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Dec 17, 2008

Adobe Cuts 600 Job Cuts & Gains

Adobe Systems Inc., the world’s biggest maker of graphic-design programs, gained as much as 7.7 percent in Nasdaq trading after its first-quarter profit forecast, bolstered by job cuts, reassured investors.

Earnings will be 43 cents to 47 cents a share in the period, excluding some costs, the San Jose, California-based company said yesterday. Analysts had estimated 44 cents on average, according to a Bloomberg survey. Adobe also posted fourth-quarter profit and sales at the top end of a preliminary range given this month.

Adobe Chief Executive Officer Shantanu Narayen, facing slumping demand for design software from advertisers, this month announced 600 job cuts, equal to 8 percent of the workforce. Ad spending probably will shrink next year, the first time since 2001, according to ZenithOptimedia and Interpublic Group of Cos.

“Investors like to see companies cut costs aggressively, which Adobe is clearly doing,” said Andy Miedler, an analyst with Edward Jones & Co. in St. Louis. He advises buying the shares, which he doesn’t own. “Everyone realizes in this environment, revenue growth isn’t in management’s hands.” Adobe, which also makes the Flash online video and animation software, rose $1.45, or 6.5 percent, to $23.77 on the Nasdaq Stock Market at 9:47 a.m. New York time and earlier advanced to $24.04. The stock had lost 48 percent this year before today.

Sales will be $800 million to $850 million in the first quarter, Adobe said yesterday, matching an earlier forecast.

‘We Delivered’

Fourth-quarter revenue was little changed, at $915.3 million, in line with the preliminary results released two weeks earlier. Net income rose to $245.9 million, or 46 cents a share, from $222.2 million, or 38 cents, a year ago, also in the range of the earlier report.

Excluding some costs, profit rose to 60 cents a share in the fourth quarter, which ended Nov. 28. Adobe said earlier this month that the figure would be 59 cents to 60 cents. Sales a year earlier were $911.2 million.

“If you consider the fact that we’ve been in a recession for a year, we think we really delivered,” Chief Financial Officer Mark Garrett said in an interview yesterday. “We delivered the revenue growth we said we would and had better profit. The industry and the market we serve is still very good. We are just waiting to get through a tough economy.”

Adobe is counting on Creative Suite 4, a package of design programs, to entice buyers. The software, known as CS4, more tightly integrates the company’s Flash technology with its other applications.

“The economy is really slowing people’s decision to upgrade from CS3 to CS4,” Garrett said. Sales of the new software “are 20 percent below where CS3 was at the same time in its product cycle, and we believe it’s all driven by the economy.”

The gain in the U.S. dollar last quarter also ate into sales at Adobe, which gets more than half its revenue outside the U.S. The euro, the British pound and other major currencies fell more than 10 percent in the third calendar quarter against the dollar. That reduced the value of sales overseas.

Source : Bloomberg
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