Suite success for Adobe

Adobe Systems, the world's biggest maker of graphic-design programs, reported a bigger profit than analysts estimated after the company cut jobs and a slump in orders eased.

Excluding some costs, fourth-quarter profit was US39c (54c) a share, the company said yesterday.

Analysts in a Bloomberg survey had estimated US37c on average for the period, which ended on November 27. A sales forecast for next quarter also topped projections.

Adobe's Creative Suite 4 software, released during the height of the financial crisis last year, was now beginning to attract more buyers, said Sasa Zorovic, an analyst with Janney Montgomery Scott in Boston.

The company is counting on its next version of the software, due next year, to trigger a surge of orders.

"The fact that CS4 is doing better than we thought is surprising," Zorovic said. He advises investors to buy Adobe shares, which he does not own. "A lot of that has to do with how conservative they were in their earlier guidance."

Adobe was little changed in late trading. The shares, up 71 per cent this year, rose US58c to US$36.36 on the Nasdaq.

Excluding some costs, profit would be US34c to US39c a share this quarter, Adobe said. Sales would be US$800 million to US$850 million.

Analysts estimated profit of US37c and revenue of US$767.5 million.

Sales declined 17 per cent to US$757.3 million last quarter, the San Jose, California, company said.

Analysts had estimated US$741.2 million.

Adobe announced plans to cut 680 jobs last month, or about 9 per cent of its global workforce. That came on top of a 9 per cent reduction at Omniture, which the company acquired for US$1.8 billion in October. That deal lets chief executive Shantanu Narayen expand into software for measuring the effectiveness of online advertising.

Because of the acquisition expenses and severance costs, the company posted a fourth-quarter net loss of US$32 million, or US6c a share, compared with a profit of US$245.9 million, or US46c, a year earlier.

Narayen is working to boost profit and enter new markets after many of Adobe's customers put off upgrading to the last version of Creative Suite, a collection of design programs that includes Photoshop and Illustrator. The creative business accounted for 58 per cent of total revenue last year.

Creative Suite 4 debuted just as the recession deepened last year. Adobe's customers, including advertising agencies and publications, curbed spending because there was less demand for marketing. US ad spending fell 2 per cent in the first nine months of 2009, according to Nielsen.

Investors are looking for a boost from version 5 of the software, which they expect to be released before June, according to Patrick Walravens, an analyst with JMP Securities in San Francisco.

"They are seeing a little better selling environment for the creative suite before CS5," said Walravens, who has an "outperform" rating on Adobe's shares. "That's likely to make people even more optimistic on CS5."

- BLOOMBERG