- The Washington Times - Friday, March 13, 2009

NEW YORK (AP) - Adobe Systems Inc. reports earnings for its fiscal first quarter, which ended Feb. 27, on Tuesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Adobe’s software products include Photoshop Illustrator, Flash, Acrobat and the Web design software Dreamweaver. Creative Suite 4, the latest version of the software package that brings in the majority of Adobe’s revenue, launched last fall _ but the recession has muted its sales.

Earlier this month, Adobe gave a first-quarter revenue outlook that at the time was below Wall Street’s expectations, but the company’s profit forecast fell in line with estimates, which drove shares higher.

The outlook prompted Jefferies & Co. analyst Ross MacMillan to upgrade Adobe to “Buy” from “Hold,” citing deeper-than-expected cost cuts. UBS also issued an upgrade.

BY THE NUMBERS: Adobe said March 5 it expects earnings of 30 cents per share and adjusted earnings of 44 cents or 45 cents per share. The company also forecast sales of $783 million to $786 million, down from a prior internal target of $800 million to $850 million.

Analysts, on average, are predicting a profit of 44 cents per share, excluding items, on sales of $784.2 million, according to a poll by Thomson Reuters.

ANALYST TAKE: “Clearly the weak economy has solidly trumped the potential benefit of Adobe’s (Creative Suite 4) product cycle,” wrote Thomas Weisel Partners analyst Blair Abernethy in a March 4 note to investors that followed the company’s revenue warning. He rates Adobe “Overweight.”

“Looking forward, we believe that the (short-term) focus for Adobe will likely center on continuing to aggressively manage its cost structure, aligning operating margins with (short-term) revenue, and work to stimulate demand for CS4,” Abernethy added.

WHAT’S AHEAD: Adobe gave a second-quarter revenue target of $675 million to $725 million earlier this month, and said it expects adjusted operating margins of 32 percent to 36 percent.

Analysts are forecasting sales of $694.4 million.

Though demand for CS4 is slow because of the recession, Abernethy still expects the Creative Suite 4 product cycle to begin in spring 2010, and said he sees “increasing potential for the development of pent-up product demand in 2010.”

STOCK PERFORMANCE: Shares of the San Jose, Calif., company lost 28 percent during the quarter to close at $16.70 on Feb. 27. The stock has climbed since.

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