ADBE ( $39 )reports strong Q2, sees flat Q3
(UPDATE: adds details from conference call, analysts' comments; updates stock price)
By Peter Henderson
LOS ANGELES, June 14 (Reuters) - Adobe Systems Inc. (NasdaqNM:ADBE - news) said on Thursday a new version of its Acrobat Web publishing software had caught on strong and managers had controlled costs in the face of an economic slowdown, allowing it to beat Wall Street expectations for quarterly earnings.
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But the San Jose, California-based firm said it was prepared for economic malaise to spread to Asia even though there had been no sign of that so far, since the United States had turned down again in May and Europe continued to fade.
Fiscal second-quarter net income fell to $61.3 million, or 25 cents a diluted share, from $65.8 million, or 26 cents a share, a year ago, Adobe said. Revenue rose 15 percent to $344.1 million from $300.1 million in the quarter a year earlier.
Operating income, not including one-time items, was 34 cents a share, beating the average expectation of analysts polled by Thomson Financial/First Call of 29 cents a share on sales of $339.7 million.
``Things were not as bad as people had been expecting. Period. I think overall people are going to be pleased with that,'' said Goldman Sachs analyst Jessica Kourakos. ``From a relative perspective they are doing well.''
Shares in the company, which also makes the popular Illustrator and Photoshop software products, rose to $39.55 after hours on Instinet from a $39.01 close on the Nasdaq before the earnings news. They had closed off 2.91 percent, or $1.17 during the regular session.
Adobe was cautious on the current quarter, predicting sales would be flat year-on-year, against $329.9 million in 2000. Many analysts had expected some growth, although Adobe had not previously released a forecast for the quarter.
``The (past) quarter was really strong,'' Robertson Stephens analyst Sasha Zorovic said, adding that he was concerned the current quarter would prove weaker.
Chief Executive Bruce Chizen said Adobe had tightly managed expenses and had done better with Acrobat 5.0 than expected. Sales in that division rose 67 percent year-on-year, he said on a conference call.
``I do think that Acrobat will be the fastest growing product and category,'' he said in a telephone interview.
Acrobat is the standard way to publish documents on the Web which can be read on a computer, attached as e-mail, and printed out, when it comes to necessary documents like tax forms.
However, an Adobe survey showed more U.S. businesses were putting off software purchases due to the softer economy, and in general Adobe U.S. sales were weaker than expected in May.
``January and May were clearly the two weakest months,'' in the United States, while Europe had dragged and Asia appeared strong, Chief Financial Officer Murray Demo said.
``It is really hard to draw conclusions other than it hasn't gotten any better, and the question is has it hit bottom?'' Demo said.
Demo said in a statement that the longer term outlook was still murky but could improve as the company refreshed other products.
``Looking to Q4, although our visibility remains low, we believe our year-over-year revenue growth will improve as we enter a new major product upgrade cycle,'' he said.
The third quarter target included a conservative assumption that Asian demand would start to weaken, he added.
``We have not seen any weakness as of the end of the second quarter,'' in Asia, he said in the conference call. ``(But) we feel that the right thing to do at this point is to factor in some,'' he said |
