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Adobe Systems should have better 2011

An impressive lineup of products and an improved economy should boost Adobe shares. Also, MFS Utilities Fund is not a typical utility stock fund and may be more risky than its peers.

March 13, 2011|By Andrew Leckey

Question: What's the outlook for my shares of Adobe Systems Inc.? They have disappointed.

Answer: Coming off a lackluster 2010, this pioneering software maker famous for its Flash, Photoshop, Illustrator and Acrobat products should have a better 2011.

Online video is a booming business, aided by the surging popularity of mobile computing and increasingly sophisticated website content. An improving economy should provide an added boost.

With sales of $3.8 billion in the year that ended Nov. 30, Adobe isn't nearly as enormous as some of its rivals, but it is dominant and profitable in its niche, with plenty of cash and modest debt.

And with so many creative professionals trained on the company's Photoshop and Illustrator products, it won't be easy for rivals to overtake its powerful influence. Creative Suite 5, the latest version of this group of popular products, is expected to improve the company's results.

The portable document format, or PDF, created by Adobe for its Acrobat software has become a widely accepted open standard. The company also sells a line of digital photography and video editing software to professionals and consumers.

Still, competitors including Microsoft Corp. and Google Inc. have made inroads against some products in Adobe's impressive lineup.

Another negative is that Apple Inc.'s iPhone and iPad do not support Adobe's popular Flash video player, and Apple Chief Executive Steve Jobs has criticized the Flash technology. But Flash has found a strong market in devices using Google's Android mobile operating system.

The company recently introduced Molehill, a video game engine within Flash that allows developers to deliver games online. Retailer GameStop Corp. offers a suite of games through an online arcade created by Flash.

Adobe's stock is up 12% this year, outperforming most other tech stocks. But it tumbled 17% in 2010, an up year for the tech sector overall.

Analysts who follow Adobe have four "strong buy" ratings on the stock, six "buys" and 18 "holds," according to Thomson Reuters.

MFS is not a typical utility fund

Question: I am a retiree who owns shares of MFS Utilities Fund. Can I continue to stick with this fund?

Answer: This $3.5-billion portfolio is not your typical utility stock fund, so it may not fit an obvious niche in your holdings and may be a bit more risky than its peers.

The fund includes not only traditional utilities but also energy and telecommunications companies. Its top stock holdings recently included Virgin Media Inc., CMS Energy Corp. and Comcast Corp. Altogether the portfolio holds shares of about 90 companies, about 40% of which are outside North America, with a few bonds to reduce volatility.

The portfolio has gained 18% in the last 12 months, giving it annualized returns of 1.9% over three years and 10% over five years. Those returns each ranked well above the average for utility funds.

Portfolio manager Maura Shaughnessy, who considers herself an opportunist, has been in charge of the fund since its 1992 inception.

This fund imposes a 5.75% sales charge on fund purchases and requires a $1,000 minimum initial investment. It last reported annual management expenses equal to 1.07% of assets.

Andrew Leckey answers questions only through the column. E-mail him at yourmoney@tribune.com

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