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High Adobe earnings lift stock

Adobe sees strong revenue growth in its first quarter, beating Wall Street analysts' estimates.

Strong sales of Photoshop and PageMaker boosted Adobe Systems' (ADBE) earnings for its first quarter, beating analysts' estimates.

The company reported after the market closed yesterday, and today its shares jumped 10.75 percent to close at 38-5/8, up 3-3/4 from yesterday's close.

Net income increased to $46.5 million, or 63 cents a share, for the quarter ending February 28; that's up from $33.7 million, or 44 cents, a year earlier.

Including nonrecurring charges and on a normalized basis, Adobe reported net income of $45.4 million, or 61 cents a share, compared to $32 million, or 42 cents a share. Wall Street was expecting 51 cents a share, according to First Call.

Meanwhile, revenues for the quarter rose 17 percent to $226.5 million compared with the year-ago period.

"We are pleased with the solid results achieved in this quarter," said John Warnock, chairman and CEO, in a statement. "It reflects the broad and growing acceptance of our products on both Windows and Macintosh platforms in both traditional markets and emerging markets such as Internet and intranet communications and Web site design and content creation."

Revenue from application products increased to $175 million, compared to $146.7 million last year. Licensing revenue for the first quarter of 1997 was $51.5 million, compared to $46.9 million last year.

"It was a good quarter in terms of revenue growth" said Hambrecht & Quist analyst Christopher Galvin. The strength of Photoshop and PageMaker, the company's two flagship products, contributed to strong revenue growth, he said. Fifty percent of Adobe's retail product revenues for the quarter came from the sale of products for Windows platforms, and 50 percent came from those for Macintosh platforms.

That such a large percentage of sales comes from Macintosh products has been a "long-standing concern" for analysts, Galvin said, but the company's Windows business is growing fast enough to compensate uncertainty surrounding Apple Computer.

"I think, as you'll see, a 50-50 split is very different from what it was a number of years ago," said Wink Grelis, company director of corporate communications.

Photoshop and PageMaker were "both upgraded during the quarter and sales were strong. The company's licensing business was also above expectation and they are gaining ground with Acrobat," said Galvin.

Grelis said that Adobe is expected to release a new version of Illustrator during the first half of fiscal 1997.

The company also announced a new venture stock dividend program for shareholders, based on stock it holds in other companies in its venture investing program.

The company's board also declared this quarter's cash dividend of 5 cents per share payable on April 15th to shareholders of record as of April 1st.