(Reuters) - Shares of Adobe Systems Inc (ADBE.O) fell more than 7 percent in early trading after the Photoshop software maker cut its full-year revenue outlook on weakness in Europe, and a shift to a subscription model slows growth.
The company said on Tuesday it expects third-quarter sales at its unit that produces the Creative Suite design software to decline from second-quarter levels.
Analysts say the company’s shift to subscriptions from a licensing model might reduce the revenue upswing it usually sees after the launch of a software upgrade.
Adobe launched its Creative Suite 6 - which includes Photoshop, Illustrator, InDesign, Flash and Dreamweaver - and the Web-based Creative Cloud product in the second quarter.
“The problem with this strategy is that it will take Adobe around four years to generate the same level of revenues from a single subscriber that it would have earned through the sale of a single perpetual license,” Nomura analyst Rick Sherlund wrote in a note.
Jefferies analyst Ross MacMillan said Adobe’s attempt to shift users to a subscription model at a faster rate using promotional pricing is also dampening growth.
Subscription adoption is still modest and is overly focused on as a concern, but the model will help revenue predictability over time, Citi analyst Walter Pritchard wrote in a note.
Nomura’s Sherlund also said most issues Adobe is facing look to be quite specific to the company instead of being caused by macroeconomic factors.
Adobe’s shares were trading down at a five-month low of $30.38 on Wednesday on the Nasdaq.
Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Sreejiraj Eluvangal