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Adobe profit forecast misses estimates amid software upgrade

Published March 19, 2012 5:44 pm

This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Boston • Adobe Systems Inc., maker of Photoshop and Acrobat software, said Monday that revenue growth slowed as sales of its widely used Creative Suite software fell, missing its forecasts, ahead of widely anticipated product launches this quarter.

Revenue rose 1.7 percent to $1.045 billion in its fiscal first quarter ended March 2, slightly below the $1.054 billion average forecast of analysts polled by Thomson Reuters.

Sales at the digital media unit, which produces Creative Suite, fell 4 percent from a year earlier, to $730 million. Creative Suite includes popular design titles Photoshop, Illustrator, InDesign, Flash and Dreamweaver.

Chief Financial Officer Mark Garret said on a conference call that Creative Suite revenue lagged the company's expectations because customers are waiting to buy two new versions set to be introduced at the end of the current quarter, Creative Suite 6 and a Web-based version of the suite that will be sold via subscription.

Analysts are increasingly concerned that the Web-based subscription service, known as Creative Cloud, will hurt financial growth over the short term at Adobe, which has operations in the Salt Lake Valley.

Adobe's sales typically surge after a Creative Suite upgrade, but analysts have said the revenue upswing might be smaller than in the past because customers who switch to the new service won't buy their software up front. Instead they will enter into subscription agreements to rent the software, making much lower initial payments. They will get extra features such as document storage at Adobe data centers and frequent updates.

Global Equities Research analyst Trip Chowdhry said it could take several quarters for revenue and profit growth to return to normal after the launch of the new products.

"I think the stock goes sideways for another couple of quarters," he said.

The software maker reported a first-quarter profit, excluding one-time items, of 57 cents per share, matching the average analyst forecast.

Adobe said it expects to post second-quarter revenue of $1.090 billion to $1.140 billion, compared with the average analyst forecast of $1.1 billion.

It forecast second-quarter profit, excluding items, of 57 to 61 cents per share, compared to the Street view of 60 cents.

Shares of Adobe closed at $34.51 on Nasdaq and fell 4.8 percent to $32.84 in extended trading.