Digicams pump Adobe profits up

Lisa Baertlein

SAN FRANCISCO: Software maker Adobe Systems Inc. posted a quarterly profit that rose more than one-third from a year ago, but shares fell 3 percent after the maker of Photoshop and Acrobat software did not raise forecasts for fiscal 2005.

"The guidance isn't going up. I think that's why the stock's down," said JMP Securities analyst Amy Feng, who added that expectations for the stock, which is up almost 60 percent so far this year -- are very high.

For the fiscal quarter ended Dec. 3, San Jose, California-based Adobe reported net income of $113.5 million, or 45 cents a share, up from $83.3 million, or 34 cents per share, a year earlier. Per-share results from the recently finished quarter included 1 penny of investment gains from Adobe's venture capital investment program.

Revenue was $429.5 million versus $358.6 million in the year-ago period, boosted by strong sales of Adobe's Acrobat document-sharing software.

The results exceeded analysts' average targets, which had called for revenue of $418.2 million and earnings per share of 42 cents, according to Reuters Estimates.

DIGITAL CAMERAS DRIVE DEMAND

The company, which will begin bulk-shipping the next version of Acrobat in English in January, said increasing marketing spending by companies as well as the boom in digital camera use had contributed to sales growth for its photo, video and text editing products, which include Photoshop, Premiere Pro and InDesign.

Early demand for Acrobat 7.0 -- the latest update to its software that lets people send and receive formatted documents over e-mail -- also has been robust, the company said.

Shantanu Narayen, Adobe's executive vice president of worldwide products, said growth has "been pretty consistent around the world."

Adobe forecast first-quarter revenue of $435 million to $455 million and per-share earnings of 45 cents to 48 cents.

It reiterated its fiscal 2005 forecast for $1.85 billion to $1.9 billion in revenue, which is in line with analysts' average forecast.

During Adobe's earnings conference call, analysts asked whether the company would scale back options grants after the Financial Accounting Standards Board -- which sets U.S. accounting standards -- on Thursday published a rule that could force companies to expense employee stock options starting in mid-2005.

"Our intent is to be competitive in the marketplace," Adobe President and Chief Executive Bruce Chizen said.

Adobe and other Silicon Valley high-tech companies have generously granted stock options to employees, using them as recruiting and retention tools.

Adobe's stock, which finished down 2.5 percent at $61.11 on the Nasdaq before the results, settled at $59.20 in after-hours trade.