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Adobe Systems rallies on 3Q earnings, upgrades

Adobe Systems Inc. (Nasdaq: ADBE) shot up 8 3/16, or 8 percent, to 106 1/16 Friday after the software developer easily topped analysts' estimates in its third quarter and set a 2-for-1 stock split.

The San Jose, Calif. company raked in $57.2 million, or 80 cents a share, on record sales of $261 million.

First Call consensus expected Adobe to earn 74 cents a share in the quarter.

On Friday, Advest Inc. upgraded the stock from a "market perform" to a "strong buy" rating while J.P. Morgan bumped it from a long-term "buy" to "buy."

The $261 million in sales represents a 21 percent jump compared to the year-ago period when it earned $152,000 on sales of $223 million.

Including investment gains and losses from the company's venture programs, Adobe earned 88 cents a share in the quarter. "Our third quarter was outstanding," said CEO John Warnock in a prepared release. "This performance demonstrates that the company has exceeded its product and operational goals."

Application sales rose to $230.7 million versus $182.1 million in the year-ago quarter. Licensing sales fell from $40.8 million in the third quarter of 1998 to $30.2 million this time around.

Company officials credited strong demand for its Photoshop 5.5 software as well as sales of its InDesign, GoLive and Illustrator offerings.

Looking ahead, Warnock said Adobe expects to see revenue growth of at least 20 percent in fiscal 2000 and an annual operating margin of 30 percent.

The 2-for-1 stock split will be paid in the form of a dividend to shareholders of record on Oct. 4. It also declared a cash dividend of 5 cents a share.

Last quarter, Adobe hurdled the Street estimates, earning $45 million, or 70 cents a share, on sales of $246 million.

The stock peaked at a 52-week high of 107 1/4 earlier this month after trading at just 28 last September.

Eight of the 13 analysts tracking the stock maintain either a "buy" or "strong buy" recommendation.