Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Can't beat them? Buy them. Adobe to take over Macromedia in $3.4b deal

Posted by Richard Koman - April 18, 2005

Adobe-Does-Macros.gifIt was just a month ago that Adobe wowed stockholders with fantastic Q1 results - 23 percent year-over-year growth in net income, 12 percent in revenue. Adobe has been hitting on all cylinders - consumer photo, pro design and Adobe products, but they had basically ceded pro web design to Macromedia with their Dreamweaver and Flash lines. In a March interview with BusinessWeek, Adobe CEO Bruce Chizen took aim at Macromedia:

"I'm not willing to stand up and say we're going to beat them tomorrow or the next day. It'll take a long time, but we're going to get more aggressive, especially on alternative platforms like mobile and devices connected to HDTV.

Well, if you can't beat them, buy them. Adobe announced this morning that they are buying the company for $3.4 billion. Macromedia shareholders will get .69 shares of Adobe stock for each share of Macromedia stock.

Technology gadfly Marc Canter is happily singing the praises of the deal, to the tune of "Ding Dong, the Witch is Dead." The creator of Director, Canter sold the company that started it long ago and has been singularly unimpressed with the management of the company that pretty much abandoned his product when it started up Flash. He suggests he would be willing to return, a la Steve Jobs, now that MACR is in new hands, but if he thinks he's going to find in Adobe a company that doesn't sell software in a box, design for single users, or depend on patent protection, I really don't know what he's been smoking.

Over at the Macromedia user forums, dedicated Macromedia developers are definitely depressed - the forums are filled with words like shock, disappointment and sadness.

So Adobe will add Dreamweaver to its list of aging dominators and make more money. But where are the real synergies? It's hard to see synergies between the companies' two platforms: Flash is light-weight and strongly server-oriented. Acrobat is heavyweight and download-focused; they've had great success in data-centric industries like finance.

Over at Jupiter, David Schatsky notes:

[The CEOs] alluded to the importance of mobile applications and cited Macromedia's greater presence there as an advantage to the combined company that can help pull Adobe's technology onto a new platform.

He also hints, "Let's also see what sounds come out of Redmond."

Flash is the right app for mobile, especially with all the server-side stuff that Macromedia has added over the years. Perhaps they have some ideas for combining Acrobat and Flash; but it's hard for me to see. My suspicion is that Dreamweaver and Flash take them where they want to go; and and after years of acquiring the wrong companies, Adobe just decided to snatch up the real deal.
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