Adobe Systems (ADBE) Shares Decline on Disappointing Earnings Report

Shares of Adobe Systems Inc. (ADBE: Charts, News) closed down -1.35 or -3.91 percent to $33.16 per share on Tuesday, after the company reported its fiscal first quarter earnings had missed analyst expectations. The earnings report, released on Monday afternoon, showed that Adobe's first quarter earnings had declined by -21 percent from last year's first quarter results, but adjusted earnings were in line with analyst expectations.

For the quarter ending in February of 2012, Adobe reported net income of $185.2 million, or $0.37 per fully diluted GAAP share, versus income of $234.6 million, or $0.46 per share in the same quarter one year ago, and $173.7 million or $0.35 per share in 2011s fourth quarter.

The company's net income on a pro forma basis for the first quarter was $209.9 million, versus $250.8 million in Q1 of 2011 and $270.5 million in the last quarter. Fully diluted pro forma earnings came in to $0.42 per share, versus $0.49 in Q1, 2011 and $0.55 in the previous quarter. According to a survey of analysts conducted by Zacks Equity Research, the consensus for Q1 2012 earnings was for $0.46.

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Adobe Systems has been on the forefront of technological innovation since its founding in Mountain View, CA in 1982. The company has since moved its headquarters to San Jose, CA. Adobe System's primary focus has been in the fields of multimedia and creativity software.

Because of the company's diversification into a wide array of products, platforms and services through its acquisition of a slew of companies, Adobe has continued to see growth, but fell behind when Apple (AAPL: Charts, News) failed to support Adobe's Flash platform and instead invested heavily in HTML5 through the Web Hypertext Application Technology Working Group or WHATWG for its iPhone line.

The lack of foresight has cost Adobe dearly, with the company now developing tools for HTML5, which came years too late. Nevertheless, Adobe has, in the past year, reorganized profit units into two main categories, Digital Media and Digital Marketing, a move that is already improving its business focus.

According to Adobe President and CEO, Shantanu Narayen, in a conference call with analysts after the earnings release, "In our Digital Media business, our strategy is to help customers create, publish and monetize their content on any device." He continued, "In our Digital Marketing business, our strategy is to help marketers measure, manage and optimize their marketing investments for maximum return."

The call highlighted Adobe's upcoming release of its Creative Suite 6 and Creative Cloud software, "Our upcoming Creative Suite release will include major updates to all of the core CS products, including Photoshop, Premiere Pro, After Effects, InDesign, Illustrator and Dreamweaver."

The company will be launching its Creative Suite 6 and Creative Cloud in April, Narayen described Creative Cloud, stating that the software, "will transform the creative process. Creative Cloud includes all of our key CS desktop products, web services such as online storage, Typekit for online fonts, Business Catalyst for website hosting e-commerce, connectivity with our new touch apps and powerful collaboration and social community features."

Adobe also recently acquired Efficient Frontier, which will add optimization capabilities for search and display advertising, giving the company an entry into social advertising. While analysts continue positive on Adobe's prospects, competition from Apple and Microsoft (MSFT: Charts, News) continue to weigh on Adobe.

Other News About ADBE
Adobe Systems' CEO Discusses Q1 2012 Results
Shantanu Narayen discusses Adobe's future prospects.
Adobe Sales Slide Ahead of Creative Suite Upgrade
Fox news article on Adobe's earnings. Other Stocks in the News
Amazon Adds That Robotic Touch is buying robot maker Kiva Systems Inc.
Apple's iPad Throws off Much More Heat: Tests
New version of iPad throws off more heat than the previous version.

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Published on Mar 21, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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