Adobe to buy stock photo company; revenues top estimates

Photoshop maker Adobe Systems Inc said it would buy stock photography company Fotolia for $800 million and reported quarterly revenue above market estimates, helped by a 28% jump in the number of subscribers to its Creative Cloud suite.

Adobe shares were up nearly 8% in extended trading.

The company said it would integrate Fotolia, a marketplace which offers royalty-free stock photos and video, with Creative Cloud to raise average revenue per user at the business.

Adobe also plans to continue Fotolia as a standalone service.

Adobe is also seeing strong demand from its corporate customers. Chief Financial Officer Mark Garrett told Reuters that Adobe had closed many deals in the quarter with enterprises, and 'the deals were getting bigger and bigger.'

Garrett added that Adobe, which loses about a third of its revenue through pirated software, is considering a number of options to combat piracy including making products like Adobe's Photoshop available only if users log into the cloud.

The company said it expected new Creative Cloud subscriptions to decline due to seasonality in the current quarter from the 644,000 it added in the fourth quarter ended Nov. 28.

'(The seasonality) is very typical for software companies, because software purchasers have been trained to buy software at the end of the quarter and at the end of the fiscal year, that's when you get the best deals, Brendan Barnicle, Pacific Crest Securities analyst, told Reuters.

'It is generally far more dramatic for other companies than Adobe,' he added.

Adobe has been switching to web-based subscription for its Creative Suite 6 from traditional box licenses to attract more predictable recurring revenue. Online subscriptions let customers access the latest versions of a host of software for a monthly payment.

The company also said it expected an adjusted profit of 34-40 cents per share on revenue of $1.05 billion-$1.10 billion

for the first quarter ending Feb. 28.

Analysts on average were expecting 39 cents per share in profit on $1.10 billion in revenue, according to Thomson Reuters I/B/E/S.

Adobe's fourth-quarter net income rose to $73.3 million, or 14 cents per share, from $65.3 million, or 13 cents per share, a year earlier.

Excluding items, the company earned 36 cents per share, higher than the analysts' estimate of 30 cents per share.

Revenue rose to $1.07 billion, while analysts had expected $1.06 billion.