Interview: Adobe
>> adobe is one of the biggest drags on the nasdaq after the company reported earnings and issued its forecast for the next quarter. oppenheimer analyst said the forecast is good but the numbers aren’t good enough. for the previous quarter, net income jumped to 45 cents a share. chief financial officer murray demo discussed the performance with suzy assaad.
>> we had a record revenue quarter for the company, we grew 20% in the quarter and finished a record year for the company, as well, growing 29% in revenue and 69% in net income. the strength is driven by the creative suite and momentum of acrobat. we see strength in the u.s. and europe. as far as the stock price, that’s difficult for me to comment on.
>> for that particular period of sales, i understand creative suite made up 61% of your sales, is that correct?
>> over the course of the year, it actually grew 66% on a year-over-year basis. it saw tremendous results,. 38% of our total revenue coming from the creative professional segment.
>> how long do you think that momentum can continue for that package?
>> for 2005, the targets provided that we reaffirmed yesterday, 11% to 14% revenue growth in 2005. we’ve talked about the launch of another version in 2005, the creative suite, quite a bit of innovation we’ll have in that and we look forward to strong results in 2005 with that set of product.
>> your stock is off today by 3%, over the last two days is down 5%. what would you attribute that to, mr. demo?
>> again, that’s difficult for me to comment on. i can only comment on what we’re doing as a company and we’ll let the financial markets make decisions in terms of the value of our stock price.
>> maybe we can get you to comment on your balance sheet. you have $1.1 billion in cash sitting on the balance sheet. what will you do with that much liquidity?
>> we’ve generated a ton of cash this past year. we have a leveraged operating model, a strong cash flow generator. when we have excess cash, we have used that for stock repurchase and we’ve repurchased about 125 million of stock in the fourth quarter and we look to continue to do that in subsequent quarters.
>> any chance of increasing the dividend?
>> it’s something we continue to discuss, obviously, at a board level with the change in the tax rate, increase in the dividend is certainly something you see in the news. but right now we believe stock repurchase is the most efficient way to return excess cash to shareholders.
>> your balance sheet indicates significant sales growth, the stock is up significantly for the year. you’re relatively debt free. and notions of converting all of that into a strategic acquisition for adobe?
>> well, we continue to look in the marketplace. right now, what you’re seeing is the consolidation in the software industry primarily driven by customers. customers want fewer but broader relationships with software partners so we’ve looked at the market space and have done some small acquisitions this past year and we’ll continue to look at that. in terms of a larger transaction, we would have to be convinced it was truly strategic and we could be successful with the integration.
>> that was the chief financial officer of adobe, murray demo. turning to retailing, jo-ann’s stores has sewn up the leadership in the fabric marketplace. the company’s stock soaring nearly 200% in 2002 and has continued to rise in 2003 and 2004. alan rosskamm, c.e.o. of jo-ann stores, talked to us about sales going into christmas.
>> we had improved results in november, our problem to some degree has been traffic and we’ve hit that head on by increasing the circulation of direct mail promotions and extending our hours in the christmas season longer than last year. our stores are busy but it’s too early to say how christmas will come out.
>> shares of jo-ann stores are up 32% for the year. looking at the week ahead, the markets are closed on friday next, the 24th, christmas eve, as wall street begins an early christmas. before that, we get more earnings reports, including two big names on wall street, bear stearns and morgan stanley. this year, wall street’s top investment firms are expected to report record earnings. on the economic front, we get data on leading economic indicators, personal income and spending, durable goods orders and weekly jobless claims. most economists we surveyed say durables orders probably rose, which would mean there’s still strong demand for factory products. as consumers do their holiday shopping, we’ll get figures on retail sales. so far, sales growth slower than it was last year. later, we’ll look at what’s ahead next week in europe and asia. coming up, we’ll hear from new york attorney general eliot spitzer. vanity fair labeled spitzer public enemy number one on wall street.
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Listen Interview: NYSE & Nasdaq
welcome to the “world financial report,” i’m michael mckee. let’s get to the numbers as we close out this week. the dow jones industrials, s&p 500 and nasdaq all finishing lower for the week. the dow down today by 56 points, s&p 500 down by 9 and the nasdaq closing almost 11 points lower. pfizer was the most actively traded stock at the new york stock exchange today. also, the worst performing stock among both the dow industrials and the s&p 500. bob bowden has details from the new york stock exchange.
