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Adobe Gains on Guidance and Deal Announcement

The consumer software maker says its numbers will hold and that it's buying Canada-based Accelio.

Shares of

Adobe Software

(ADBE) - Get Adobe Inc. Report

rose nearly 10% Friday after the company reiterated its first-quarter guidance and announced a $72 million acquisition of




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Shares of the San Jose, Calif.-based software maker rose $3.23 to $36.93 in recent trading. News of the acquisition also sent Ottawa, Canada-based Accelio shares up nearly 44% to $2.76.

Also Friday, Merrill Lynch analyst Jay Vleeschhouwer reiterated his intermediate strong buy rating on Adobe, saying the company was positioned for stronger revenue growth. Merrill has no banking relationship with Adobe.

Sasa Zorovic, an analyst with Robertson Stephens, said the main reason for Adobe's stock boost was that short-sellers were covering their positions after betting that the company would lower guidance this week for the period ending March 2. Zorovic has a buy rating on the stock, and his firm has no banking relationship with Adobe.

In its announcement of the Accelio deal Friday, Adobe made minor changes to guidance from Thursday, saying gross margin would fall 1 percentage point from estimates, to 92%, and that operating margin would fall 1 percentage point, to 27%. Adobe said it will take an acquisition charge of $12 million to $15 million and forecast pro forma earnings-per-share dilution of about 2 cents. The company said the acquisition is expected to boost revenue by $30 million to $35 million in fiscal year 2002.

On Thursday, Adobe reiterated earlier guidance provided Dec. 13. The company stood by forecasts of first-quarter revenue falling between $265 million and $280 million and said pro forma earnings per share would range between 20 and 22 cents. That compares with $264.5 million in revenue and 20 cents a share in pro forma earnings in the fourth quarter. Last year Adobe recorded $329 million in revenue and 33 cents a share in pro forma earnings.

Zorovic called the Accelio deal "very strategic," noting that the company's electronic forms are used by more than 7,000 companies. "It is exactly in the area of

Adobe that is growing fastest -- that is, the e-paper segment that fits with the Acrobat product."

Accelio also wins out on the deal, which comes at a considerable premium over the $43 million that Open Text offered Thursday in a hostile takeover bid.