Ahead Of The Bell: Microsoft, Adobe Upgraded

NEW YORK (AP) — Software companies are in a better position to meet financial expectations because of cost cutting and a likely rise in spending brought on by federal stimulus money, according to a research report from RBC Capital Markets.

With those factors in mind, RBC analyst Robert Breza upgraded several big software names Tuesday, including Adobe Systems Inc., Concur Technologies Inc. and Microsoft Corp.

"The hill ahead still looks steep and bumpy," Breza said. "But we think there is little room to fall based on the backdrop."

San Jose, Calif.-based Adobe, best known for its Photoshop software, was upgraded to "Outperform" from "Sector Perform." Breza noted the company's 8 percent work force cut announced in December. He said Adobe's brand remains strong and with limited competition.

Breza upgraded Redmond, Wash.-based Concur to "Sector Perform" from "Underperform," seeing little risk to the company's stock price following a 35 percent slide in its value in the year to date. Furthermore, the analyst expects the first customers from Concur's partnership with American Express in the next few months. The companies have an agreement in which American Expresses markets Concur's expense management software to corporate clients.

Microsoft, also based in Redmond, was upgraded to "Outperform" from "Sector Perform." Breza said PC sales have likely hit a bottom and the introduction of Windows 7 operating system will help shares. Management is also likely to keep tight control over employee head count, which should hold down expenses over the next few quarters, he said.