Adobe surpasses expectations
Adobe lives up to its own hype thanks to strong shipments of Windows-based products and solid performance for Macintosh applications.
Adobe also announced it will repurchase up to 15 million shares of its common stock during the next two years.
Last week, Adobe prepped the financial community for its expected good fortune,
announcing that it would report record revenues and improved earnings due to a jump in shipments during the final week of its third quarter.
Adobe shares ended the day up 8.7 percent to close at 49-3/4, up 4 points.
For its third fiscal quarter ended August 29, including non-recurring items, Adobe reported a net income of $53.4 million, or 72 cents a share, compared with a net income of $29.8 million, or 40 cents a share, a year ago. Analysts were expecting 48 cents a share, according to First Call.
The current report includes an after-tax gain of $12.9 million, or 17 cents a share, in connection with granting 555,000 shares of Netscape Communications stock to Adobe stockholders. Also reflected is the sale of 200,000 shares of Netscape late in the quarter and non-recurring expenses of $4.6 million associated with acquisitions during the quarter.
Excluding the gains and charges, the company would have reported a net income of $41 million, or 55 cents per share--still above expectations.
Adobe achieved record revenue of $230 million, up from revenues of $180.9 million in the third quarter a year ago.
Licensing revenue was off by about 10 percent, to $45.2 million, compared with $50.4 million last year. The company attributed the drop to a number of factors affecting original equipment manufacturers (OEMs), primarily in the Japanese market.
Application products revenue for the quarter was $184.9 million, compared with $130.5 million reported for the same quarter of fiscal 1996. For the quarter, 50 percent of Adobe's total application products revenue, excluding platform-independent and UNIX products, came from the sales of products for the Windows platform. Fifty percent were related to the Macintosh platform.
Application products revenue on the Windows platform grew 75 percent, and application products revenue on the Macintosh platform grew 42 percent, said the company.
Adobe said the boom in the last week of the quarter came from promotional sales of its three major application products, Photoshop, Illustrator, and PageMaker. The products were bundled with the ActionPack retail promotion, which began shipping earlier this month in connection with the latest version of FrameMaker 5.5.
Adobe also announced that its board of directors authorized a stock repurchase program, in which the company will buy back up to 15 million shares of Adobe common stock over the next two years. During the third quarter, Adobe repurchased 450,000 shares of common stock, and at quarter end there were 73 million outstanding shares.
As previously disclosed, Adobe was a defendant in a U.S. patent infringement lawsuit brought by Quantel, a U.K. corporation. The suit alleged that Photoshop infringed five Quantel patents. Adobe vigorously defended the lawsuit, and a verdict announced today declared that Photoshop did not infringe the patents and that the patents are invalid. Quantel filed the lawsuit against Adobe in January 1996.