Adobe's Creative Cloud subscriber growth impresses investors

By Neha Alawadhi Features Reuters

Adobe Systems Inc, the maker of Photoshop and Acrobat software, forecast current-quarter results below analysts' estimates but reported a 22 percent jump in the number of subscribers to its Creative Cloud suite from the preceding quarter.

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The company's shares rose about 8 percent after initially falling 5 percent in extended trading.

Adobe added 402,000 subscribers for Creative Cloud, which includes Photoshop, Illustrator and Flash, in the fourth quarter, up from the 331,000 it added in the third quarter.

"Investors are giving Adobe's management team credit for its progress despite the light profit to this point, and will likely continue to do so, as long as the number of new cloud subscribers continue to outpace expectations," Edward Jones' technology analyst Josh Olson told Reuters.

The company said in September it expects subscriber growth for Creative Cloud to top 331,000 due to strong demand from corporate customers.

Adobe has been shifting to web-based subscription service Creative Cloud from a licensing model since last year.

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Subscription models bring in less money upfront as payment is spread over the entire period of use unlike traditional packaged software, but typically ensure more predictable recurring revenue.

Adobe said it expects revenue of $950 million to $1 billion in the first quarter.

The company forecast adjusted earnings of 22 cents to 28 cents per share.

Analysts on average were expecting earnings of 34 cents per share on revenue of $1.02 billion, according to Thomson Reuters I/B/E/S.

The company's net income fell to $65.32 million, or 13 cents per share in the fourth quarter ended November 29, from $222.3 million, or 44 cents per share, a year earlier.

Excluding items, the company earned 32 cents per share, in line with analysts' estimate.

Revenue fell 9.6 percent to $1.04 billion, slightly above the estimated $1.03 billion.

Adobe's shares were up at $57.90 in extended trading after closing at $53.99 on the Nasdaq on Thursday.

(Reporting by Sruthi Ramakrishnan and Neha Alawadhi in Bangalore; Editing by Maju Samuel and Don Sebastian)