Adobe Systems Shares Fall as Outlook Disappoints

U.S. design software maker Adobe Systems issued a revenue outlook that disappointed some investors on Monday, sending its shares down more than 3 percent.

Adobe's headquarters in San Jose, California.
Adobe's headquarters in San Jose, California.

The maker of Photoshop, Flash and Acrobat released the forecast as it reported a 41 percent rise in quarterly profit. Brisk revenue growth overseas offset flat sales in the economically troubled United States.

Adobe forecast revenue in a range of $855 million to $885 million for the fiscal third quarter, which ends August 29. That compares with an average analyst forecast of $876 million according to Reuters Estimates.

"Some investors ... were expecting a higher forecast," said Goldman Sachs analyst Sasa Zorovic.

The company, the world's biggest maker of design software, also forecast third quarter per-share profit before items at between 45 cents and 47 cents, compared with the average Wall Street estimate of 45 cents.

Chief Executive Shantanu Narayen said that, while Adobe has so far been able to meet its financial targets in the midst of the U.S. economic slowdown, its fate could change if conditions worsen.

"I'm not an economist. All I can do is reflect on what I have seen so far," he said. "Demand for our products remains strong. (But) we are not immune to a recession."

Adobe is seeing strong revenue growth in Europe and in Asia.

In the first two quarters of this year, sales in Europe, the Middle East and Africa accounted for 35 percent of revenue, compared with 33 percent in all of last year and 30 percent the prior year. Meanwhile, U.S. sales have fallen to 44 percent of revenue, from 49 percent of revenue two years ago.

"We expect to see the trend toward international revenue continue," Narayen said.

It issued the forecast as it reported quarterly results.

Adobe's profit excluding items for its fiscal second quarter ended May 30 was 50 cents per share, ahead of the 46 cents expected by analysts, according to Reuters Estimates.

Second quarter revenue rose 19 percent to $887 million, led by a 40 percent increase in sales in Europe. Revenue grew 38 percent in Asia and just 0.1 percent in the United States.

Adobe reported net income for the second quarter at $214.9 million, or 40 cents per share, up from $152.5 million, or 26 cents a share, a year earlier.

Adobe shares fell $1.05 to $41.80 in extended trading, after rising 14 cents to close at $42.85 on Nasdaq.

Shares of Adobe , which rose 0.33 percent to close at $42.85 Monday, dropped about 2.5 percent in extended electronic trading.

Excluding items, Adobe reported a second-quarter profit of 50 cents a share on sales of $886.9 million for its second quarter.

In the same period last year, the company earned 37 cents a share on sales of $746 million.

Analysts' projections put the company's performance for the quarter at 46 cents a share on a topline of $880 million.

Adobe also forecast earnings per share before items and revenue for the current quarter that were largely in line with or ahead of analyst expectations.

For its current, third quarter, Adobe said it expects a per-share profit before items of 45 cents to 47 cents and revenue in a range of $855 million to $885 million. Analysts currently expect a third-quarter profit of 45 cents per share on average on revenue of $876 million.

- Wire services contributed to this report.