Adobe Beats Estimates

Updated from 5:03 p.m. EDT

SAN FRANCISCO - In the face of economic headwinds, Adobe Systems(ADBE Quote) is proving to be a brick house.

The company topped first-quarter consensus estimates Tuesday and reiterated guidance.

The San Jose, Calif., maker of Creative Suite and Acrobat software said revenue rose 37% to $890.4 million, from $649.4 million for the same period of last year. Analysts polled by Thomson Financial were expecting a top line of $875.9 million.

Net income was up 52% to $219.4 million, or 38 cents a share, from $143.9 million, or 24 cents a share, in the year-ago period.

Excluding items, EPS was 48 cents. Analysts were looking for 45 cents a share.

Adobe's profit received an $11 million boost from foreign exchange, which may have contributed to strong growth in Europe, CFO Mark Garrett said on the conference call.

During the quarter, the Americas region generated 45% of revenue, Europe 36% and Asia/Pacific 19%, Garrett said. Europe accounted for 28% of revenue three quarters ago.

Adobe projected second-quarter revenue of $855 million to $885 million and EPS, excluding items, of 45 cents to 47 cents. Analysts were expecting revenue of $875.3 million and EPS, less items, of 44 cents.

For the full fiscal year ending in November, the company is targeting EPS, excluding items, of $1.86 to $1.92. Analysts were expecting $1.82.

"We expect revenue for the third quarter to be approximately the same as the second quarter," Garrett said.

The dollar's weakness has been factored into guidance, Garrett said.

"This guidance points to ongoing strength in Creative Suite sales," Goldman Sachs analyst Sasa Zorovic wrote in a note. "Despite management's guidance, we remain cautious on the deteriorating macro environment that could likely dampen demand in future quarters."

Adobe builds guidance on the assumption that economic conditions remain unchanged, CEO Shantanu Narayen said. While the company is not immune to an economic downturn, "we do have a global as well as a diversified business."

The company can follow weekly, real-time channel sales data, Garrett said. "We can act quickly on the expense side. We believe we can manage the expenses very prudently."

Shares of Adobe were recently up $2.61, or 8.2%, to $34.49 in after-hours trading.

Narayen said the company's objective is to drive adoption of Adobe's Flash media player software to all mobile devices, including Apple's(AAPL Quote). "We're also committed to bringing the Flash experience to the iPhone. We want to work with Apple to bring that capability to the device."

On Monday, the company announced that Microsoft(MSFT Quote), which makes a competing rich-media player called Silverlight, had licensed Flash for its Windows Mobile software to give cell phone users that option for Internet-based video.

But Apple CEO Steve Jobs recently dismissed the idea of licensing Flash for the iPhone. Apple also has not licensed Silverlight.

Nevertheless, user adoption of Flash continues apace for enabling videos posted to the Web. "Monthly volume of video streamed in Flash increased over 300% between August 2007 and January 2008," Narayen said.