Adobe Revenues Beat Expectations

Adobe Systems Inc.s quarterly results reflect not only the state of the PC software market but also of the trickle down effects of the economic downturn.

The San Jose, Calif., company reported second quarter earnings below last years but above analyst expectations. For the three months ended May 31, 2002, Adobe posted a net income of $54.3 million, or 22 cents a share. During the same period last year, the company earned $61.3 million or 25 cents a share.

Overall revenue for the three months dropped 8 percent to $317.4 million, compared with $344.1 million for the same period a year ago.

The company said much of its drop is due to a related drop in the advertising business, where companies are holding onto dollars usually spent on advertising. The result has meant fewer sales of Adobe products to designers and artists who use the companys software for their business.

However, Adobes CEO Bruce Chizen said he expects revenue in the second half of this year to increase 10 to 20 percent from last years second half.

“Despite a continuing soft economy, we had a solid quarter with a strong release of PhotoShop [PhotoShop 7.0, released in April], said Chizen.

“Strategically, we took steps to realize the large Acrobat opportunity in the enterprise with the closure of our Accelio acquisition and our new SAP [AG] relationship,” Chizen said in a statement.

For its third quarter, Adobe said it is targeting revenue of $300 to $320 million. The software company said it is looking at putting 20 to 21 percent of revenue toward research and development; 33 to 34 percent toward sales and marketing; and 9 to 10 percent toward general and administrative costs.

For the fourth quarter, Adobe projects targets for revenue of $315 million to $345 million.

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