Adobe buys Macromedia in $3.4B stock deal (1 Viewer)

Zlatan

Senior Member
Jun 9, 2003
23,049
#1
APR. 18 5:30 P.M. ET By acquiring rival software maker Macromedia Inc. in a deal originally valued at $3.4 billion, Adobe Systems Inc. is positioning itself to do battle with Microsoft Corp. over the tools to create, distribute and manage content online.

The deal, announced Monday, would put Adobe's ubiquitous Acrobat document-sharing program under the same roof as Macromedia's Flash software for creating and viewing interactive content on Web sites independent of operating systems or devices.

Adobe, which also makes the Photoshop image-editing line and a host of other programs for creative professionals and consumers, also gets the Web site-building application Dreamweaver as well as software for enabling real-time collaboration among business users.


Shares of San Francisco-based Macromedia closed at $36.72, gaining $3.27, or nearly 9.8 percent, Monday on the Nasdaq Stock Market. San Jose-based Adobe's shares lost $5.89, or 9.7 percent, to close at $54.77

Under the deal, which both companies' boards approved, Macromedia stockholders get 0.69 shares of Adobe common stock for every share of Macromedia common stock. Based on Monday's closing price, the deal would be worth $3.07 billion.

The $3.4 billion value was based on Adobe's Friday closing price, which represented a 25 percent premium. Macromedia stockholders are to own about 18 percent of the combined company when the deal closes.

Executives of both companies pointed to new market opportunities and downplayed the cost savings. The acquisition, Adobe said, would at most be "slightly accretive" to its earnings in the first year after closing, which is expected this fall.

"This is all about growth," Adobe CEO Bruce Chizen said. "We're doing this because we believe the combined offerings will be even more compelling to our customers given the challenges they're going to face in trying to communicate information in this very complex environment."

As digital content increasingly finds its way onto cell phones, handheld computers and even televisions, the makers of the tools for working with information are racing to make deals so their technology is not left out as new standards emerge.

Macromedia has had success in persuading makers of cell phones and other non-PC devices to embed its Flash technology in their devices, Chizen said in an interview. Since the start of the year, Macromedia has inked deals with Nokia and Samsung Electronics.

Adobe has had less success in this regard, said Chizen.

"Clearly, Macromedia has done a great job both in understanding and gaining value from the non-PC market," he said. That, he added, "is what is very attractive to us."

Besides boosting revenues from software sales and licensing, the combined companies will profit as more developers buy the specialized tools required to create content. They'll also have a greater say in creating standards for new mobile devices.

But Microsoft also has ambitions beyond the PC market it currently dominates with its Windows operating system, Web browser and other content-playing technology. It currently offers a simplified version of Windows for both cell phones and handhelds -- as well as "light" versions of its Web browser and media player.

In addition, the world's largest software maker is expected to include technology in its next-generation Windows that could threaten Adobe's dominance with its Acrobat software and the portable document format it invented. Microsoft also has been launching programs to help improve collaboration within the workplace.

With Macromedia's Breeze real-time collaboration software, Adobe will be able to offer more of an all-encompassing suite of offerings than it had before the merger.

"At its simplest level, Adobe wants to get into a new content type," said Connie Moore, an analyst at Forrester Research. "At a more strategic level, this puts Adobe in a very different place in terms of competing against Microsoft or Oracle or IBM."

Still, Adobe's move is most likely a pre-emptive move against Microsoft, said Steven Ashley, an analyst at Robert W. Baird & Co. "It makes it harder for Microsoft to challenge Adobe," he said. "As it stands today, they don't compete very much against one another."

The transaction, contingent upon the approval of regulators as well as the shareholders of both companies, is expected to be completed by the fall. The combined company will keep Adobe's name and San Jose headquarters.

Adobe and Macromedia, until recently, were bitter rivals, squabbling over the look of the interfaces used in their software and financial analysts and customers had speculated about a merger for years.

Chizen will remain as chief executive of the combined company and Adobe's Shantanu Narayen will continue as president and chief operating officer. Macromedia's chief executive, Stephen Elop, will join Adobe as president of worldwide field operations. And Rob Burgess, Macromedia's chairman and former CEO, will take a seat on Adobe's board.

The companies did say there would be cost savings out of the deal but did not mention layoffs specifically.

Adobe employs 3,700 people in offices around the world. It reported revenues of $1.67 billion for fiscal 2004. Macromedia reported sales of $370 million in fiscal 2004.

On Monday, both companies also updated their financial guidance.

