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Adobe revenue up from last quarter

The software publisher, still on the mend from the economic downturn, says it's poised for annual revenue growth of at least 20 percent once the economy recovers.

Software publisher Adobe Systems continued its recovery Thursday, reporting second-quarter earnings that were still down from a year ago but topped last quarter.

The company reported revenue of $317.4 million and earnings of 22 cents a share for the quarter ended May 31. That compares with $344.1 million and 25 cents a share in the same period a year ago and $267.9 million and 20 cents a share in the previous quarter.

Excluding one-time charges, earnings came out at 27 cents a share. On that basis, analysts polled by First Call had predicted earnings of 25 cents a share.

Adobe has suffered with the overall economic downturn, which has hit advertising and other key customer segments particularly hard. Revenue for the previous first quarter was down 29 percent from a year ago.

Adobe CEO Bruce Chizen said in late April that revenue and earnings for the quarter were on track with previous estimates and that Adobe was poised to maintain annual revenue growth of at least 20 percent once the economy recovers.

Company executives are counting on the release of a new version of Photoshop to help spark a short-term recovery, while recent efforts to boost Adobe's presence in enterprise software could pave the way for long-term growth.

"Despite a continuing soft economy, we had a solid quarter with a strong release of Photoshop," Chizen said in a statement.

The company predicted flat to modest growth for the third quarter, with revenue of a $300 million to $320 million and pro forma earnings per share of 24 cents to 27 cents. Fourth-quarter revenue was forecast at $315 million to $345 million and earnings per share at 26 cents to 29 cents.

In a conference call with financial analysts following the earnings announcement, Chizen said the fourth-quarter estimates were lowered from previous internal expectations. He explained that while initial sales for the new Photoshop have been strong, the product has not given the boost to related software--such as the Illustrator design package--that the company expected.

"As we've gone through the quarter, it's clear to us that Photoshop has not had the pull-through on Illustrator and other products we had anticipated," he said. "One of the reasons we're giving the range we are is the uncertainty around Photoshop."

Chizen said in an interview that he expects Photoshop to exert more influence on sales of other products written for Mac OS X as customers become more familiar with the new version.

"What we're hoping is that as people begin to work with Photoshop, they'll realize what a great experience it is...and go out and buy the other products," he said.

Chizen added that revenue from Adobe's acquisition of Canadian server software maker Accelio has not materialized as quickly as expected.

"In retrospect, we were a little overly optimistic on how we'd resolve some of the transition issues," he said.

Chizen said the Accelio acquisition is already starting to pay off, however, with Adobe's recently announced partnership with software maker SAP. Accelio's software for managing data from online forms already works with SAP, giving Adobe a head start as it works to convert a broad class of business customers to electronic documents based on Adobe's Acrobat and PDF software.

"You're already beginning to see the payoff just with the Acrobat growth," Chizen said in the interview. "The combination of Accelio and Acrobat is going to really be the driver for that segment of our business."