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Adobe Systems' Earnings Doubled in Fourth Quarter

Posted on: Thursday, 11 December 2003, 06:00 CST

Dec. 12--Adobe Systems said Thursday that profit doubled in the fiscal fourth quarter, news that topped analyst expectations and prompted after-hours traders to snatch up the stock.

It comes at the close of an odd year for Adobe, when sales improved but the company mood reflected the weak overall tech economy. Just last month, Adobe laid off 3 percent of its staff, a move Chief Executive Bruce Chizen said would realign the workforce to fit the San Jose company's plan for growth.

For the quarter that ended Nov. 28, Adobe said profit rose to $83.3 million, or 34 cents a share, from $40.1 million, or 17 cents a share, a year ago. Sales rose 22 percent to $358.6 million from $294.7 million. Analysts called it a notably strong quarter for a software company.

Adobe shares jumped nearly 5 percent during regular trading Thursday, in anticipation of strong results. Adobe announced its results after the market closed, and the stock jumped again -- nearly 6 percent, to $42.06.

Adobe is planning for a strong 2004 -- somewhat stronger than Wall Street's expectations. Chizen said Adobe is planning for $1.425 billion in revenue next year, assuming the economy remains stable.

"In speaking with a lot of people both here in the valley and around the country in particular, there is a lot of optimism. If that optimism turns into real spending, then we could do better than we're anticipating," Chizen said. "But I'm not going to build my business plan on that."

As usual, Adobe's ePaper business, which is based on its Acrobat portable document format technology for electronic documents, posted the strongest growth. Sales jumped 40 percent for the quarter, comprising more than a third of revenues, and sales were up 42 percent for the year. Chizen said 40 percent of the sales in the ePaper business were under Adobe's corporate licensing program, which was a record -- and that its mid-tier Acrobat Standard software has been outselling Acrobat Professional 2 to 1.

Sales of Adobe's new Creative Suite also looked strong, even though foreign-language versions have not arrived and many positive reviews had not yet hit newsstands during the quarter.

"They are really trying to be all things to the creative professional that the creative professional needs, within a single environment," said Alexis Gerard, analyst at Future Image research firm in San Mateo. "That, of course, is beneficial to the customer, and it's also important to them as far as making sure that they leverage their various areas of functionality."

That makes for a strange time at Adobe. The company is posting surprisingly strong numbers, but it is also laying off people and occasionally moving jobs overseas. Chizen said that has made these adjustments especially tough to explain -- there will always be adjustments in the business as some projects shrink and others expand, but he hopes that in the future the business will grow enough that Adobe employees will switch jobs, not lose them.

"I think there's a lot of employees that still don't understand it; I think there are a lot of employees who don't understand that while we're making a lot of resource shifts, some of that involves hiring in a place like India," Chizen said.

"There will always be a game of musical chairs, but the goal is to have enough chairs that everybody has a seat."

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To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com.

(c) 2003, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News.

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