Adobe cuts FY revenue outlook on weak Europe demand
(Reuters) - Adobe Systems Inc (ADBE.O), maker of Photoshop and Acrobat software, cut its full-year revenue outlook as weak demand in Europe could affect sales of the recently launched versions of its popular design software.
The company launched its Creative Suite 6 — which includes Photoshop, Illustrator, InDesign, Flash and Dreamweaver — and the Web-based Creative Cloud products in the second quarter.
Analysts have expressed concern that the Web-based subscription service will hurt Adobe's financial growth at least over the short term.
Adobe's sales typically surge after a Creative Suite upgrade, but analysts have said the revenue upswing might be smaller than in the past because customers who switch to the new service will not buy their software up front.
Instead they will enter into subscription agreements to rent the software, making much lower initial payments. They will get extra features such as document storage at Adobe data centers and frequent updates.
The company expects third-quarter sales at its digital media unit, which produces the Creative Suite, to decline over the second quarter, it said on a conference call with analysts.
"We are trying to be prudent about European demand and the currency impact of what's going on in Europe," Chief Financial Officer Mark Garrett said on the call.
Adobe also expects digital marketing suite revenue to grow quarter-over-quarter, but revenue from its legacy enterprise products — Adobe Connect and Adobe LiveCycle — to fall slightly.
The company, which expects revenue from these products to fall about $150 million this year, said earlier this year it would stop investing in them and focus on its other businesses.
Adobe now expects revenue growth of 6 percent to 7 percent, implying full-year revenue of $4.47 billion to 4.51 billion and an adjusted profit of $2.40 to $2.46 per share.
It earlier forecast a profit of $2.38 to $2.48 per share, excluding items, and revenue growth of 6 percent to 8 percent.
Adobe shares, which closed at $32.89 on the Nasdaq on Tuesday fell 4 percent to $31.65 in trading after the bell. They have declined 5 percent since the company reported first-quarter results on March 19.
(Reporting by Sayantani Ghosh in Bangalore; Editing by Joyjeet Das)