Adobe Delivers Solid Results

This Tuesday, Adobe Systems Incorporated (NASDAQ: ADBE), the leading maker of creative applications, reported its Q4 and FY08 results. Earnings matched the top end of the company’s lowered forecast from earlier this month.

Q4 revenue grew less than 1% to $915.3 million. Net income grew 10.6% to $245.9 million or $0.46 per share. Adjusted EPS was $0.60 versus the company’s forecast of $0.59 to $0.60. The forecast was lowered due to weak demand for its new Creative Suite 4 (CS4) line of products. Earlier coverage is available here and here.

In Q4, Adobe bought back shares worth $206.3 million and during the full year, shares worth $2.14 billion. Cash flow from operations in Q4 was $338 million and the cash and short-term investment position at the end of the quarter was $2 billion, the same as in Q3.

By segment, Creative Solutions segment Q4 revenue was $508.7 million, down 11% as demand for the new CS4 products was affected by the global economic downturn. Business Productivity solutions segment revenue grew 13% to $278 million. Within Business Productivity Solutions, Knowledge Worker revenue grew 4% to $199 million and enterprise revenue grew 45% to $79 million. Mobile and Device segment revenue more than doubled to $48.2 million due to strong demand for Flash Lite and renewal of several agreements with major OEMs.

By region, demand was particularly affected in North America and Europe. The Americas accounted for 46% of revenue, Europe 34% and Asia 20%.

For the full fiscal year 2008, revenue grew 13% to $3.58 billion, meeting the target set early in the year. Net income was $872 million or $1.59 per share versus $724 million or $1.21 per share in 2007. By segment, Creative Solutions revenue grew 9% to $2.07 billion, Business Productivity grew 16% to $1.06 billion, and Mobile business revenue grew 115% to $113.1 million.

To control costs, Adobe has announced headcount reductions of about 600, or 8% of employees. Headcount at the end of Q4 was 7,544. The company has also reorganized its business segments. It is dividing its Other segment into two: Platform, and Print and Publishing. The Mobile and Device Solutions segment will be combined with the new Platform segment as it is focusing on making Flash a standard across all mobiles. However, getting Flash on the iPhone is still far in the future.

While on the topic of Flash, Adobe is facing aggressive competition from Microsoft’s Silverlight, with Netflix and NBC Universal choosing the Silverlight technology. Adobe, which has a dominant market share of 98%, has launched the open screen project including 19 companies like Nokia and Verizon. The project encourages users to develop applications using Adobe’s technology.

For Q1, Adobe is targeting revenue in the range of $800 to $850 million impacted by the economic conditions and seasonality. It expects GAAP EPS in the range of $0.30 to $0.35 and non-GAAP EPS in the range of $0.43 to $0.47. Operating margin is expected in the range of 26% to 28%. Adobe is currently trading around $22 with market cap around $11.5 billion. The stock hit its 52-week low of $19.49 on December 5 following the company’s revised forecast. Still a solid company, although the Creative Solutions business is vulnerable from attack by Apple.