Adobe Doubts Its 3Q Forecast

Jul 30 2001

SAN JOSE, Calif., July 30 - Software provider Adobe Systems Inc. <ADBE.O> on Monday said it should meet its fiscal third-quarter earnings targets but warned its revenue could take a hit because of slumping conditions across its product lines, news which sent its stock down 10 percent.

Adobe said after a "solid" June, U.S. revenue was weaker than expected in July, and Japanese revenue in July fell more than its reduced expectations. Adobe said revenue from Europe, which began slowing in April, stabilized during the first two months of the quarter.

Adobe, which makes the popular Acrobat Web publishing software and the Illustrator and Photoshop software products, said in June that sales in the third quarter, which ends Aug. 31, would be flat year-on-year, against $329.9 million in 2000. Many analysts had expected some growth, although Adobe had not previously released a forecast for the quarter.

"Despite the global economic conditions and its potential effect on our Q3 revenue, Adobe is on track to meet its bottom line target for the quarter," Adobe President and Chief Executive Officer Bruce Chizen said in a statement.

Shares of Adobe fell by over 10 percent after the warning in early trade on Nasdaq, falling to a low of $38, before edging back to $38.84, down $4.22.

Analysts have been looking for third-quarter earnings, excluding goodwill amortization costs, of 26 cents to 30 cents per share, with a mean expectation of 28 cents, according to research firm Thomson Financial/First Call.

In June, Adobe reported fiscal second-quarter net income fell to $61.3 million, or 25 cents a diluted share, from $65.8 million, or 26 cents a share, a year ago. Second quarter revenue rose 15 percent to $344.1 million.

At that time, it revealed a survey that showed more U.S. businesses were putting off software purchases due to the softer economy, and that in general Adobe U.S. sales were weaker than expected in May.

Acrobat is the standard way to publish documents on the Web which can be read on a computer, attached as e-mail, and printed out, when it comes to necessary documents like tax forms.