ADBE: Up Fast in a Flash

For Dvorchak's preview heading into the Adobe Systems conference call, please click here.

It is hard to fathom how a company can surprise on the upside after preannouncing results two weeks earlier, but Adobe (ADBE - commentary - Cramer's Take) managed it -- or managed to take advantage of the market's festive spirits post-Bernanke.

Adobe is up 9% in after hours after "beating" by a couple pennies and reaffirming guidance. Adobe reported EPS of $0.60 on revenue of $915 million; the street was at $0.58 on $918, in line with the preannouncement numbers. So nothing really changed after two weeks, but wee! We'll celebrate anyway!

The real excitement around Adobe is its growth positioning. The focus of the call was Flash -- on the web, on mobile devices, everywhere -- which is a critical technology for multimedia on the web. The proliferation of creative work beyond very narrow industries (Hollywood, Madison Avenue, etc.) to the broader population plays to Adobe's strengths.

Creative Suite (CS) -- the suite with Photoshop, etc. -- is a large percent of revenue, so it must get its slice of attention, but the story is not there right now. CS was down 11% year over year due to economic effects, according to management. CS4 is young in its product cycle, and management claims to be getting positive feedback from customers, but fiscal reality is intruding.

Interestingly, management noted that large licensing deals and emerging markets were very strong, while shrink-wrap into distribution was weaker. Adobe plans to add demand generation programs -- while simultaneously keeping a cap on expenses -- by promoting to specific distribution partners.

Meanwhile, management made a strong case for fiscal responsibility, with quick layoffs and more restructuring to preserve the company's quite-large margins. The layoffs will affect the February quarter expenses (there were some savings this quarter from summer interns leaving the payroll), and management hinted there was more to come.

Adobe also crowed about other more minor expense controls, such as the elimination of nonvital travel and salary adjustments. The planned price increase in February is still a-go, which will help margins. Management believes its value proposition is strong, and customers are unlikely to move based strictly on price action.

People often use the hackneyed cliché about "skating to the puck" -- Adobe is the puck. The world is moving right to them.

Know What You Own: Adobe operates in the application software sector; other companies in this field that may interest investors include Apple (AAPL - commentary - Cramer's Take), Microsoft (MSFT - commentary - Cramer's Take), Oracle (ORCL - commentary - Cramer's Take), SAP (SAP - commentary - Cramer's Take), CA (CA - commentary - Cramer's Take) and Intuit (INTU - commentary - Cramer's Take).

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At the time of publication, Dvorchak was long ADBE, although positions can change at any time.

Gary Dvorchak is a managing partner of Aviance Capital Management, a Sarasota, Fla.-based institutional asset manager that manages $200 million in growth and value equities and fixed income. Dvorchak holds a master's degree in business administration from Northwestern University and a bachelor's degree in computer science from the University of Iowa.