Adobe, Darden earnings disappoint

Shares of both companies fall in Tuesday's after-hours trading. The declines could affect Wednesday's market.

By Charley Blaine Sep 21, 2010 8:54PM
Charley BlaineIf the market starts to shake on Wednesday, you can blame Adobe Systems (ADBE) and Darden Restaurants (DRI).

Both reported quarterly results late Tuesday that disappointed investors.

Adobe's shares fell 15.5% to $27.83 in after-hours trading. The company is best known for its Adobe Acrobat software and makes the Creative Suite family of design software.
Darden, operator of the Red Lobster and Olive Garden chains, was off 2.1% to $43.10.

In Adobe's case the problem was guidance. The company forecast fiscal-fourth quarter earnings per share of 48 cents to 54 cents on revenue of $950 million to $1 billion. The Street estimate has been 53 cents a share on revenue of $1.03 billion.

The issue appears to be slow sales of its flagship product Creative Suite 5. Sales are slow in Japan and in its U.S. education market, executives said on today's conference call.Adobe Systems

The product includes more than a dozen programs for editing photos, videos and sound, creating interactive websites and designing print publications. The package, released last spring, includes Photoshop, Illustrator and Dreamweaver.

It's not cheap: $1,898 to $2,599 per license.

In the fiscal third quarter, Adobe earned $230.1 million, or 44 cents a share, up 69% from $136 million, or 26 cents a share, a year ago. Excluding one-time charges, Adobe's earnings were 54 cents a share, better than the consensus estimate of 49 cents. Revenue was up 42% to $990.3 million, just as head of the Street estimate of $985 million.

For Darden, the problem was Red Lobster, whose sales fell 1.7% in the fiscal-first quarter after falling 7.9% in the year ago. Darden Restaurants

Sales are its Olive Garden and LongHorn restaurant chains were up 2.7% and 2.2% from a year ago, respectively.

Darden earned $113.1 million, or 80 cents a share, up from $94.3 million, or 67 cents a share, a year ago. Revenue increased 4.2% to $1.81 billion, as combined same-restaurant sales at its three main chains grew 1.1%.

Analysts had expected earnings of 77 cents on revenue of $1.82 billion, Reuters said.

So far, futures trading late Tuesday suggest a flat open on Wednesday. Stocks were mixed after the Federal Reserve left interest rates alone but suggested it may try some new tactics to jump-start a stagnant economy.

The pressure on Adobe's stock is likely to be intense on Wednesday. The shares were off 0.5% to $32.94 in regular trading today and already were down 10% on the year before the earnings  release came out.

Darden shares were up 25.5% on the year before they reported results. So maybe the stock will dip a bit. It has been a darling of investors who see the casual dining business as a leading indicator on the economy.
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