Adobe outlook beats forecasts

BOSTON (Reuters) - Adobe Systems Inc issued an earnings forecast sharply above Wall Street projections, contrasting sharply from a pessimistic outlook three months ago when it was concerned about the weak economy.

Adobe President and CEO Shantanu Narayen speaks in New York in this June 23, 2010 file photo. REUTERS/Eric Thayer

Its shares surged more than 7 percent after-hours.

The world’s biggest maker of design software forecast on Monday that it will post current-quarter profit, excluding items, of 54 to 59 cents a share, beating the average analyst forecast of 51 cents, according to Thomson Reuters I/B/E/S. It also projected revenue of $1 billion to $1.05 billion, ahead of the average forecast of $992 million.

That forecast marked a sharp contrast to one issued three months ago when problems in key markets in Japan and the U.S. educational sector caused Adobe to warn that revenue would fall short of Wall Street expectations. As a result, investors had been anxious about the forecast for the first quarter, issued on Monday.

The company also posted a profit, excluding items, of 56 cents per share for the fourth quarter, which ended December 3. That beat the average forecast of 52 cents. Quarterly revenue of $1.0 billion beat the average forecast of $988 million.

Global Equities Research analyst Trip Chowdhry said that Adobe had been too conservative in its previous forecast, issued in September, because executives were spooked by tough economic conditions.

“Overall, the economy has improved a lot since then,” Chowdhry said.

Still, sales at Adobe’s creative solutions business, which includes its flagship software package Creative Suite 5, declined to $542 million in the fourth quarter from $550 million in the third quarter. The software maker had forecast this would happen, blaming economic weakness that hurt sales in Japan and to educational customers in the United States.

CS5 is a collection of more than a dozen programs for editing photos, videos and sound, creating interactive websites and designing print publications. The package, which was released last spring, includes Photoshop, Illustrator and Dreamweaver.

Adobe charges from $1,899 to $2,599 for CS5, or $599 to $899 to upgrade from an earlier version.

Shares of Adobe closed at $29.18 on the Nasdaq and surged 7.2 percent to $31.30 in extended trading.

Reporting by Jim Finkle, editing by Matthew Lewis.