ADOBE Q4 LOOKS BRIGHTER THAN EXPECTED.

Adobe Systems Inc has produced a far better fourth quarter than many were expecting with significant increases in quarterly revenues both sequentially and year-on-year. The San Jose-based document management and desktop publishing software house saw fourth quarter net profits up 7% at $50m on revenues up 9% over last year at $247m. Sequentially, revenues rose by 11% over the third quarter. In mid-October, Adobe told investors to expect an improvement in profits resulting from cost cutting activities, and the company duly delivered. Diluted earnings per share came in at $0.78, some 12 cents ahead of the consensus of estimates, although the figure also includes a 2 cent per share gain on Adobe's venture capital investment activities. Adobe also said it was on track to meet profit expectations for the first quarter of this financial year. In August this year, Adobe cut staff numbers by around 10% and restructured its activities to reduce expenses by $50m to $60m annually. Consequently, the third quarter saw only break-even income. This quarter, however, chief executive John Warnock said his company had seen record worldwide demand for Adobe's Illustrator and Acrobat applications, pushing total applications revenue up by 15% over last year's fourth quarter to $208m. Revenues from Adobe's older typeface licensing business declined by 16% to $39m, hit by weakness in Japan's PC and printer market, the company said. Also contributing to the decline in licensing revenues was an ongoing decline in royalty payments from Hewlett-Packard Co's monochrome laser printer division. The company also repurchased 10% of its entire share capital during the fourth quarter, that's 6.8 million shares purchased over just three months, all but completing Adobe's 15 million share re-purchase program. Consequently, cash outflow in the quarter was $171m.