Adobe Cashes In

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Adobe Systems (Nasdaq: ADBE) gets a lot of press for its gee-whiz graphics and design tools, but today the technology takes the backseat to the firm's sparkling first-quarter financial results. The performance leaves this Fool at a loss for words. There's little to say except "Wow."

When last we checked in with Adobe, it had updated its outlook for the first quarter, predicting bigger revenues and profits -- something that has become a welcome habit over the past few quarters. Today, it blew that update out of the water, beating the top end of the target by $18 million to post $423 million in revenue, a 43% increase year over year. Earnings of $0.50 per share beat the high end of the guidance target by 20%, and they were an incredible 127% better than last year's Q1.

Citing record revenues for its high-end electronic document services and continuing strength in sales of its Creative Suite -- which includes updated versions of perennial favorites like Photoshop and Acrobat, along with my favorite layout program, InDesign -- Adobe raised its 2004 outlook. It hopes for revenues near $1.5 billion and diluted EPS between $1.40 and $1.46. The targets represent 15% revenue growth and 30% earnings growth over last year.

The only nits to pick with Adobe might be its reluctance to share the wealth with stockholders. With $200 million in cash, $1 billion in short-term investments, and very healthy cash flows, you'd think it could up its dividend just a stitch from the current $0.0125 a quarter.

Despite the 8% jump today, putting shares near $40 per stub, Adobe trades at only 27 times forward estimates. That looks like a reasonable deal given its growth, and if an economic upturn can turbocharge its already fast-growing e-document business, the rewards will be even better.

Can't tell the Acrobat from the bearded lady? Get the 411 on the Fool's Help with this STUPID Computer! board.

Fool contributor Seth Jayson thinks InDesign is the greatest thing since canned beer. He owns plenty of Adobe software, but no Adobe stock. View his Fool profile here.