Adobe Performs Better Than Expectations

Adobe System Inc. answered all critics as it posted a 13% jump in its stock value. This was announced in the quarterly report of the $22 billion software company. Ironically the jump comes just after it was known that the firm’s third quarter profits had dipped by 35%.

The world’s largest maker of graphic design software had on Thursday beaten Wall Street estimates by posting a dip of profit by 35% in the last quarter. The California-based company reported its net income for the three months ended September 1 at $94.4 million compared to $144.9 million or down by $0.16 per share, in the year-ago quarter.

However, statistics can be misleading. The dip can be attributed to the expenditure on the Macromedia accusation, which by all counts seems to be a profitable deal. So if for a moment we ignore this factor, then the firm posted an earning of $0.29, which handsomely beats the Wall Street estimate of $0.26 per share. Adobe shares traded as high as $38.19.

Wall Street analysts were expecting Adobe to post profits of around $152.5 million, or 26 cents per share, on revenue of $595 million.

Considering the sales in the quarter ending 1st September, Adobe scooped $602.19 million. The figure stood at $487.04 million last year in the same quarter. The rise comes despite the fact that customers are delaying purchases until the release of the upgraded version of Acrobat PDF software, which is due to be released in the current quarter. Though, the rise can still be attributed to the boost coming from the Macromedia deal.

Also Adobe seems to be enjoying the fact that the demand for multimedia tools is soaring due to the ongoing mega trends in the tech world like online advertising and media applications.

Chief Executive Officer Bruce Chizen, 51, in an interview yesterday, said sales of Adobe's Acrobat software, which accounts for about 20 percent of sales, were better than Adobe had anticipated.

Looking ahead, Adobe sees fourth-quarter earnings, excluding items, of 32 cents to 34 cents a share on revenue of $655 million to $685 million. Analysts project earnings of 32 cents a share on revenue of $668.8 million. Analysts expect the biggest sales boost to come from Creative Suite 3, which Chizen said will be released in the second quarter of 2007.

The positive effect of the jump in the stock value of Adobe is that the other software companies can expect a similar sort of package. The situation very much resembles the condition that prevailed in the early 1990s when the Wall Street had become tech savvy and the newly established technology firms flourished.