Today: Adobe (ADBE) beats expectations in earnings as its cloud offering shows more growth, but the executive who spearheaded the change departs for Apple (AAPL). Also: eBay (EBAY) gains, EA falls, Apple treads water.
Adobe posts an earnings win but a loss in executive suite
San Jose software firm Adobe continued to show strong results after converting its popular Creative Suite to a subscription cloud offering, but the top executive in charge of that switch is leaving the company to take a job at Apple.
Overall, Adobe's revenue and profits declined in its fiscal first quarter from a year ago: The company reported net income of 35 cents a share on revenues of $1 billion, down from profits of 37 cents a share on revenues of $1.05 billion. Despite the drop, the company beat analyst expectations, which were for earnings of 31 cents a share on revenues of $986 million, according to Thomson Reuters.
More importantly for Adobe and analysts, however, the
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company is seeing phenomenal growth in its subscription offering, which helps to smooth out its income stream -- instead of reaping rewards upon the introduction of new software, Adobe takes in subscription money consistently throughout the year.
The company announced Tuesday that subscription revenues doubled in the quarter, to $224.3 million, with more than 500,000 customers paying for subscriptions -- a gain of 153,000 in three months -- and more than 2 million taking advantage of free
Kevin Lynch, formerly Adobe's chief technology officer. (Photo by Victoria Chu) (Chu)
or trial subscriptions that could translate to income down the road.
"Creative Cloud is quickly becoming mainstream, with the overwhelming majority of Creative purchases on Adobe.com now being Creative Cloud subscriptions," CEO Shantanu Narayen said in Tuesday's news release.
Adobe stock, which had dropped 0.8 percent to $40.75 in regular trading Tuesday, soared more than 7 percent higher in after-hours trading, topping $43 a share as analysts praised the company's progress in its new business model.
"The speed of the transition is the paramount thing on investors' minds," Robert W. Baird analyst Steven Ashley told Bloomberg News. "We all know this is the transition year."
"It looks like consumers are choosing the Creative Cloud ... and that's what seems to be driving the results," Macquarie Research analyst Brad Zelnick told Reuters.
The one negative in Tuesday's announcement was the departure of Adobe Chief Technology Officer Kevin Lynch, which was reported in the company's filing with the Securities and Exchange Commission. The executive, who spearheaded Adobe's switch to a cloud model, is joining Cupertino tech giant Apple as vice president of technology.
In a 2011 interview with the Mercury News, Lynch described Adobe's cloud offering, which would debut just a month later, as "a culmination" of the efforts he had been focusing on since taking the job in 2008. With those efforts showing fruit, he will now be joining a company that has long avoided one of Adobe's signature offerings, Flash, which Lynch has championed.
Adobe said it would not name a new CTO, instead splitting the duties among different executives.
eBay recovers, EA plunges, Apple holds relatively steady
Wall Street continued to lag Tuesday after its record-breaking run, with only the Dow Jones industrial average gaining among the three major U.S. stock indexes, and that increase was a tiny one. Technology stocks varied widely, with Silicon Valley joining in as the SV150 index of the region's largest tech companies declined 0.3 percent.
eBay, which had fallen to its lowest point of 2013 as large credit card companies promised charges on PayPal as the company's online-payments service moves into the physical space, found gains Tuesday after making its own fee news. The San Jose e-commerce giant announced that it would begin charging a flat fee to sellers using its Marketplace platform, instead of the varying fees it has charged that took the number of transactions and size of sales into consideration.
The move was seen as an attempt to keep its retailers and possibly steal some from rival Amazon, which also has a popular Marketplace offering. Paired with a beneficial ruling from the U.S. Supreme Court on selling used copyrighted material, the news helped push shares up 2 percent to $51.10.
Electronic Arts (ERTS) headed in the other direction, losing 8.3 percent to $17.15 one day after CEO John Riccitiello stepped down before the Redwood City video game company announces disappointing earnings results. Though the stock rose in late trading Monday after the move was announced, investors and analysts eventually focused on the fact that EA has to develop more hit games in order to turn the ship around.
On the anniversary of the day it announced a dividend, Apple declined slightly as it did not announce an increase in the amount it returns to shareholders, as reports Monday suggested it would. Investors are anxious for the company to return some of its cash to them, with Apple expected to hit $170 billion in cash reserves this year, according to a Tuesday report from Moody's. Apple dipped 0.3 percent to $454.49.
Hewlett-Packard gains, Oracle loses ahead of Wednesday events
Ahead of a big day for both companies Wednesday, Hewlett-Packard (HPQ) and Oracle (ORCL) headed in different directions. HP continued its positive momentum of late by gaining 1.2 percent to $23.11, its highest closing price since May of 2012. That milestone could be a selling point for the company Wednesday at its annual shareholders meeting, where some large investors are hoping important directors will not be re-elected.
Redwood City software giant Oracle fell 1 percent to $35.69 a day ahead of its annual earnings report, which -- like Adobe -- will give a clearer picture of the success of its cloud venture. For live coverage of the HP meeting and Oracle earnings Wednesday afternoon, go to www.sv.com.
One of the largest dips of the day belonged to Sunnyvale networking company Juniper, which declined 5.3 percent to $19.14 after Goldman Sachs downgraded the firm on fears that Cisco (CSCO) is poised to defeat its competitor; Cisco fell 0.7 percent to $21.52. Yahoo (YHOO) gained 0.7 percent as AllThingsD reported more executives were on the way out and The Wall Street Journal reported the Sunnyvale Internet company would buy video site Dailymotion for its much-rumored "large acquisition."
Silicon Valley tech stocks
Up: Ruckus, eBay, SunPower (SPWRA), HP, Advanced Micro Devices, Yahoo, SolarCity, Google (GOOG), Facebook
Down: EA, Juniper, Workday, Splunk, VMware, Netflix (NFLX), Symantec, Zynga, Jive, Oracle, Gilead, Yelp, Adobe, LinkedIn, Cisco, Applied Materials, Nvidia, Intel (INTC), NetApp
The tech-heavy Nasdaq composite index: Down 8.49, or 0.26 percent, to 3,229.1
The blue chip Dow Jones industrial average: Up 3.76, or 0.03 percent, to 14,455.82
And the widely watched Standard & Poor's 500 index: Down 3.76, or 0.24 percent, to 1,548.34
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408