Updated from 1:56 p.m. EST
reiterated fiscal fourth-quarter guidance Monday and said a restructuring charge during the quarter will fall at the low end of a range disclosed earlier this month.
In its intraquarter update during an analyst day in New York, the San Jose-based network publishing company said it still expects to report revenue in the fourth quarter, which ends Nov. 29, between $285 million and $300 million and pro forma earnings of 21 cents to 25 cents a share.
In the fourth quarter of last year, Adobe earned 20 cents a share on $264.5 million in revenue. The Wall Street consensus calls for earnings of 23 cents a share on $290.1 million in revenue in the fourth quarter, according to Thomson Financial/First Call.
Shares of Adobe declined 27 cents, or 1.1%, to close Monday at $23.48. Shares declined to $23.40 in recent trading.
The company, which has been hurt by a downturn in the advertising market, is assuming the economic environment and demand for its products remains the same next year. "We're assuming many of our creative professionals that are working at Starbuck's today will be working at Starbuck's next year," Adobe President and CEO Bruce Chizen said half-jokingly during the analyst day.
The confirmation of guidance, which was largely expected by Wall Street, comes after Adobe disclosed in a filing with the
Securities and Exchange Commission
earlier this month that it expects to take a restructuring charge of between $10 million and $14 million "in order to realign its resources to support its future business plans." The company said it also expects to add resources to support different requirements of its business strategy.
During the company's analyst day in New York Monday, CFO Murray Demo said the company now expects the restructuring charge to be at the low end of that range. Demo said the restructuring includes laying off 250 employees (previously the company had said 260), or about 7% of its staff. The cuts will come throughout the company but will fall primarily in research and development and sales and marketing, he said.
However, Demo also said Adobe plans to add back positions in both departments tied to its ePaper initiative, which includes Acrobat products. Ultimately, the company expects the restructuring to lead to net savings of $2 million per quarter, Demo said. He did not disclose the expected net change in head count after the layoffs and new hires.
In a note following the SEC filing, Prudential Securities analyst John McPeake said he believes Adobe is restructuring its workforce to shift its focus from creative professionals, targeted by its PhotoShop and Illustrator software, to enterprise customers, targeted by its Acrobat products.
McPeake, who has a buy rating on Adobe, noted that the products for creative professionals are often sold by resellers while Adobe's Acrobat products and fledgling electronic forms business require a direct sales force.
"We do not anticipate a large decrease in headcount as the company will likely be hiring new employees in significant numbers to fill the needs of its enterprise sales strategies," McPeake wrote in the note. His firm does not do investment banking business.