Adobe Profit Down 59% but Cloud Subscribers Jump
Adobe Systems Inc.'s (ADBE) fiscal third-quarter profit dropped 59% as the software company reported falling product
sales and a jump in operating expenses.
But shares rose 5.6% to $50.92 in after-hours trading, as Adobe added more "Creative Cloud" subscribers than many Wall
Street observers anticipated. The stock has risen 28% in 2013 through Tuesday's close, outperforming the broader market.
Adobe, the maker of Photoshop and Illustrator design software for creative professionals and Web marketers, is
transitioning to subscription services and away from packaged software. Software-as-a-service, a subscription-based
business model, offers customers more pricing options and flexibility.
The company ended the quarter with 1.3 million paid Creative Cloud subscribers, an increase of 331,000 from the end of
the fiscal second quarter. Adobe also said its marketing cloud business revenue totaled $254.9 million in the latest
period, up 28% from a year ago.
For the quarter ended Aug. 30, Adobe reported a profit of $83 million, or 16 cents a share, down from $201.4 million,
or 40 cents a share, a year earlier. Excluding stock-based compensation and other impacts, per-share earnings fell to 32
cents from 58 cents.
Revenue slid 7.9% to $995.1 million.
The company in June projected an adjusted profit between 29 cents to 35 cents on $975 million to $1.03 billion in
Operating margin narrowed sharply to 11.1% from 25.8%. Operating expenses rose more than 8%, as research and
development, sales and marketing, and other costs grew.
Product sales, still the bulk of Adobe's revenue, slumped 28% while subscription revenue soared 73%. Revenue from
services and support rose 17%.
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