Adobe Systems Inc. $23 – Nasdaq symbol ADBE

ADOBE SYSTEMS INC. $23 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 531.0 million; Market cap: $12.2 billion; WSSF Rating: Average) makes software that lets computer users easily create, edit and share electronic documents in the popular PDF format. It also makes software that graphic designers use to create print publications and web pages. Excluding one-time items, Adobe’s earnings per share in its third fiscal quarter ended August 29, 2008 rose 11.1%, to $0.50 from $0.45 a year earlier. Revenues grew 4.2%, to $887.3 million from $851.7 million. The company spent $170.1 million (19.2% of revenue) on research in the latest quarter, up 4.2% from $163.2 million (19.2% of revenue) in the year earlier quarter. In October, 2008, Adobe launched its new Creative Suite 4 software program. This new version makes it easier for users to design web sites that include features such as animation and live video. Due to the growth of the Internet over the past few years, Creative Suite now accounts for over 55% of Adobe’s total revenues. Adobe holds cash of $2.0 billion or $3.77 a share. Long-term debt of $350 million is a low 3% of its market cap. That gives the company plenty of room to finance new product development, particularly on software for cellphones and other mobile devices that can access the Internet. Adobe now trades at 13.2 times this year’s forecast earnings of $1.74 a share. That’s reasonable in light of its market share and growth prospects. However, the stock will probably make little progress until the overall economy improves. Adobe is a hold.

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