Thursday, March 23, 2006

Adobe's results disappoint and investors punish them - should they?

Design software maker Adobe Systems last night posted lower quarterly net income on acquisition-related costs and gave a disappointing outlook, sending its shares down 4%.

Net income was down around a third in their latest quarter from a year ago. And they put out silghtly lower projections going forwards, but stuck to their guidance for the full year.

That doesn't sound so bad? So what's all the fuss about and why did the stock take such a pummelling? Well, investors are still concerned about major software company M&A - as they should be - just check out Computer Associates.

And Adobe took one big bite when they acquired Macromedia. But strategically it makes complete sense - it'll all come down to execution now. The market needs to give them a little time. The key is how they do in 2007.

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