Adobe Shares Fall as Software Maker Cuts Jobs

By Aaron Ricadela - Nov 9, 2011 9:44 PM GMT+0700

Adobe Systems Inc. (ADBE) shares fell the most in 13 months after the company said it will cut 750 jobs as it lessens its focus on older products and shifts investment to programs for digital publishing and Web advertising.

The job cuts, mostly in North America and Europe, will cost $87 million to $94 million before taxes, the company said in a statement yesterday. That includes $73 million to $78 million of charges in the fiscal fourth quarter, which ends Dec. 2. After the costs, net income will be 30 cents to 38 cents a share, compared with a previous forecast of 41 cents to 50 cents.

Adobe, the largest maker of graphic-design software, is facing competition from Apple Inc. and Microsoft Corp. and an industry shift away from its Flash technology for Internet programming. To cope with the changes, the San Jose, California- based company is adapting its products for the increasingly popular HTML5 programming language and software for cloud computing, which is delivered over the Internet.

The company said it is channeling research, sales and marketing investments into digital media and marketing in its next fiscal year, and expects less licensing revenue from software for corporate servers. As a result, Adobe said sales will increase 4 percent to 6 percent next year. Analysts surveyed by Bloomberg had expected sales to increase 9 percent to $4.53 billion next year.

Adobe’s shares fell 12 percent to $26.72 at 9:32 a.m. New York time, the most since Sept. 22, 2010. The company was the worst performer in the Standard & Poor’s 500 index. The stock has declined 1.2 percent this year before today.

Analyst Meeting

Adobe Chief Executive Officer Shantanu Narayen and other executives are scheduled to hold presentations for financial analysts today in New York, where they will discuss the company’s business strategy.

The company is overhauling the way it sells its most popular software, called Creative Suite, to spur more frequent purchases of programs like Photoshop and Dreamweaver. As more customers seek to buy and use software over the Internet, Adobe plans to release a software package called Creative Cloud early next year.

Adobe also reiterated its fourth-quarter forecast for sales and profit yesterday. Revenue will be $1.08 billion to $1.13 billion, and profit excluding certain costs will be 57 cents to 64 cents a share, Adobe said in September when it reported third-quarter results.

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net