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Adobe beats estimates, names new CEO

The company easily tops analyst forecasts in the fourth quarter and promotes its president to the company's top executive spot.

Bruce Chizen Adobe Systems easily topped analyst forecasts in the fourth quarter Thursday and promoted its president to the company's top executive spot.

The maker of graphics and publishing software reported a fiscal fourth-quarter operating profit of $127.5 million, or 34 cents a share, excluding amortization and special charges. A First Call/Thomson Financial survey of 13 analysts predicted a profit of 29 cents a share for the quarter, which ended Dec. 1.

Also Thursday, Adobe said Bruce Chizen will replace company co-founder John Warnock as CEO. Chizen keeps his current title of president, and Warnock remains co-chairman of Adobe as he becomes chief technology officer. Warnock also continues to oversee Adobe Ventures.

Shares of Adobe rose slightly to $58.13 in after-hours activity on the Island ECN immediately following the release of the results. Adobe dropped $8.88, or 13 percent, to $57.31 in Thursday's regular trading ahead of the fourth-quarter report.

"Based on every measure, Adobe today is in the best position in its history, and much of that success is due to Bruce's leadership," Warnock said. "With this in mind, the time is right for me to turn the CEO position over to him. This is a personal decision I have considered for some time, and a natural transition that I have been discussing with the Adobe board."

Including all items, Adobe earned $79.2 million, or 31 cents per share.

Fourth-quarter revenue increased 26 percent year over year and 8 percent sequentially to $355.2 million. "This has been a phenomenal year," Warnock said.

For fiscal 2000, Adobe earned $287.8 million, or $1.13 per share, on revenue near $1.3 billion.

Analysts expected Adobe to top the consensus expectation. However, before the company's earnings report, Morgan Stanley Dean Witter's Rebecca Runkle lowered Adobe to "neutral" from an "outperform" rating because of macroeconomic worries.

"The slowing economy and spate of pre-releases, on the margin, make us more nervous about recommending such a high-multiple stock," Runkle said in a research note.

Growth in Adobe's graphics business could slow, Runkle wrote, because about a third of the company's revenue comes from print publishing, which is undergoing a slowdown in ad spending.

But company executives on Thursday said they still expect to hit their original target of at least 25 percent revenue growth in the first quarter and fiscal 2001. "We continue to see strong growth in the network publishing economy," Chizen said.

J.P. Morgan analyst Aditya Narayanan remained upbeat about the stock and reiterated a "buy" rating on it.

"Our thesis on Adobe remains largely unchanged and (we) believe $84 remains fair value for the stock barring any change in guidance," Narayanan wrote in a note released before the earnings report.