Adobe's Q2 view shaken by Japan quake fallout

Reuters News
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Posted: Mar 22, 2011 6:35 PM
Adobe's Q2 view shaken by Japan quake fallout

By Bijoy Anandoth Koyitty and Supantha Mukherjee

BANGALORE (Reuters) - Adobe Systems Inc posted first-quarter profit above Wall Street estimates, but the world's biggest maker of design software cut its second-quarter revenue outlook by $50 million, citing uncertain business environment in Japan following the earthquake.

"Japan is our second largest country from a revenue perspective and March is typically our biggest revenue month of the year there due to fiscal year-end spending," Chief Financial Officer Mark Garrett said in a statement.

"There's no doubt that the pace of the revenue has changed since the earthquake," Garrett said on a conference call.

Japan accounted for about 13 percent of Adobe's sales in 2010. Analysts said the setback in Japan would not be long-term as the orders have not been canceled.

"The $50 million revenue loss could be pushed out to a few quarters," Global Equities Research analyst Trip Chowdhry said.

More than 10 days after a 9.0 magnitude earthquake and 10-meter tsunami struck the northeast of Japan, many electronics manufacturers are struggling to get back up to speed as factories grapple with power cuts, crippled infrastructure and a shortage of parts.

Large U.S. Companies like Hewlett-Packard Co and Dell are assessing the impact to its business from the disaster.

Chowdhry said the real question for Adobe is its ability to accelerate the revenue growth.

"The question is, what is the next growth catalyst for Adobe? PC is slowing down. Flash is becoming less relevant. How can they accelerate the revenue growth?"

Q1 BEATS

For the first quarter, Adobe earned 58 cents a share, excluding items, on revenue of $1.03 billion. Analysts were expecting earnings of 57 cents a share, or revenue of $1.03 billion.

First quarter revenue was driven by Creative Suite, Acrobat and Omniture Solutions as well as a rebound in the education market and seasonal strength in Japan, the company said on a conference call with analysts.

Sales at Adobe's creative and interactive business, which includes its flagship software package Creative Suite 5, rose to $424.8 million in the first quarter from $404.8 million in the fourth quarter.

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.

With a slew of tablets hitting the market, Adobe's Flash product is being used in Android tablets including Mobility Holdings Inc Xoom and Samsung Electronics' Galaxy Tab.

Shares of Adobe, which closed at $32.88 on Nasdaq, were slightly down at $32.60 in extended trading.

(Reporting by Supantha Mukherjee and Bijoy Koyitty in Bangalore;Editing by Prem Udayabhanu)