Adobe 2Q beats Street

June 15, 2000: 6:23 p.m. ET

Graphics software company cites strength in Internet software

NEW YORK (CNNfn) - Strong demand for its Web publishing and "Acrobat" software helped Adobe Systems Inc. top analysts' estimates for its second fiscal quarter on Thursday.

Adobe posted an operating profit of $95.8 million, or 51 cents a share, during the three months ended June 2, which beat, by 3 cents, the estimate of analysts polled by earnings tracker First Call.

Including one-time items, Adobe's net income was $65.8 million, or 52 cents per share.

Executives at Adobe, based in San Jose, Calif., attributed the strong results to strength in its Internet-related applications and provided a bullish forecast for the company's prospects.

"Our Web publishing and Acrobat revenue accelerated, and our overall business continues to be fueled by the Internet," said John E. Warnock, Adobe's chairman and chief executive officer of Adobe. "We are in the best position in the company's 17 year history."

Adobe shares ended Thursday's session up 2-7/8, or 2.4 percent, at 124-3/4 ahead of the earnings news. They slipped 3-1/4 to 121-1/2 in after-hours trading.

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In early April, Adobe raised its financial targets for the second half of its fiscal year, saying revenue should grow 25 percent and its operating profit should remain at 30 percent of revenue.

Warnock said the company remains on track to meet those targets. "We confirm 25 percent planned revenue growth for the second half of fiscal 2000, and we are pleased to announce that we expect 25 percent revenue growth in each of the third and fourth quarters of fiscal 2000," he said.

He also provided new operating model targets for the company, including a gross margin target of 92 percent and expense targets as a percent of revenue as follows: 20 percent research and development; 33 percent sales and marketing; and 9 percent general and administrative.

Also on Thursday, Adobe named Murray Demo senior vice president and chief financial officer of the company.

Demo, who joined the company three years ago, had been serving as interim CFO, vice president and corporate controller.