Adobe's Sales, Profit Up

Analysts' forecasts called for Adobe to earn 28 cents a share on $633.9 million in sales in the first quarter.

For fiscal year 2006, Adobe said GAAP earnings should total 74 cents to 82 cents a share and non-GAAP earnings $1.26 to $1.30 a share on sales of about $2.7 billion.

Those targets, which include a full year of Macromedia results for the first time, represent 13% annual non-GAAP earnings growth and 37% sales growth. By comparison, earnings grew 24% and revenue 18% in just-completed fiscal 2005.

Analysts were forecasting that Adobe would earn $1.25 a share on $2.69 billion in sales in fiscal 2006. Several analysts had updated their numbers to reflect the Macromedia acquisition in their 2006 estimates.

Outgoing CFO Murray Demo noted that Adobe is targeting a non-GAAP operating margin for 2006 of 36% to 37%, approximately in line with the stand-alone company's 2005 operating margin.

To help achieve those targets, Adobe plans to lay off 650 to 700 employees from both companies, or about 10% of the combined workforce.

Adobe plans to incur restructuring charges of $20 million to $25 million in the 12 months ending Dec. 1, 2006, although the majority of the activities related to restructuring will be completed in the first quarter ending March 3, 2006.

In a separate announcement after the bell, Adobe said Demo would leave Adobe "to spend more time with his family" after nearly 10 years with the company. Chizen said Demo will remain in his role until March, or later if the company has not found his replacement by then.

Adobe shares have enjoyed a nice run this fall, appreciating nearly 30% since the beginning of September vs. a more modest 6% climb of the Nasdaq Composite.

After hours, shares of Adobe recently rose $1.18, or 3.4%, to $36.11 in after-hours trading; shares closed the regular session up 41 cents to $34.93.

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