As it prepares to swallow Macromedia, Adobe has reassured its investors by turning in a solid second-quarter financial result. Revenue and income hit expectations and sales are reportedly on target around the world.
Revenue rose 21% to US$496 million, from the year-earlier period for the quarter ended June 3. Net income was US$149.8 million, up 37% from the prior year. Adobe also edged ahead of analysts' US$492 million revenue estimate.
Adobe says its Macromedia acquisition remains on track to close in several months. The deal will increase Adobe's strength in the document and web publishing market by uniting such popular technologies as Adobe's PDF format and Macromedia's Flash, along with Adobe's Photoshop image software and Macromedia's Dreamweaver development application under one corporate umbrella.
"These are good results because of the company's consistency in its performance," Ovum analyst David Bradshaw says. "What it really signifies is that there is good cause for optimism for the technology market in general."
Adobe's Creative Suite 2, a bundle of its top design and publishing applications, showed strong sales in its first quarter of release and will likely gain momentum in the coming months as international versions ship, Smith Barney analyst Tom Berquist says. Adobe slightly reigned in its forecast for its next quarter, predicting revenue of US$470 million to US$490 million where the analysts' consensus estimate had been US$485.7 million, but Berquist expects sales to come in at the higher end of that range.
He did register concern about Adobe's long-term growth, as it has no major product upgrades scheduled for next year and will soon be saddled with the task of integrating Macromedia.
Analysts will be keeping a close eye on Adobe over the next few years to see how it fares in an increasingly competitive environment for enterprise web publishing tools and standards. Microsoft recently released a beta version of Metro, its own document management format to rival PDF, and an array of software vendors such as IBM, BEA Systems and Oracle are beefing up their own document management and publishing offerings. Ovum's Bradshaw cites Microsoft's "attempt to muscle in on Adobe's market" as a potential problem for Adobe, while Berquist says Adobe will need to "clearly define its value proposition to customers" also being wooed by other middleware and management software vendors.