June 20, 2012 / 1:38 PM / 6 years ago

Adobe shares fall on cut in forecast

(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

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