Bloomberg News

Adobe Falls After Reporting Lower-Than-Expected Europe Sales

June 22, 2011

(Updates shares in second paragraph.)

June 22 (Bloomberg) -- Adobe Systems Inc., the largest maker of graphic-design software, declined the most in nine months after reporting that second-quarter sales in Europe were $10 million to $15 million less than it had anticipated.

The stock fell $2, or 6.3 percent, to $30.01 at 4 p.m. New York time in Nasdaq Stock Market trading, for the biggest drop since Sept. 22, 2010. The shares have lost 2.5 percent this year.

San Jose, California-based Adobe dealt with uneven overseas sales in the second quarter while readying a new version of its flagship Creative Suite software. Europe was weaker than anticipated primarily because customers in Scandinavia and the U.K. held back purchases, Chief Financial Officer Mark Garrett said on a conference call yesterday.

“Adobe reported subpar fiscal second-quarter performance due to weaker than expected European business, which offset better than expected Japanese business,” said Yun Kim, an analyst with Gleacher & Co. in New York, in a report today.

The company yesterday reiterated its forecast that sales this year will grow by 10 percent, including the slowdown in Europe.

The earthquake and tsunami in Japan, Adobe’s second-largest market, shaved $10 million from sales in the quarter, less than the $50 million the company projected in March, Garrett said.

Profit Tops Estimates

Profit excluding certain costs in the second quarter, which ended June 3, rose to 55 cents a share, Adobe said in a statement yesterday. That compared with the 51-cent average analyst projection in a Bloomberg survey. Revenue increased 8.5 percent from a year earlier to $1.02 billion, topping analysts’ estimates for $995.7 million.

In the current quarter, profit before some expenses will be 50 cents to 56 cents a share, Adobe said. That compares with a 54-cent average analyst prediction. Revenue will be $1 billion to $1.05 billion, the company said, while analysts had estimated $1.02 billion.

Chief Executive Officer Shantanu Narayen has been seeking ways to generate more recurring revenue and make Adobe a bigger provider in software development for smartphones and tablet computers. The company also is adding tools that help developers write code for websites and applications that run on mobile devices, lessening dependence on its mainstay Flash programs, installed in virtually all personal computers.

Creative Suite

Adobe last month released Creative Suite 5.5, a collection of Photoshop, Dreamweaver, InDesign and other software to help designers lay out documents and publications, adjust photographs and create digital drawings. The new version lets users pay for the products monthly or yearly at prices much lower than for unlimited use of the full suite.

Creative Suite 6 is scheduled to be released next year, and will include a new version of Photoshop, which wasn’t updated in version 5.5, Narayen told analysts. Adobe will eventually release applications from the suite to run on tablet computers, Garrett said in an interview yesterday.

Adobe is trying to encourage developers to use its Flash Internet video and animation software to build mobile applications, and has been clashing with Apple Inc. over access to its iPhone and iPad devices, which don’t run Flash.

Adobe updated its Flash tools on June 20 to make it easier for developers to write code that runs on Apple’s iOS mobile operating system. It plans to start testing an HTML-creation tool called Edge next month.

--Editors: Lisa Rapaport, Jillian Ward

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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