Adobe lowers expectations, lays off 300

Lowering its earnings expectations, Adobe Systems has announced a cost cutting program involving the elimination of up to 300 positions worldwide and the reorganisation of its operational divisions and senior management. One of the company's problems is a 40% fall in its revenues in Japan.

Lowering its earnings expectations, Adobe Systems has announced a cost cutting program involving the elimination of up to 300 positions worldwide and the reorganisation of its operational divisions and senior management.

The cost reduction program, intended to achieve long-term growth, is expected to result in annual savings of $US50 to $60 million , the graphics and printer software maker says.

Citing weak sales in Japan, and the delay of a major product upgrade, Adobe's revenues for its third quarter of fiscal 1998 ending August 28, 1998, may be below analysts' expectations, Charles Geschke, Adobe's co-chairman and president, said in a telephone interview.

Geschke said a product, which he declined to name, that was previously expected to be updated in the third quarter of this year will now be delivered in the fourth quarter. Meanwhile, the company experienced a 40% drop in revenue year-over-year in Japan, he said.

The Adobe layoffs will come mostly from the management ranks and will be concentrated in North America, Geschke said.

Based upon preliminary analysis of third-quarter results, Adobe said revenue is likely to be in the range of $220 million to $225 million , compared to $230 million reported in the third quarter of fiscal 1997, according to Geschke.

After a one-time restructuring charge, and other non-recurring expenses, Adobe's net income may approach break-even or be a loss, compared to net income of $53.4 million [for the year-ago quarter. The third quarter of fiscal 1997 included gains of $12.9 million from the sale of securities.

Wall Street analysts polled by First Call as of the end of July expected Adobe to post earnings of 52 cents a share, down from 55 cents reported in the same quarter of fiscal 1997. Adobe will release its third-quarter fiscal 1998 figures on Sept. 24.

Third-quarter operating expenses are also expected to be relatively flat when compared with the second quarter of fiscal 1998, the company said.

"These expected results are unacceptable," John Warnock, co-chairman and chief executive officer of Adobe, said in a statement.

The reorganisation of Adobe's operating divisions and management structure, also announced yesterday, will align marketing functions and product development.

The company will now focus on delivering integrated products to professional publishers and graphics-oriented consumers and business people, which allow for cross media publishing, which includes print and Web publishing and associated workflow, said Bruce Chizen, who was appointed executive vice president of worldwide products and marketing today.

In addition, Adobe will focus its marketing more on consumers and address the needs of sectors such as medical, government, law and insurance, all traditionally heavy paper users which are now looking to move to electronic workflow and publishing methods.

Adobe also said it eliminated three executive positions with the affected managers resigning from the company. Specifically, Adobe scrapped the positions of executive vice president and chief administrative officer; executive vice president for marketing; and executive vice president for product divisions. The positions had been held by Jackson Bell, Robert Roblin and Ross Bott, respectively.

CEO Warnock and Geschke will continue to partner in co-chairing the company. But Warnock will resign from his three public board positions over the next three months in order to better concentrate on day-to-day operations at Adobe. Warnock sits on the board of directors of Evans & Sutherland Computer, Netscape Communications, and Octavo, according to Adobe's Web site.

Geschke said the move is not an indication that Warnock spent too much time outside the company, but is rather intended to signal his complete commitment to Adobe and its long-term growth.

For his part, Geschke will concentrate on Adobe's external relationships and continue in his role as primary spokesman for the company.

Meanwhile, all of Adobe's engineering and marketing operations now report to Chizen, head of global products and marketing. Chizen, who in turn reports to Warnock, was formerly senior vice president and general manager of the company's Graphics Products Division.

Harold Covert, formerly vice president of finance and operations, was named senior vice president and chief financial officer reporting to Warnock. Fred Snow continues in his role as executive vice president of worldwide field operations.

The San Jose, California-based company also announced the creation of a new executive team responsible for overseeing the company's performance, strategies and policies.

Along with Warnock, Geschke, Snow, Chizen, and Covert, the executive team includes Colleen Pouliot, senior vice president, general counsel and secretary; Jim Stephens, vice president of investor relations; and Rebecca Guerra, vice president of human resources.

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