Adobe to Buy Macromedia for $3.4B A Graphics Battle With Microsoft Looms Clint Boulton
Adobe Systems has agreed to acquire rival Macromedia for $3.4 billion in a deal that sets the stage for a showdown with Microsoft in the graphics software space.
Adobe and Macromedia have fought it out in the market for creating digital documents and other forms of rich media for years. Macromedia is particularly prized for its Flash technology, including the company's multimedia authoring program and the Flash Player, which blends graphics, sound, and streaming video and audio.
Macromedia also makes a popular development product called Dreamweaver, which allows programmers to build Internet applications and Web sites.
In addition to its hugely popular image management software Photoshop, Adobe is also known for its Portable Document Format (PDF) technology that allows users to shuttle advanced digital documents via e-mail.
The combination of Adobe's digital document prowess and Macromedia's Web development specialty could make the company a formidable foe for Microsoft, which has its own graphics software.
Microsoft makes such products as Expression, Image Composer, PhotoDraw, Paint, Picture It!, and Digital Image Pro. For business users, Microsoft offers Office Visio 2003, a drawing and diagramming solution that helps users articulate business and technical concepts such as visual diagrams.
But Microsoft has a greater graphics piece in the works that could challenge Adobe's digital document skills, a subsystems code-named Avalon. This "visualization" component blends an advanced application user interface, documents, and media content. Avalon is slated to appear in the company's next-generation Longhorn operating system in 2006.
Purchasing Macromedia would help Adobe stake new ground for selling graphics software to mobile and enterprise segments, which experts have agreed holds
tremendous possibilities for growth.
"Customers are calling for integrated software solutions that enable them to create, manage, and deliver a wide range of compelling content and applications — from documents and images to audio and video," said Adobe CEO Bruce Chizen.
Macromedia stockholders will receive .69 shares of Adobe stock for every share of Macromedia stock. The deal represents a price of $41.86 per share of Macromedia stock, based on Adobe's and Macromedia's closing prices on Friday, April 15. Should the deal close in fall 2005 as expected, Macromedia
stockholders would own nearly 18 percent of the combined company.
If the deal closes, Chizen will remain CEO and Shantanu Narayen will remain president and chief operating officer. Stephen Elop, president and chief executive officer of Macromedia, will join Adobe as president of worldwide field operations.
Murray Demo will remain executive vice president and chief financial officer. Dr. John Warnock and Dr. Charles Geschke will remain as co-chairmen of the Board of Directors of the combined company and Rob Burgess, chairman of the Macromedia Board of Directors, will join the Adobe Board.
The companies will make additional details and information about the acquisition available
here.
Adobe also said its board of directors has approved a post-acquisition stock repurchase program of $1 billion, "to be consistent with our overall commitment to deliver value to our stockholders," Chizen said.
Funded from working capital, the program is expected to commence following the close of the accord.