>> thank you, michael. after pfizer said the celebrex painkiller more than doubled the riv of heart attacks in a study, shares falling 11% in extremely heavy volume. 10% of the new york stock exchange volume on the day attributable to pfizer. mostly a generally upward trend to the intraday chart. eli lilly saying it added a safety warning to the label of its attention deficit drug, straterra, after two people taking the medicine suffered liver damage, and those shares down over 2%. astrazeneca, a.d.r.’s down almost 8% on the day. other drug stocks , generally selling across the board in the likes of novartis, bristol-myers and schering-plough. pfizer was the worst performer in the s&p 500 today and the second worst performer was leggett and plat, a missouri company that makes bedding furniture, forecasting earnings at the low end of previous forecasts and shares down 8%. this time of year, many investors are watching retail closely. sobering news from circuit city. the c.e.o. said he was disappointed with the company’s third-quarter sales and is cautious about the fourth quarter, adding this about last quarter. best buy shares down 2.5%, radioshack down over 2% on the day. while they may not be buying electronics at circuit city, they are buying shoes. nike reported fiscal second-quarter earnings higher than analysts’ estimates and nike shares up on the day. another winner on the day, las vegas sands. the stock began trading wednesday and rallied again today, finishing at the high of the session and high of its lifetime, up 8% on the day, rising 60% on wednesday in an i.p.o. of $29 a share, rose 60% on wednesday, its first day of trading. 5% rise yesterday and it rose 8% today. michael mckee, back to you.
>> bob bowden, thank you very much. computer shares, bank stocks , two of the industry groups leading the nasdaq lower today. june grasso has details from the nasdaq marketsite in times square.
>> computer shares are one of the groups leading the nasdaq lower today. let’s look at palmone, the world’s largest maker of handheld computers, had their largest percentage loss this year after the company forecast third-quarter profit and sales that may miss analysts’ estimates. palmone was downgraded at merrill lynch and cut to underperform at bear stearns. adobe systems also falling, world’s biggest maker of graphic design software, saying fourth-quarter net income was 45 cents a share, more than the 42-cent average analyst estimates. but oppenheimer and company analyst explained the drop by saying that adobe is already an expensive stock and they need to give numbers that are not only above where the street is, but a lot above where the street is. apple computer, yesterday it was one of the best performing members of the nasdaq 100 on news of the storage of ipods in the holiday shopping season, today, it was one of the worst performing members. the banking group was one of the worst performing groups led lower by hudson city bancorp. its majority shareholder is to be merged into the company. fifth third bank and northern trust also lower. northern trust cut to market perform at ryan beck after a recent runup. the nasdaq biotech index is the only group that has been consistently positive all day, led higher by o.s.i. pharmaceuticals, surging on news that its competitor, astrazeneca’s lung cancer medicine failed in a study. i’m june grasso, bloomberg news, at the nasdaq marketsite in% times square.
>> checking oil prices, now, the almost 14% gain for the week is the biggest in almost five years. new york crude finishing up $5.57 for the week at $46.28. there’s speculation that below normal temperatures will boost demand for heating oil and supplies have fallen. other energy futures on the week -- more now on our top story, pfizer, world’s largest drugmaker, lost $24.3 billion in market cap in u.s. trading today as shares plunged to a six-year low as the federal government halted a study of pfizer’s celebrex after finding the painkiller caused an increased rescue to the―risk to the heart. in a conference call, executives at the cancer institute, the f.d.a. and the national institutes of health, said investigators would try to gather data on whether celebrex helped prevent colon cancer. in addition, they said no decision had been made on whether to recall celebrex or require a new warning label and advised doctors to consider using alternative drugs for patients on celebrex and decided to notify all researchers and get consent from all patients in other trials testing celebrex for various conditions. pfizer says it has no plans to withdraw celebrex. pfizer c.e.o. said the negative result was unexpected and inconsistent with other research. “we believe the ultimate value of celebrex and bextra will be proven by its use in millions of patients and the impressive record developed for both drugs surrounding efficacy and safety.” t. rowe price with/32 million pfizer shares, money manager kris jenner says the company could lose $1 billion in sales next year. the company sold $1.88 billion worth of celebrex in 2003.
>> there’s undoubtedly going to be sales declines in the pfizer world wild cox-2 franchise, the question is, to what extent. i just think that―we think there will probably be a billion or so less in sales in 2005 than in 2004 specifically related to this franchise.
>> regulators in the u.s. and europe were already looking harder at the class of cox-2 inhibitors. merck pulled vioxx off the market in september. investors may see today’s closing price as a blessing. pfizer stock fell as much as 24% on the news before ending the day down 11%, 25% for the year. moody’s cut its outlook to negative from stable on the news but kept its triple-a rating on pfizer. standard & poor’s confirmed its triple-a rating for pfizer. adobe was one of the biggest drags on the nasdaq today. when we come back, we’ll take a closer look at the company’s performance and hear from the chief financial officer.
