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Revenues Touch Record Levels :
The firm’s net income for the second quarter of FY 2007, ended June 01, rose to $152.5 million or 25 cents a share from $123 million or 20 cents a share in the year-ago period. Adobe surpassed Street estimates as revenues surged 17.3% to a record $745.6 million. The top-line growth was driven by good performances of Creative Suite products and Acrobat. Operating margins expanded 92 basis points primarily due to lower restructuring and related expenses. The bottom line surged 24% on the back of higher operating income, as well as good contributions from interest and other income.
CS3 Debuts with Flying Colors :
In June 2007, Adobe unveiled Creative Suite 3 (CS3), including updates to the Photoshop and Dreamweaver Web development software. This was the most awaited product rollout in the firm’s 25-year history. More than half of the existing user base is expected to upgrade to CS3 in 2007. Favorably, the new product has performed extremely well in its early days, helping Adobe garner record revenues in its second quarter of FY 2007. The company’s products have been at the vanguard of the creative industry. Fueled by explosive growth of products like Acrobat, Photoshop, and the Illustrator, it has been able to post excellent results over the last five years. Revenues almost doubled from $1.3 billion in 2003 to $2.6 billion in fiscal year 2006, while net income nearly doubled to $506 million during the same period. The rise in usage of digital photography and digital video the world over has propelled sales of products like InDesign, Dreamweaver, and Flash.
CS3 will Spur Top-Line Growth :
Adobe recently released Creative Suite 3 (CS3), its most significant product in several years. Encouragingly, demand for the suite has been strong, and this should bolster the firm’s top line in coming quarters. The firm expects EPS to range between 28 and 31 cents in the third quarter of FY 2007, on revenues of $760–$800 million.
Can Microsoft be a Threat?
Currently, the firm is riding on the success of its recent product releases. Other factors such as increasing demand for creative suites in emerging economies and the explosive growth of 3D applications have also buoyed Adobe’s management. However, competition seems to be intensifying with players like Autodesk (ADSK) and Parametric (PMTC) aggressively advancing into the 3D software sector and industry titans like Apple (AAPL), Google (GOOG) and Corel fighting it out in the multimedia and graphics software arena. However, the toughest challenge could be thrown up by Microsoft Corporation. With the launch of Expression Studio and Windows Vista, the Redmond based giant is forcing its way into the creative software space and heading for a face-off with Adobe. The silver lining for Adobe, however, comes in the form of loyal customers, as it enjoys a very good client retention rate. Most creative professionals are familiar with its products and will not shift to other platforms easily. Adobe’s rivals may therefore find it difficult to lure its customers away.
--Anjan05 06:21, September 12, 2007 (PDT)
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