San Francisco: Adobe Systems Inc. reported rise of 41% in profit in Q2 because of strong sales and booming demand in international markets.
For the three months ended 30May, the maker of Photoshop design software and the Acrobat publishing tool reported net income of $214.9 million, or 40 cents per share, compared to $152.5 million, or 25 cents per share, in the same quarter a year ago.
Excluding special items, the software maker reported income of $272.7 million, or 50 cents a share, compared to $223.2 million, or 37 cents a share in the same quarter a year ago.
On that same basis, analysts polled by Thomson Financial had predicted, on average, earnings per share of 46 cents on revenue of $880 million. Actual revenue beat those expectations at $886.9 million, up 19% from $745.6 million a year ago.
Sales in foreign markets with stronger currencies than the dollar translated into more dollars for Adobe. About 5% of Q2 revenue, or $44 million, came as a result of positive foreign exchange rates, CFO Mark Garrett told investors in a conference call to AP.
More than 50% sales from overseas, driven by demand for digital content
More than half Adobe’s sales some from overseas. Emerging markets in Eastern Europe, Brazil and China offer great opportunities for growth as software piracy declines, chief executive Shantanu Narayen said.
Narayen said the company’s positive performance results from burgeoning demand for digital content and from the fact that both Adobe’s geographic reach and its product mix are very diversified.
“The amount of video that’s being used on the Web continues to explode, and I think frankly we are very early in people using video on the web,” Narayen said. “The desire to continue to consume personalized content is going to continue for a long time.”
The San Jose-Calif.-based company expects Q3 earnings of 34 cents to 36 cents per share, or 45 cents to 47 cents per share on an adjusted basis. Adobe expects revenue of $855 million to $885 million in Q3. Shares of Adobe closed Monday at $42.85, up one-third of 1%, before the results were announced. In after-hours trading, they rose initially and then fell 99 cents, or 2.5%, to $41.86.
High oil prices could be a damper on future performance
Global Equities Research analyst Trip Chowdhry said Adobe executed very well in a terrible economic situation. But he doubted the company could sustain such results longer than a couple more quarters, mainly because of high oil prices.
“Every customer of Adobe, direct or indirect, is being crunched because of the oil prices,” Chowdhry said. Even if technology companies are getting a pass so far, as some analysts believe, each segment will eventually be hit, he said.
“We always say we are not recession proof, but Adobe is also not one of those providers of luxury goods,” Narayen said. “It’s a productivity tool that enables knowledge workers to be more productive, and so maybe our impact is a little more muted than some other companies.”