Just found this relevant release from yesterday which kind of sums up the analysts' negative case:
Dow Jones Newswires -- September 26, 1997
Adobe Exec's Resignation Seen Part Of
Co. Streamlining
By MARIA V. GEORGIANIS
Dow Jones Newswires
NEW YORK -- Adobe Systems Inc. (ADBE) took a step toward
repositioning itself for reinvigorated sales and earnings growth with
changes in its management structure.
Adobe said Friday it cut out the chief operating officer position following
the resignation of David Pratt, who held the post. In addition, the
company's board created an office of the chairman of the board. Chief
Executive John E. Warnock and President Charles M. Geschke will both
have the title of chairman of the board.
The company said in a press release that it made the moves to "to
streamline planning and decision making in the company." An Adobe
spokeswoman said other changes were likely in the company's pursuit of
growth. Changes are expected in the way the company is organized but
any other personnel changes will come at levels below that of company
officers, she added.
Piper Jaffray Inc. analyst Hany Nada said Adobe's elimination of the chief
operating officer position may be an effort to refocus its management team
and speed up its decision-making.
"They're notoriously slow to make decisions on acquisitions and product
introductions," Nada said.
Adobe's sales and earnings growth needs a spark, given that its current
product upgrade cycle has peaked and new products aren't expected until
at least next year's first half.
Volpe Brown Whelan & Co. analyst Peter Rogers said the company "lost
some of its decision-making edge" over the last couple of years because of
integration issues with its acquisition of Aldus Corp. and Frame
Technology Corp.
In addition, the company has a lot of senior executives to run through
decisions, Rogers said, adding that the elimination of Pratt's position
shows that "operational simplicity is something that was sought by
management.'
"The company has an ideal structure right now," following Friday's
announcement. Rogers said, But the real issue "isn't the structure, it's the
execution. The company really needs to be much more aggressive in
formulating and articulating a longer-term product vision," he said.
Adobe's growth prospects are expected to get a boost during the second
half next year with the anticipated arrival of upgrades for PageMaker,
PhotoShop, Acrobat and FrameMaker.
"The key issue for the company in the next several quarters is maintaining
earnings momentum, because most of the upgrades are out now," Rogers
said.
Adobe's earnings exceeded earnings expectations at 55 cents a share,
excluding items, on revenue of $230 million, for the fiscal third quarter
ended Aug. 29. The sales were driven largely by promotions on core
graphics software.
During the fourth quarter ending Nov. 30, Adobe is expected to post
earnings of 57 cents, according to a First Call Inc. consensus.
Some analysts expect Application and Postscript revenues to be flat to
down sequentially due to the lack of new software upgrades and declining
Postscript royalties.
Piper Jaffray's Nada sees fourth-quarter Postscript royalties as paling
against $45.2 million in the third quarter because of lower printer prices
and Hewlett-Packard Co.'s (HWP) migration of its network printers to
another printing language.
He estimates fourth-quarter earnings of 50 cents a share on revenue of
about $222 million.
The analyst said he expects fourth-quarter application revenue of $182
million. However, he said, that figure may be higher depending on
software sell-through data released over the next few months by market
research firm PC Data, of Reston, Va.
Nada estimates Postscript royalty revenue at $40 million.
An Adobe spokeswoman said the company offered former chief operating
officer Pratt other positions in the company, but he decided to resign.
Copyright c 1997 Dow Jones & Company, Inc. All Rights Reserved. |
