Adobe Stock Plummets after Earnings Expectations Lowered

Published by: TheMightyOz on 23rd Sep 2010 | View all blogs by TheMightyOz

Adobe Stock Plummets after Earnings Expectations Lowered

Adobe announced Tuesday that sales and earnings for next quarter may fall short of expectations, leading to a huge drop Wednesday in the company’s stock price. The announcement said the company is projecting fourth quarter profits as low as 48 cents per share, whereas analysts had projected earnings of 52 cents per share. Wednesday, Adobe shares (ADBE) fell more than 20 percent from Tuesday’s close, and at one point in the day the stock reached a new 52-week low at $25.81.

Analysts have attributed the lower earnings expectations on the poor sales of Adobe Creative Suite 5, a software package that includes Adobe Photoshop and Acrobat. A handful of investors expect Adobe profits to increase by more than ten percent by the end of next year. They say that the slumping sales shouldn’t have come as a surprise because of a severe decline in demand for personal computers.

Adobe stock had enjoyed substantial gains early in September, after AppleiPhones, iPads, and iPods had restricted what tools developers were allowed to use when creating apps for their products. The move was expected to open the door for developers to use Adobe Flash in developing new apps.

But insiders are saying that Adobe’s focus should be on Google’s Android operating system, with a number of new Android-based phones set to hit the market this year. The growing popularity of the Android OS favors Adobe, and is applying pressure to Apple. The drop in Adobe’s stock could make the company more attractive to larger companies eyeing Adobe for a takeover, possibly Google.

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