Adobe Beats on Record Q2 Sales; Shares Down 1% in AH on Guidance

Adobe Systems reported a 24% rise in Q2 net income to $152.5 million, or $0.25/share, on revenue of $745.6m (+17% y/y). Both figures beat analysts' average estimate (adjusted EPS of $0.37 beat estimates of $0.35), but light Q3 guidance sent its shares down 1% in after-hours trading on volume just under 1.5 million shares after losing 0.3% in normal trading Thursday. Adobe forecast Q3 EPS of $0.39 - $0.41, on sales of $760m - $800m, at the mid-range of what analysts had expected. A Piper Jaffray analyst told Bloomberg "it's a classic example of the Street always wanting more." A Goldman analyst said it was a "very good" quarter, noting "their guidance perhaps could have gone higher, but they do a very good job of reining in expectations." Sales of Adobe's Creative Suite software (including CS3 released in April) rose 21% to $436.6m; CS3 sales exceeded those of CS2 by 30% over the same period post-release. Acrobat software sales increased 15% to $184.8m.

Sources: Adobe F2Q07 Earnings Call Transcript, Press release, Bloomberg, MarketWatch
Commentary: Is IBM Really Mulling a Bid for Adobe? • Adobe Shares Higher Ahead Of FY Q2 Results Thursday • Is Another Adobe Buying Opportunity Approaching?
Stocks/ETFs to watch: Adobe Systems (ADBE). Competitors: Microsoft (MSFT), Apple (AAPL). ETFs: Software HOLDRS (SWH), iShares Goldman Sachs Software (IGV), PowerShares Dynamic Software (PSJ)

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