Adobe Gets Creative

Posted Mar 24th 2010 12:20PM by Tom Taulli
Filed under: Earnings Reports, Adobe Systems (ADBE)

For Adobe Systems (ADBE), the fiscal first-quarter was somewhat light, with a 19% drop in profits to $127.2 million, or $0.24 per share. Although, revenues were up 9% to $858.7 million.

But looking ahead, things should improve nicely. According to its guidance, Adobe expects to post earnings of $0.39 to $0.44 per share in Q2. Revenues are forecast at $875 million to $925 million. The estimate from Reuters was for earnings of $0.41 per share and revenues of $860 million.

So what are the catalysts? First of all, Adobe is getting a boost from its acquisition of Omniture, which provides web traffic analytics. Roughly 10% of revenues came from this business.

But perhaps the biggest driver is the upcoming launch of the latest version of the Creative Suite (it will be called CS5). The software offering makes it much easier to design websites and is bundled with other popular software applications like Photoshop and Illustrator.

All in all, it looks like CS5 will offer some strong features as well as deep integration with Omniture. More importantly, there should be a healthy upgrade cycle -- which had been interrupted by the recession.

In morning trading, the shares of Adobe were up $1.76 to $36.97.

Tom Taulli advises on business tax preparation and is also the author of a variety of books, including The Complete M&A Handbook. His website is at Taulli.com.

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