Computer software company Adobe Systems Inc. (NASDAQ:ADBE) released 1Q 2007 earnings after the market closed yesterday. The results are not bad and beat estimates. First quarter revenue was $649.4 million, a bit less than the $655.5 million reported revenue for Q1 2006. While analysts polled by Thomson Financial had estimated revenue of $655.3 million, they also estimated EPS of $0.29. Here Adobe beat estimates and reported EPS of $0.30, based on 604 million weighted average shares. This figure is above Adobe's previous guidance.

1Q 2007 operating income was $146.3 million, up $16.3 million from 1Q 2006 operating income. GAAP operating income in 1Q 2007 was 22.5%, compared to 19.8% in 1Q 2006. GAAP net income was $143.9 million in 1Q 2007, up from $105.1 million in 1Q 2006, but down from $183.2 million in 4Q 2006.

Adobe Systems CEO Bruce Chizen states the company is "preparing for its biggest product launch in history." Adobe has already begun distribution of the alpha version of Apollo, a Web development software already in use at eBay. Also getting ready to ship are Creative Suite 3, and later in the spring 2 more editions of Photoshop.

Adobe is optimistic about full-year 2007 figures. For 2Q 2007 Adobe is targeting revenue of $700-$740 million, with an operating margin of 36%. GAAP EPS for 2Q 2007 are in the $0.23-$0.26 range. Adobe reaffirmed its annual revenue growth target of approximately 15%.

The stock has responded positively to the earnings release. At midday, Adobe was trading at $42.95, up $2.21.

Google and Adobe are jumping into each other's playground with the announcement that Adobe will be bundling the Google Toolbar with many (if not all) Adobe products for the life of the agreement. Well, this is significant for this reason -- Adobe controls two of the most widely-used technologies on the internet today: the free Adobe Acrobat Reader (used to read online documents) and the Macromedia Shockwave player (a de-facto multimedia player for rich media content like web advertising and short video segments).

With Adobe and Microsoft recently having a small tiff over the inclusion of PDF publishing in the upcoming Microsoft Office 2007 productivity suite, this new deal with Adobe and Google is just another shot across the bow for Microsoft in its efforts to fend off the competition. Although I think Adobe was completely off its rocker by insisting that Microsoft take out native PDF publishing capabilities from its newest Office software suite (everyone else with PDF publishing capability doesn't seem to cause Adobe issues), this is no small deal for Google. It just gets the Google Toolbar installed on Microsoft's Internet Explorer or Mozilla's Firefox -- which run the majority of all web browsing activity in the world today.

[Disclosure: I own MSFT shares as of 6-22-06)