No doubt about it, Adobe Systems
Last evening, Adobe released second-quarter results that exceeded its own previous guidance. The stock is down slightly as management tempered current enthusiasm regarding April releases of new Adobe and Macromedia creative solutions software. In other words, third-quarter guidance wasn't as optimistic as Wall Street was hoping for, given the strong second-quarter results that saw sales jump 17% and adjusted earnings advance nearly 20%.
Certain analysts suggest Adobe is merely being conservative, as it's unsure how new versions of Adobe Photoshop and Macromedia applications such as Flash, Fireworks, and Dreamweaver will be received by core creative professional customers. But, judging by past company growth, users will openly embrace the increased functionality as they build websites, add graphic effects to photographs, enhance the broadcast quality of videos and film, and "produce professional-quality printed publications."
The 2005 acquisition of Macromedia has allowed Adobe to keep growing sales in the double digits, and judging by second-quarter results, cash flow generation remains impressive -- it came in more than double reported net income. This also means the high P/E ratio shouldn't be as scary to investors, since cash flow multiples are more reasonable.
Investing in Adobe would be a no-brainer if it weren't for the fact that Microsoft
Adobe must also compete with the likes of Apple
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Fool contributor Ryan Fuhrmann is long shares of Microsoft, but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.