
"Despite a continuing soft economy, we had a solid quarter with a strong
release of Photoshop," said Adobe President and chief executive Bruce
Chizen, who added that the new version of the company's key photo-editing
software posted the second-best quarterly performance in its history.
"What we don't know is how is it going to proceed as we move through the
quarter and into Q4," Chizen said. Chizen told Reuters that revenue from
Acrobat, Adobe's document-sharing software that contributes almost one-third of
company sales, was $74 million in the past quarter and should be about the same
this quarter.
Revenue from Accelio, which the company purchased in April, was
"disappointing," he said. Prudential's McPeake said flat Acrobat
results were a cause for concern because the software is one of Adobe's biggest
growth products.
Adobe said it sees pro forma earnings of 24 cents to 27 cents per share on
revenue of $300 million to $320 million in the current fiscal quarter. Analysts'
consensus earnings estimate of 26 cents was in line with the company's forecast,
but the average Wall Street revenue estimate had been higher, at $328.2 million,
according to First Call.
For the fourth quarter, the company sees revenue of $315 million to $345
million and pro forma profit of 26 cents to 29 cents per share. Analysts
consensus was for a per-share profit of 26 cents on revenue of $335.8 million.
Chizen, who declined to issue a 2003 forecast, said the economy has stabilized,
but at a relatively low level of demand.
"It hasn't gotten any worse, in our opinion, anywhere in the world. It
hasn't gotten any better. I don't see that changing in the short term,"
Chizen said. Adobe's shares have been trending higher since late September and
were up 20 per cent year-to-date, while the stock of rival Macromedia Inc. was
down 1.5 per cent before Thursday's action.
The after-hours drop in Adobe's shares, if sustained, would take the stock to
its lowest level since February.
(C) Reuters Limited.