Stinging from a revenue shortfall, Adobe to shed workers

By Scott M. Fulton, III | Published December 4, 2008, 2:20 PM

Today, Adobe is joining the passing parade of corporations everywhere -- not just in technology -- shedding headcount to save expenses. But a check of its numbers may make some ask why so drastic a move.

That Adobe isn't seeing the level of revenue it would have liked to see from its fiscal fourth quarter thus far, should not be a surprise to anyone. So this morning's filing with the US Securities and Exchange Commission, stating it plans to shed 600 workers, was certainly sad but maybe not shocking.

The shocking part comes after you fetch a calculator: Adobe told the SEC today that its Q4 revenue projections for 2008 would be lower than earlier projections by a whopping 3%. That is, it expects to earn on the order of $913.5 million this last quarter, plus or minus $1.5 million. It had expected $940 million.

If Adobe is correct, then this wouldn't even amount to a decline for the company. Last year's Q4 revenue was reported to be $911.2 million. While that was a surge of over one third over fiscal Q4 2006, the signs had been visible for well into last year that such gains could not be repeated in 2008.

View the full ADBE chart at Wikinvest

What triggered the layoffs? In essence, according to the company's statement, a really bad day. "The Company sited weaker than expected demand for its new Creative Suite 4 family of products that began shipping in Q4 in North America and Europe," the statement reads, "as the main cause for the shortfall in fourth quarter revenue."

Exactly how bad that shortfall in sales for CS4 was, Adobe hasn't yet shared. But this could give you a bit of a preview: The pre-tax charges the company will incur, the statement goes on, would cost it about $78,333 per severed employee -- meaning that Adobe is willing to spend about a year's salary, in hopes of being able to recoup more than that from operating expense reductions in the same year. CS4 only launched in late September.

And Q1 2009 revenue outlooks have been lowered to between $800 and $850, although a 10% quarter-on-quarter dip into Q1 is not altogether unprecedented.

Today's news is certainly not without company, as we've seen reports today of newspaper publisher Gannett sacking 1,800, media giant Viacom sacking 850, AT&T eliminating 12,000 more jobs over three years, and news that MTV Networks (part of Viacom) is scuttling its joint venture with RealNetworks' Rhapsody, with layoffs expected there as well.

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