Adobe shares tumble in premarket trading after guidance disappoints

Ahead of the Bell: Adobe shares sink

NEW YORK — Shares of Adobe Systems Inc. plunged 21 prcent in pre-market trading Wednesday after the software maker gave a revenue outlook below expectations for the current fiscal quarter.

Investors were disappointed even though the company behind Photoshop and Illustrator posted a 69 percent jump in its fiscal third-quarter net income, with adjusted earnings and revenue above what Wall Street was expecting.

Adobe’s products are used by creative professionals such as Web designers and developers, businesses such as ad agencies and media companies, as well as educational institutions, large businesses and consumers.

The company attributed the lower outlook to economic weakness in its second-largest geographic region, Japan, and the U.S. education market, which has faced budget constraints due to the recession.

Baird analyst Steven M. Ashley downgraded the company’s shares to “Neutral” from “Outperform” based on the guidance. Ashley’s target price is $36. He noted that the company’s flagship Creative Suite 5 software package is selling about 15 percent better than its predecessor, which launched in the fall of 2008 amid the financial crisis.

Sasa Zorovic of Janney Capital Markets, meanwhile, reiterated a “Buy” rating on the stock and said while the two weak areas represent short-term risks for the company, “we do expect the demand in this geography and vertical to return; Adobe’s competitive position remains unchanged. In our view, this is a matter of when — not if.”

Shares of San Jose, Calif.-based Adobe fell $6.94, or 21 percent, to $26 in pre-market trading.