Adobe Beats on Both Lines

Updated from 5:06 p.m. EDT

San Jose, Calif.-based Adobe Systems(ADBE - Cramer's Take - Stockpickr) beat analysts' second-quarter expectations and projected healthy sales for the coming quarter.

The publishing-software developer on Thursday reported net income of $152.5 million and EPS of 25 cents, compared with $123.1 million and 21 cents a share for the same quarter of 2006.

Excluding items, Adobe earned $223.2 million, or 37 cents a share.

Analysts polled by Thomson First Call had projected net income of $216.6 million, or 35 cents a share.

In recent after-hours trading the stock was down 36 cents, or 0.8%, to $43.60. The stock had been trending higher ahead of the report.

Revenue for the quarter was $745.6 million, 17% better than revenue of $635.5 million a year ago and analysts' estimates of revenue of $728.8 million.

Growth was driven by strong sales of the company's new Creative Suite 3 product and Acrobat software, according to CEO Bruce Chizen.

With strong sales of the bundled software suites over standalone products, the company has high expectations for its Master Collection, due out in July. On a conference call, Chizen called it the "uber-suite," priced at $2,500.

"It's the first product that combines best of Macromedia products with Adobe products," said president and chief operating office Shantanu Narayen. Adobe acquired Macromedia in 2005.

The company said it is targeting revenue of $760 million to $800 million in the third quarter. Adobe projected EPS will be between 39 cents and 41 cents, excluding items.

Consensus is for EPS of 40 cents on revenue of $781 million.

Asked about Adobe vis-à-vis Google(GOOG - Cramer's Take - Stockpickr) Gears, the search giant's recently announced "offline" software, Narayen said Gears is complementary to Adobe's software and demonstrates the need to work offline. "The reality with Google Gears is it's still just in conjunction with a browser."

With the beta release of AIR (Adobe Integrated Runtime) this week, "we have stronger applications," Narayen said. AIR, which has open-source elements and crosses the bridge between the PC and the Web, works both within and outside browsers.