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Graphic design software vendor Adobe (Nasdaq: ADBE) beat Wall Street's second-quarter earnings estimate by a nickel yesterday on strong sales of its Acrobat software.
The excellent quarter can be attributed to cost controls and the latest release of Acrobat. Adobe has a track record of prudently managing expenses in difficult economic conditions. The ability to control costs is best displayed by its operating margin, which improved to 34% this quarter, compared to 29% in the same period last year. The company also released its latest version of Acrobat in April. This product, which can be found in almost all desktop computers, converts written information into portable document format (PDF) files. That saves money by reducing paper flow and improving business communication. Acrobat is immensely popular and should be able to continue driving the company's results in future quarters. Adobe also benefited from the pricing of its products. Much of its software is sold to small design shops, for example, at very low price points Those purchases are easier to make during difficult economic times, which leaves Adobe better positioned than large enterprise software companies that sell applications for millions of dollars. In last night's conference calls, Adobe told investors to expect flat year-over-year revenue growth next quarter, citing slow demand in the U.S. and Europe. Adobe's Asian business, which represents 25% of the company's top line, was stronger than expected. However, the company's not counting out poor results there down the road. But given its proven operating leverage -- the ability to control costs with slowing sales -- Adobe will most likely continue its bottom-line success. News to Go
Fiber optic component supplier JDS Uniphase (Nasdaq: JDSU) warned after the market's close yesterday that its fourth-quarter quarter sales would come in lower than expected. The company expects sales of $600 million, down from earlier projections of $700 million. The lowered sales mean it will take an extra inventory charge of $225 million to $250 million. Excluding onetime charges, that should translate into a Q4 loss of $0.06 per share to $0.08 per share. Wall Street expected earnings of $0.05 per share. Networking equipment company Nortel Networks (NYSE: NT) announced new job cuts and a second-quarter loss this morning. The company expects a loss of $19.2 billion after charges, while cutting another 10,000 jobs. Nortel had already announced 20,000 layoffs in April. Nortel plans to report a loss of $1.5 billion, or $0.48 per share, on sales of $4.5 billion before the impact of charges for bad debts and job cuts. The company continues to suffer from customers cutting spending on telecommunications equipment. International Rectifier (NYSE: IRF), which makes semiconductors that regulate electricity flow, said yesterday that it expects fourth-quarters sales of $179 million to $193 million, compared to $276 million in the year-ago quarter. The company had been forecasting sales between $237 million and $257 million. Next fiscal year, it expects sales to grow 5% to 10%, down from its earlier forecast of 20% to 25%. Pinnacle Systems (Nasdaq: PCLE), which makes digital video products, warned of lower fourth-quarter results yesterday, citing difficult economic conditions. The Mountain View, Calif.-based company expects pro forma earnings to break even, well below Wall Street's expectation of earnings of $0.09 per share. The company also lowered its sales forecast 10%, calling for revenue between $60 million and $64 million. Pinnacle expects an inventory charge of $3 million to $5 million and severance costs of $1 million. Comair, a unit of Delta Air Lines (NYSE: DAL), announced it reached an agreement with its pilots, following several days of negotiations with federal mediators. The details of the agreement weren't made available, but the company's pilots had been asking for compensation and benefits in-line with other large airlines. During the 12-week long strike, Comair has lost more than $200 million, while 2,400 non-pilot employees have been laid off and more than 35 planes were returned to the manufacturers. Mike Trigg hopes Tiger Woods doesn't win the U.S. Open. Mr. Trigg's holdings can be viewed in his personal profile. The Motley Fool is investors writing for investors.
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