Adobe Projects Optimistic 2010

Last month, Adobe (NASDAQ:ADBE) reported its fourth quarter and fiscal year 2009 results. It swung to a loss in the quarter as it faced a $192 million tax charge relating to its recent $1.8 billion Omniture acquisition.

Q4 revenue declined 17% to $757.3 million. Revenue of $26.3 million is included in the total revenue as a result of the close of the Omniture acquisition on October 23. The company swung to a loss of $32 million or $0.06 per share compared to net income of $245.9 million or $0.46 per share last year and $136 million or $0.26 per share last quarter. Non-GAAP EPS was $0.39 per share. Q3 analysis is available here.

For fiscal year 2009, revenue of $2.95 billion, compared to $3.59 billion in fiscal 2008. Net income was $386.5 million compared to $871.8 million last year.

Adobe ended the quarter with cash and short-term investment position of $1.9 billion compared to $2.7 billion at the end of last quarter. It repurchased 5.3 million shares for about $174 million in the quarter. For the year, the company repurchased 15.2 million shares for about $425 million. It ended the quarter with headcount of 8,660 versus 7,564 in Q3 and added 1,184 employees as part of the Omniture acquisition. Adobe also implemented a restructuring program to eliminate about 630 positions.

By segment, Creative Solutions revenue in the forth quarter was $429.3 million, down from $508.7 million last year and up 7.2% from $400.4 million last quarter. Creative Solutions revenue, which accounts for two-thirds of Adobe’s total revenue, had a strong quarter and beat expectations. During the quarter, there was an increase in CS4 demand as well as strength in the company’s hobbyist business due to the Elements product launch. Photoshop Elements version 8 for Windows and Macintosh and Premiere Elements Version 8 for Windows were launched in September and received great reviews. In particular, Photoshop Elements had strong results in the Mac retail market.

Business Productivity solutions revenue was $211.8 million, down 24% y-o-y but up slightly from $210 million last quarter. Within this segment,  Knowledge Worker revenue was down 25% y-o-y and 3.3% q-o-q to $149.3 million despite Adobe Acrobat and Adobe Acrobat Connect having a strong quarter. Enterprise revenue which includes revenue from Adobe Reader and Adobe Flash was down 21% y-o-y but up 12.6% q-o-q to $62.5 million. Print and Publishing revenue was $42.9 million, down 17.5% y-o-y but up 1.6% q-o-q. Platform revenue was $47 million down 38.6% y-o-y but up 4.7% q-o-q.

In Adobe’s new Omniture segment, revenue for the partial quarter was $26.3 million, and $8.3 million of deferred revenue was excluded from this result due to purchase accounting. The company added 70 new Omniture customers in October and November. With the Omniture acquisition, Adobe will eventually add analytical, measurement, and optimization capabilities to future versions of Flash, Dreamweaver, and Acrobat which would help its customers to evaluate the impact of their digital advertising.

For the first quarter, Adobe expects revenue of $800 million to $850 million, GAAP EPS of $0.21 to $0.25, and non-GAAP EPS of $0.34 to $0.39. Analysts expect Q1 revenue to be $799 million and EPS to be $0.37. The Omniture business is expected to report revenue of $78 million to $83 million, excluding $14.7 million in deferred revenue. The Adobe stock is currently trading around $37 with market cap of about $19.5 billion. It hit a 52-week high of $38.20 on December 16 after its earnings were announced.

After a year of weak demand for Adobe’s Creative Solutions products, demand finally picked up, and the strong forecast indicates that this division will continue to improve in the first quarter. Creative Suite 5, due for launch in 2010, might also add to revenues next year. Overall, 2010 looks promising for Adobe.