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Adobe Hurt By Japan's Weakness

Software maker warns that the fourth quarter will underwhelm.
Adobe Systems Inc. reported that its third-quarter net income dropped by nearly half. What's more, it's warning that fourth-quarter revenue and earnings will fall short of projections, as weak sales in Japan compound business troubles at home.

Adobe, which makes popular graphics-editing software such as Photoshop, earned $40.3 million on revenue of $292.1 million during the quarter ended Aug. 31. A year ago, net income was $78.3 million on revenue of $328.9 million. During a conference call Wednesday, CFO Murray Demo blamed a sharp halt in Japanese sales. "They basically stopped spending," he said.

In addition, Adobe says weak conditions in the United States, Japan, and other markets will cause the company to miss fourth-quarter financial targets. The vendor expects fourth-quarter revenue of $310 million to $320 million, compared with the $352.2 million analysts had expected. Adobe also revised its earnings-per-share estimate down to 27 cents or 28 cents, vs. consensus estimates of 31 cents.

CEO Bruce Chizen told analysts that sales of the company's Acrobat document-management software remain strong--up 45% annually during the third quarter. But sales of Photoshop, Illustrator, and other packages aimed at graphics professionals were weak. Chizen said the trend would continue until the economy picks up.