Adobe 1st-quarter profit drops as costs climb; sales improve and results surpass Wall Street

Adobe posts lower 1Q profit, exceeds expectations

NEW YORK — Adobe Systems Inc. said Tuesday that fiscal first-quarter earnings declined on higher expenses, but sales climbed as demand for its design and publishing software improved with the stabilizing economy.

The results surpassed Wall Street’s expectations, and Adobe also gave a strong forecast for the current quarter, thanks to the better economy and a key product upgrade that Adobe said Tuesday it would launch by early June. Its shares rose in after-hours trading.

Adobe earned $127.2 million, or 24 cents per share, in the three months that ended March 5. That is down 19 percent from a year earlier.

Excluding items such as stock compensation costs, Adobe earned 40 cents per share in the latest quarter, above the 37 cents that analysts polled by Thomson Reuters were expecting.

Revenue rose 9 percent to $858.7 million, also surpassing analysts’ expectations. Operating costs increased 18 percent to $592.5 million as research, development, marketing and other expenses grew.

The bulk of Adobe’s revenue comes from Creative Suite, its flagship software package targeting professional designers and Web developers. The company launched the most recent version, Creative Suite 4, in the fall of 2008, just as the financial crisis hit.

This squeezed sales of the product, but analysts widely expect the next version to do better, boosted by pent-up demand from businesses that may not have upgraded to CS4.

Shantanu Narayen, Adobe’s president and CEO, announced during a conference call with analysts that Adobe will hold a launch event for CS5 on April 12. He said the product is “on track” to ship in major languages late in the second quarter, which ends June 4. Traditionally, these languages have been English, French, German and Japanese.

In a statement earlier, Narayen said its first-quarter results were driven by stability in its creative business and strength in its Acrobat document-creation products and Omniture, a Web analytics software company that Adobe bought last fall in a $1.8 billion deal.

For the current quarter, Adobe is forecasting a profit of 23 cents to 30 cents per share. Excluding items, the company expects to earn 39 cents to 44 cents per share, compared with analysts’ expectations of 41 cents per share.

The company forecast revenue of $875 million to $925 million, above Wall Street’s predictions of $858.6 million.

In an interview, Narayen said the sense he’s getting from Adobe’s customers is that the economy is stabilizing. Businesses know they can only defer software and hardware upgrades for so long.

“People continue to realize that technology can help them,” he said.

Edward Jones analyst Andy Miedler called the quarter’s results strong, noting that some of Adobe’s businesses “struggled pretty significantly during the downturn.”

“Adobe is economically sensitive, and as the economy improves they should be the beneficiary of that, especially as advertising improves,” he said.

In extended trading Tuesday after the results were announced, Adobe shares gained $2.33, or 6.6 percent, to $37.55. Earlier, the stock closed up 27 cents at $35.22.