Adobe Q2 Profits and Sales Ride High on CS3 Sales
Desktop publishing software maker Adobe saw its profits climb 24% in its second quarter on the back of healthy sales of its new Creative Suite 3 product.
Adobe’s net income for the reporting period ended June 1 rose to $152.51m, or earnings per share of 25 cents, compared to $123.1m, or 20 cents EPS, in the same quarter a year ago. Excluding expenses related to its acquisition of Macromedia a couple of years ago, items Adobe earned $223m or 37 cents EPS.
Adobe’s revenue for the quarter was also up 17% to $745.6m.
Both profits and sales for the quarter exceeded analyst forecasts of net income, excluding items, of $216m, or 35 cents EPS and revenue of $728.8m.
Bruce Chizen, CEO of San Jose, California-based Adobe, told analysts in a conference call yesterday that growth was driven by strong sales of the company’s new Creative Suite 3, or CS3, and its bread-and-butter Acrobat document sharing software.
Chizen referred to CS3 as the biggest ever product launch in Adobe’s 25-year history. The suite bundles together several of Adobe’s document and graphic design products, including Photoshop for photo editing and Dreamweaver for web design, into a single package and comes with premium pricing to boot.
CS3 also provides features to integrate multimedia into Web sites and cell phones, which a key part of Adobe’s strategy to expand beyond its current niche of desktop designers and artists. Adobe’s Flash media player is already used to display video’s on YouTube and Myspace.
CS3 was released in April and is widely tipped by analysts to put Adobe on a long term product growth curve. Chizen expects a “blockbuster summer” for CS3. Chizen also said that Adobe’s popular Acrobat desktop software also performed well in the quarter.
Around 80% of the company’s revenue now comes from the CS3 and Acrobat product lines.
The results however did not stop Adobe’s stock from dipping 1.1% to $43.45 in the after-hours trading yesterday, after earlier closing 1% down.
Looking ahead to its third quarter, Adobe is targeting revenue of $760m to $800m with quarterly EPS falling between 28 and 31 cents. Wall Street consensus pegs EPS of 40 cents on revenue of $781m for the same quarter.
“Assuming continued business momentum, we expect to exceed our original fiscal year revenue and profit targets,” Chizen said.
Adobe employs around 6,400 people worldwide. The company has a cash war chest of $902m and over $6.14bn in total assets.