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Adobe can't penetrate punters' tight wallets: Users holding out for CS6

Sales at Digital Media unit down by $100m

globalisation

Adobe's first quarter profits took a bashing as customers of its legacy desktop software deferred purchases in anticipation of forthcoming Creative Suite 6 and Creative Cloud.

The maker of reassuringly expensive software saw net income slide 21 per cent to $185.2m for the first quarter ended 2 March.

Total sales edged up 1.3 per cent to $1.04bn but revenues from the Photoshop daddy's product division fell more than 4 per cent to $808.5m, while subscriptions turnover leapt 38 per cent to $146m, and service and support climbed 15 per cent to $90.4m

The Digital Media unit shed almost £100m of revenues in the quarter to $730m.

CEO Shantanu Narayen said the decline was "not a competitive issue" but more related to pent up demand for next-gen creative tools and the subscription based products due late in Q2.

"It was clear that the demand for CS6 is more than in prior cycles, and that's what sort of led to this decline in revenues for CS5.5," he told analysts on a conference call.

He said that 40 per cent of Creative professional customers and students it surveyed were waiting for the upgrade, which includes updates to core CS tools including Photoshop and InDesign.

Narayen expects the Creative Cloud will drive higher revenues over time "through an expansion of our customer base by acquiring new users through a lower cost of entry".

"We will continue to offer the perpetual licensing model as we transition our customers to this new subscription model," he added.

The Digital Marketing unit grew 30 per cent on Q1 2011 to $260m.

Back in November Adobe revealed plans to lay off 750 staff across its licensing biz to concentrate on HTML5 work.

This process has been completed, management said on its call last night.

The headcount for Q1 totalled 9,963, some 38 more workers than a year ago due to the acquisition of Efficient Frontier early this year. Adobe is forecasting Q2 sales of $1.090bn to $1.14bn. ®

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