Adobe shares dropped nearly nine percent in after-hours trading following the announcement of plans to restructure its business to focus more on digital media and marketing, a move that result in the purging of 750 jobs.
The near eight percent workforce reduction will contribute to between $87 million to $94 million in pre-tax restructuring charges, the majority of which will be recorded in the fiscal quarter ending Dec. 2, 2011. As a result, the company has updated its earnings-per-share estimates to between 30 cents and 38 cents for the quarter, down from the previous target of 41 cents and 50 cents per share.
However, Adobe reaffirmed its belief that it will hit its quarterly revenue goal of between $1.075 billion and $1.125 billion.
The workforce reduction will affect all business units and geographies and will cover a certain number of unspecified projects, spokeswoman Jodi Sorenson told Reuters.
The move reflects a change in strategy for Adobe, which has seen companies like Apple and Microsoft choose HTML5 over its hallmark Flash product for their respective mobile device software. Give credit to Adobe for recognizing the migration toward HTML5 and responding accordingly.
“With the shifting landscape that favors HTML5-based content and application delivery, we are doubling down in our investment in this area,” Chief Executive Shantanu Narayen noted in early September.
Adobe's the new digital media growth strategy reflects Narayen's pledge. As part of the restructuring, Adobe will shift resources to help support HTML5 development through a number of its tools, including Adobe Dreamweaver, Adobe Edge and the newly acquired PhoneGap platform.
To compensate for some of the strategic changes, Adobe will reduce its investment in certain enterprise solution product lines, which will result in lower-than-expected fiscal revenue growth for 2012. The company now anticipates sales to increase between four percent and six percent in the upcoming fiscal year, down from the previous range of eight percent to 11 percent.
However, Adobe CFO Mark Garrett believes that the strategic changes will enable the company to "drive faster and more predictable growth in FY2013 and beyond."
Beecher Tuttle is a TechZone360 contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.
Edited by Rich Steeves
