Nov. 9 (Bloomberg) — Adobe Systems Inc. fell the most in 13 months after announcing plans to cut 750 jobs as it stops making Flash technology for mobile devices and shifts investment to programs for digital publishing and advertising.
The job cuts, mostly in North America and Europe, will cost $87 million to $94 million before taxes, the company said in a statement yesterday. That includes as much as $78 million of charges in the fiscal fourth quarter ending Dec. 2. After the costs, net income will be 30 cents to 38 cents a share, compared with a previous forecast of 41 cents to 50 cents.
Adobe, the largest maker of graphic-design software, is facing competition from Apple Inc. and Microsoft Corp. and an industry shift away from the Flash technology for Internet programming. To cope with the changes, the San Jose, California- based company is adapting its products for the increasingly popular HTML5 programming language and software for cloud computing, which is delivered over the Web.
Adobe plans to release more tablet-computer software and “aggressive” subscription pricing plans designed to attract new customers, Chief Executive Officer Shantanu Narayen told analysts today in a meeting in New York. Adobe’s software-as-a- service business may reach $1 billion over time, he said.
“Billions of dollars are shifting to digital” publishing, Narayen said. “We’re looking to deliver all these solutions in the cloud.”
Shares Fall
Adobe fell 8.7 percent to $27.79 at 11:52 a.m. New York time, after declining 14 percent for the biggest intraday drop since Sept. 22, 2010. The company was the second-worst performer in the Standard & Poor’s 500 Index. The stock has declined 1.2 percent this year before today.
The company will stop developing the Flash Player for mobile devices and instead emphasize the Air software, which will work with online app stores, Danny Winokur, an Adobe vice president, said in a company blog post today.
Adobe said it is channeling research, sales and marketing investments into digital media and marketing in the next fiscal year, and expects less licensing revenue from software for corporate servers. As a result, Adobe said sales will increase 4 percent to 6 percent next year. Analysts surveyed by Bloomberg had expected sales to increase 9 percent to $4.53 billion.
The company is overhauling the way it sells its most popular software, called Creative Suite, to spur more frequent purchases of programs like Photoshop and Dreamweaver. As more customers seek to buy and use software over the Internet, Adobe plans to release a software package called Creative Cloud early next year.
Adobe also reiterated its fourth-quarter forecast for sales and profit yesterday. Revenue will be $1.08 billion to $1.13 billion, and profit excluding certain costs will be 57 cents to 64 cents a share, Adobe said in September when it reported third-quarter results.
–Editors: Jillian Ward, Tom Giles
