Adobe 4Q profit shrinks but subscribers grow

NEWS: Adobe Systems Inc., the maker of Photoshop software, reported Thursday that its fiscal fourth-quarter profit shrank as its shift to cloud-based software cuts into profitability. Its forecast fell short of Wall Street expectations, but subscribers grew, helping lift shares in extended trading.

DETAILS: The company’s subscription-based revenue jumped 85 percent to $359.7 million. Paid Creative Cloud subscriptions grew 402,000 from the end of the fiscal third quarter, to 1.4 million. But product sales slumped by a third from a year ago, to $567.2 million.

Adobe’s profitability was also hampered by restructuring charges, compensation expenses and other special items.

NUMBERS: Adobe earned $65.3 million, or 13 cents per share, for the quarter that ended on Nov. 29. That’s down from $222.3 million, or 44 cents per share, in the same months last year. Excluding one-time items, earnings came to 32 cents per share, matching analysts’ prediction.

Revenue fell 10 percent to $1.04 billion. Analysts polled by FactSet expected $1.03 billion.

FUTURE: Adobe expects to earn 22 to 28 cents per share, excluding one-time items, on revenue of $950 million to $1 billion for its current quarter. Analysts were anticipating 33 cents per share on revenue of $1.02 billion.

For fiscal year 2014, it expects earnings of $1.10 per share, with revenue unchanged from the $4.06 billion generated in 2013. Analysts had forecast earnings of $1.61 per share for the year on revenue of $4.35 billion.

Over the longer term, Adobe expects earnings of $2 per share in fiscal 2015 and of at least $3 per share the following year. Wall Street had predicted earnings of $2.30 per share and $3.48 per share for those years.

STOCK: Shares fell 65 cents to close regular trading at $53.99 but increased $4.01, or 7.4 percent, to $58 in after-hours trading. The stock has gained 43 percent this year.