Adobe said it expects sales and profits to be at the upper end of the range of its previous estimates. Macromedia said it expects to exceed its previous forecast.

"It's a lot easier to combine two companies that are healthy and doing really well with lots of growth than it is to try to acquire and integrate a company that is broken," Chizen said. "That is the piece that gave us comfort in taking the next step."
 

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gray

Senior Member
Moderator
Apr 22, 2003
30,260
#2
This is huge...

I really hope they keep the Macromedia range of products intact, and this will improve both the Adobe and Macromedia software packages, and make them even more compatible.
 
OP

Zlatan

Senior Member
Jun 9, 2003
23,049
  • Thread Starter
  • Thread Starter #4
    ++ [ originally posted by gray ] ++
    This is huge...


    Too much info dude :rolleyes:


    :D




    But yeah, I agree, this is an important deal. I like Macromedia, always been a fan of their products. I've gotten used to Fireworks, use it regularly for my basic needs.
     

    gray

    Senior Member
    Moderator
    Apr 22, 2003
    30,260
    #7
    ++ [ originally posted by Jeeks ] ++
    This will kill the competition
    Actually, I don't really think it will.

    Adobe and Macromedia never were in direct competition with each other, in fact they both knew their place in the market, and their software packages complement each other very well.

    Adobe's main players are programs like Photoshop, Premiere, Acrobat, After Effects etc. which are used for print/publishing and video editing, while Macromedia focuses a lot on web production, with Fireworks, Flash, Director etc.

    Of course the big money in the market comes not from personal/small business users, but broadcasting applications, but it's not the same kind of battle as you have with Windows vs. Linux or Inferior Explorer vs. Mozilla
     

    Elnur_E65

    Senior Member
    Feb 21, 2004
    10,848
    #9
    This is very logical. We are seing consolidation within the software industry. Last month Oracle bought PeopleSoft, so at least on the ERP market there are only 3 main players- Microsoft, Oracle and SAP. Microsoft actually placed a secret bid for SAP last December, but the deal was not sealed.

    Within the next 4 years there will be only 2 software companies around- either Microsoft and Oracle, or Microsoft and SAP. The former is more realistic.
     

    gray

    Senior Member
    Moderator
    Apr 22, 2003
    30,260
    #10
    ++ [ originally posted by Elnur_E65 ] ++
    Within the next 4 years there will be only 2 software companies around- either Microsoft and Oracle, or Microsoft and SAP. The former is more realistic.
    2 software companies... in the world???

    Care to make it interesting? :)
     

    JCK

    Biased
    JCK
    May 11, 2004
    124,162
    #11
    gray this is what is happening, for the past 6 years EA bought almost all existing game companies. Now Adobe bought Macromedia, and so on....there will be 2 or 1 company for each category
     

    Elnur_E65

    Senior Member
    Feb 21, 2004
    10,848
    #12
    ++ [ originally posted by gray ] ++

    2 software companies... in the world???

    Care to make it interesting? :)
    Well, I meant the ERP/Databases/B2B segment of the industry :) (don't really know much about consumer software market).

    That's where we're headed. I just read on the news that Oracle is close to buying out Siebel (well known for retail and supply chain soft).
     

    jaecole

    Senior Member
    Apr 7, 2005
    3,017
    #14
    ++ [ originally posted by Elnur_E65 ] ++
    Within the next 4 years there will be only 2 software companies around- either Microsoft and Oracle, or Microsoft and SAP. The former is more realistic.
    What happens to IBM, Accenture, HP and Sun then? :D
     

    Mr. Gol

    Senior Member
    Sep 15, 2004
    3,472
    #18
    I don't know if I like this. Adobe will probably dump some Macromedia products and rename the other ones (like they did when they bought CoolEdit). Besides that I think that Macromedia has a lot more user friendly products. Anyway, as long as they don't change anything concerning Flash/Dreamweaver/ColdFusion it's not that bad :)
     

    Elnur_E65

    Senior Member
    Feb 21, 2004
    10,848
    #19
    ++ [ originally posted by jaecole ] ++


    What happens to IBM, Accenture, HP and Sun then? :D
    Good question :)

    IBM has lost its software dominance years ago. They now consentrate on business consulting, IT services, servers and computers

    Accenture deals with management consulting, technology services, knowledge management, and outsourcing

    HP makes computers

    Sun is more into servers, storage and IT services nowadays.

    Actually, Oracle is not a purely software company either- their strength is in databases. But now that they bought PeopleSoft they plan to compete with Microsoft and SAP.
     

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