Adobe cuts earnings forecast for third quarter

Shares of Adobe Systems fell more than 7 per cent after the Photoshop software maker cut its full-year revenue outlook, heightening concerns that the company’s shift to a subscription model was slowing its growth. The company said it expects third-quarter sales at its digital media unit that produces the Creative Suite design software to decline from second-quarter levels. Analysts say the company’s shift to subscriptions from a licensing model might reduce the revenue upswing it usually sees after the launch of a software upgrade. Adobe launched its Creative Suite 6 -which includes Photoshop, Illustrator, InDesign, Flash and Dreamweaver -and the Web-based Creative Cloud product in the second quarter. Transition to a subscription model often tends to be more difficult than the management initially expects, JMP Securities analyst Patrick Walravens said, downgrading Adobe to “market underperform” from “market perform.” “The problem with this strategy (shift to subscription) is that it will take Adobe around four years to generate the same level of revenues from a single subscriber that it would have earned through the sale of a single perpetual license,” Nomura analyst Rick Sherlund wrote in a note. From guldtoday