UPDATE 3-Adobe 4th-qtr profit up 21 pct on strong revenue

(Adds details from conference call)

By Jim Finkle

BOSTON, Dec 17 (Reuters) - Adobe Systems Inc (ADBE.O) posted a 21 percent rise in fourth quarter net income on strong sales of its design software on Monday, but may have disappointed investors by sticking to its full-year outlook. Its shares fell in after-hours trading.

Even though the maker of Photoshop, Flash and Illustrator software gave a fiscal first quarter forecast that was above Wall Street expectations, investors were concerned sales growth could be hitting a peak soon as the world's largest maker of design software kept its fiscal 2008 revenue projection intact.

Net income rose to $222 million, or 38 cents per share, for its fiscal fourth quarter ended Nov. 30, on a reduced number of shares outstanding, from $183 million, or 30 cents, a year earlier.

Revenue grew 34 percent to $911 million, fueled by sales of software for editing photos, building Web sites and creating graphics.

Profit excluding items was 49 cents per share in the quarter, beating the average analyst target of 48 cents on a reduced number, according to Reuters Estimates.

"The results look solid," said Steve Ashley, an analyst with Robert Baird.

He said he was surprised the stock fell on the report, and said that could be because some investors were disappointed Adobe left its full-year forecast unchanged, even as its first-quarter forecast was above estimates.

Cowen & Co. analyst Walter Pritchard said that expenses were about $10 million higher than he had forecast during the quarter, due to legal costs.

He said that investors may have over-reacted to the higher-than-expected expenses, or that it could be linked to the full-year forecast.

Pritchard said that such a negative response was par for the course at a time when investors are generally pessimistic about the prospects for the economy and corporate earnings.

The broad U.S. stock market declined on Monday amid concerns that a persistent housing slump and surging prices present a serious threat to the U.S. economy.

But executives from Adobe said that such issues have not hurt sales of the company's software.

"We have not seen any negative economic impacts to our business," Chief Financial Officer Mark Garrett said in an interview with Reuters.

Adobe forecast fiscal first-quarter revenue of $855 million to $885 million, which would be down from the recently completed quarter but above the average Wall Street expectation of $837 million, according to Reuters Estimates.