High research spending cuts their risk

Article Excerpt

These two software makers continue to spend heavily on research. That hurts their earnings, but it helps them compete in their rapidly changing industry. Right now, we prefer Symantec for new buying. ADOBE SYSTEMS INC. $39 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 498.8 million; Market cap: $19.5 billion; Price-to-sales ratio: 4.4; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) earned $307.9 million in the fourth quarter of its 2012 fiscal year, which ended November 30, 2012. That’s down 7.4% from $332.6 million a year earlier. Earnings per share fell 9.0%, to $0.61 from $0.67, on more shares outstanding. Revenue was flat at $1.15 billion. Adobe continues to spend a high 17% of its revenue on research. Adobe is doing a good job of selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription service instead of a one-time purchase. It sold 10,000 Creative Cloud subscriptions a week in the…