Analyst stays cautious on Adobe Systems in anticipation of Acrobat 6.0
U.S. Bancorp Piper Jaffray expects next version to ship in Feb. or March 2003

4 September 2002

By Kurt Foss, Planet PDF Editor

In a broker note posted today on CNet's Brokerage Center, analyst C. Eugene Munster of US Bancorp Piper Jaffray advised investors "continue to be cautious in the near-term given the lack of catalysts and a loss of momentum in Photoshop and Acrobat," adding that "we expect the next version of Acrobat to ship in February or March of 2003." Munster noted that Adobe Systems has made no formal announcement of such a future product, but the projection is very much in line with the product's release history. Acrobat 5.0 shipped in the same general timeframe in 2001.

During most of the rest of the year, Acrobat sales set new records for the company's ePaper Solutions group during successive financial quarters, even surprising many analysts participating in Adobe's quarterly report conference calls with its continued greater-than-40 percent growth as late as Q3 2001 -- until the worsening worldwide economy and the impact of September 2001's terrorist attacks intervened. Since then, Adobe has reported Acrobat sales as "stagnant." While the economic downturn is considered the major cause, it's also considered significant that Acrobat 5.0 is nearing the end of its cycle. Only a new version will reinvigorate significant sales.

Anticipating a new version early in 2003, Munster issued the following "keypoint" advice to potential investors:

"Buying shares of ADBE three to four months before the Acrobat upgrade ships, and selling one month after shipment has historically produced returns of 32 percent. For the upcoming Acrobat cycle, this translates into adding to shares in the November timeframe. Acrobat 5.0 data has been excluded to account for a meaningful earnings disappointment in the months prior to its release."

Accordingly, he adds that "in the fall timeframe we expect to see increased interest in ADBE shares surrounding the anticipation of Acrobat."

Adobe's current rating with U.S. Bancorp Piper Jaffray:

Adobe Stock Sept 02

* Market Perform: Expected to perform in line with the relevant broader market index over the next 6 to 12 months.

* High: The stock price has moved up or down by more than 20% in a month in at least 8 of the past 24 months. All IPO stocks automatically get this volatility rating for the first 12 months of trading.

Adobe plans to report its third quarter fiscal 2002 results on September 12, 2002 after the market closes.

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