Adobe posts higher 2Q profit as revenue soars
Software maker Adobe Systems Inc. posted higher net income for its most recent quarter, driven by strong demand for the software package it sells to professional designers and developers.
Adobe earned $148.6 million, or 28 cents per share, in the fiscal second quarter, which ended June 4. This is up 18 percent from $126.1 million, or 24 cents per share, in the same period a year earlier.
Adjusted earnings were 44 cents per share. On that basis, analysts surveyed by Thomson Reuters had expected a profit of 42 cents per share.
President and CEO Shantanu Narayen said in addition to the successful launch of Creative Suite 5, Adobe had solid results across all of its business segment and geographic regions.
The company's ongoing spat with Apple Inc. over Adobe's Flash technology, used for Web videos and other content, did not seem to soften demand for the latest version of its flagship Creative Suite software package. Apple bans Flash from the iPad, the iPhone and the iPod Touch, and CEO Steve Jobs had described it as outdated, unreliable and unfit for the handheld gadgets because it's meant for PCs.
Narayen said the Flash debate has not affected demand for the Flash creation tools that are part of Creative Suite 5. And in a reference to Apple's popular iPhone, he said that as mobile devices with Flash become available during the rest of the year, "those that don't have Flash on their smart phones will wish they did."
By providing Flash for smart phones Narayen says Adobe is "serving a pent-up need," from the growing number of people who use devices other than PCs to connect to access Web content.
Adobe's revenue grew 34 percent to $943 million from $704.7 million, largely driven by strong demand for Creative Suite 5, which launched at the end of April, two months into the quarter. This handily surpassed Wall Street's expectations of $905.9 million.
Creative Suite, which includes programs such as Photoshop for photo editing and Illustrator for graphic design and illustration, brings in the bulk of Adobe's revenue. Poor timing hurt sales of the previous version, Creative Suite 4, which went on sale in the fall of 2008 just as the financial crisis hit.
As a result, CS5 is getting a boost from pent-up demand from customers who have held back on upgrades and are now two versions behind.
For the current quarter, Adobe forecast adjusted earnings of 46 cents to 50 cents per share on revenue of $950 million to $1 billion. Analysts have been expecting a profit of 48 cents per share, excluding items, on revenue of $958.7 million.
Adobe also said it plans to buy back up to $1.6 billion of its shares by November 2012. Andy Miedler, an analyst with Edward Jones, praised the move and said it shows confidence in the strength of Adobe's long-term prospects.
Miedler, who has a "Buy" rating on Adobe's stock, called the Adobe vs. Apple controversy "overblown," and said there is room for both Flash and HTML5, the latter an emerging programming standard with features that compete with Flash.
Shares of Adobe, which is based in San Jose, Calif., fell 81 cents, or 2.5 percent, to $31.95 in after-hours trading. Before the release of results, the stock had closed down 37 cents at $32.76.