Adobe tops Wall St hopes on design tool demand

By Eric Auchard

SAN FRANCISCO (Reuters) - Design software maker Adobe Systems Inc (ADBE.O) posted better-than-expected quarterly results on Tuesday and raised its outlook on strong demand for its products, sending shares up nearly 5 percent.

The maker of Acrobat Reader, Flash and Photoshop software said it is enjoying solid sales of established products including its Adobe Acrobat document publishing system and its Creative Suite 3 graphical design tools, even despite a weak economy.

In addition, the San Jose, California-based company is seeing record revenue from its LifeCycle line of products, which help companies create online forms to replace paper records. Adobe is also benefiting from demand for digital design tools used to create everything from YouTube videos to mobile phone software to the latest eye-grabbing advertising.

"It is all three product lines contributing to the results," Chief Financial Officer Mark Garrett said in a phone interview following the company's fiscal third-quarter report.

"We have continued to perform well through the year, even in a tough macroeconomy," Garrett told Reuters, referring to sale, earnings, margins and other targets the company set in December. "We are exceeding expectations in every way."

The San Jose, California-based company said net income for its fiscal third quarter ended August 29 fell to $191.6 million from $205.2 million a year ago.

Earnings per share rose to 35 cents on a diluted basis from 34 cents a year ago, on 9 percent fewer shares outstanding. Excluding one-time items, Adobe reported third-quarter profit of 50 cents per share compared with 45 cents a year ago.

The latest quarter's results significantly exceeded Wall Street forecasts, which estimated a profit, excluding one-time items, of 46 cents per share, according to Reuters Estimates.

Revenue rose 4 percent to $887.3 million -- the top end of analysts' expectations, according to Reuters Estimates. Sales forecasts had ranged from $867.5 million to $887.3 million, with an average of $877 million, Reuters Estimates showed.

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Adobe said it expected net earnings for the fiscal fourth quarter ending in November of 39 cents to 41 cents per share. On an adjusted basis, excluding one-time items, Adobe anticipates 51 to 53 cents a share.

That outlook is at or slightly above analysts' average forecast of 39 cents for fourth-quarter net profits and 51 cents per share, on average, in adjusted earnings, according to Reuters Estimates.

Adobe said it expected revenue for its fourth quarter ending in November of $925 million to $955 million. That compares to Wall Street forecasts which ranged from $918 million to $972 million, according to Reuters Estimates. The average analyst forecast was $939.4 million.

Analysts said results in the latest quarter faced difficult comparisons to the year earlier quarter due to an anticipated product transition ahead of the company's anticipated release of an upgrade to a key product line, Creative Suite 4, or CS4.

A year ago, Adobe reported record results fueled by the release in spring of 2007 of the last version of the product, CS3. Analysts had debated whether customers might wait to buy the CS4 package once it ships sometime in October or November.