SAN JOSE (dpa-AFX) - Publishing and design software maker Adobe Systems Inc. (ADBE), said Tuesday that its third-quarter profit declined from the prior year, hurt mainly by lower operating margin as it spent more on marketing and research & development. Nevertheless, excluding items, adjusted earnings for the quarter topped Street estimates, while revenues missed expectations.
Looking ahead to the fourth quarter, Adobe Systems detailed a strong outlook which is indicated to come in ahead of Street estimates. Following the news, shares of the company gained over 6 percent in extended trade on the Nasdaq.
Adobe Systems, famed for its Photoshop editing and Acrobat document-sharing software, reported GAAP net income for the quarter of $195 million or $0.39 per share, a decline from $230 million or $0.44 per share in the prior year.
Excluding items, non-GAAP net income for the quarter was $273 million or $0.55 per share, compared to $284 million or $0.54 per share a year earlier.
On average, 25 analysts polled by Thomson Reuters expected earnings of $0.54 per share for the quarter. Analysts' estimates typically exclude special items.
Adobe Systems' profit for the quarter was impacted as operating expenses increased to $634.4 million from $589 million last year. As well, non-operating expense rose to $17.4 million from $5.3 million recorded last year.
GAAP operating income for the quarter was $274 million or 27.1 percent of revenue, compared to $302 million or 30.5 percent of revenues last year. Non-GAAP operating income was $366 million or 36.1 percent of revenue, compared to $385 million or 38.9 percent of revenue in the previous year.
The maker of products such as Acrobat and Flash, reported sales of $1.013 billion for the quarter, an increase from $990.3 million a year ago. Twenty-three Wall Street analysts expected sales of $1.03 billion.
The company had forecast third-quarter revenue of $1.00 billion to $1.05 billion, GAAP earnings of $0.35 to $0.42 per share and non-GAAP earnings of $0.50 to $0.56 per share.
During the quarter, Adobe Systems repurchased 3.6 million shares of its common stock.
Looking ahead to the fourth quarter, Adobe Systems expects GAAP earnings in the range of $0.41 to $0.50 per share, non-GAAP earnings of $0.57 to $0.64 per share, and revenues of $1.075 billion to $1.125 billion.
Street analysts currently expect earnings of $0.59 per share on revenues of $1.07 billion for the fourth quarter.
Fourth-quarter operating margin is anticipated in the range of 26.5 to 29.5 percent on a GAAP basis, and 36 to 38 percent on a non-GAAP basis.
Adobe Systems also reaffirmed its 10 percent revenue growth objective for fiscal year 2011.
Mark Garrett, executive vice president and CFO of Adobe Systems, said, 'We delivered strong earnings in Q3. At the high end of our financial targets for our fourth quarter, we will achieve our 10 percent annual revenue growth target as well as earnings growth of 20 percent for the fiscal year.'
ADBE closed Tuesday's regular trade at $24.64, down $0.63 or 2.49%, on a volume of 11.5 million shares on the Nasdaq. In after hours, the stock gained $1.55 or 6.29%.
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