Adobe to buy Macromedia

[Tami]

Adobe to buy Macromedia
By MATTHEW FORDAHL

SAN JOSE, Calif. — Combining two of the largest makers of software for creating and delivering digital content, Adobe Systems Inc. said Monday it will acquire Macromedia Inc. in an all-stock transaction valued at approximately $3.4-billion (U.S.).

Macromedia shares rose more than 10 per cent in early trading, while Adobe shares sank nearly 11 per cent .

Both companies said the long-rumoured acquisition was not to consolidate and cut costs but to help Adobe expand into new markets, particularly in the area of providing content to mobile phones and other handheld devices.

"This is not a consolidation play. This is all about growth," said Bruce Chizen, Adobe's chief executive officer. "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."

San Jose-based Adobe's software includes the popular Acrobat program for creating and reading documents that can be viewed on a variety of systems, including PCs and cellphones, as well as the popular Photoshop program for working with digital photographs.

Macromedia, based in San Francisco, makes the Dreamweaver Web-design program and Flash, which is used to animate and add interactivity to websites. The company recently announced tools for expanding its reach into mobile devices as well.

Neither company, however, would speculate Monday on actual product plans.

Under terms of the deal, approved by the companies' boards of directors, Macromedia stockholders will receive 0.69 shares of Adobe common stock for every share of their Macromedia common stock. That will result in Macromedia stockholders owning about 18 per cent of the combined company when the deal closes.

Shares of Adobe lost $6.49, or 10.7 per cent , to $54.17, in Monday morning trading on the Nasdaq Stock Market. Macromedia shares gained $3.48, or 10.4 per cent , to $36.93.

The transaction, contingent upon the approval of both companies' stockholders, is expected to be completed by the fall. It also requires the approval of federal regulators.

The companies, up until about 2001, were bitter rivals, squabbling over the look of the interfaces used in their software. Still, financial analysts and customers have been speculating about a merger for years.

Afterward, both struggled as Internet boom ended, said Steven Elop, Macromedia's chief executive.

"We were largely focused inward, making sure we had the strategies in place for the next generation of activities," he said. "We both, in parallel, developed visions that turned out to be very complementary, and we established a track record of success that puts us in a much stronger position to look outward."

Chizen will remain as chief executive of the combined company and Adobe's Shantanu Narayenb will continue as president and chief operating officer. Elop will join Adobe as president of worldwide field operations.

The companies said they are in the midst of developing "integration plans" that will build on their similarities. They made no mention of layoffs.

Adobe employs 3,700 people in offices around the world. It reported revenues of $1.295-billion for fiscal 2003. Macromedia reported sales of $370-million in fiscal 2004.

"While we anticipate the integration team will identify opportunities for cost savings by the time the acquisition closes, the primary motivation for the two companies' joining is to continue to expand and grow our business into new markets," Chizen said.

[url=\"http://www.globetechnology.com/servlet/story/RTGAM.20050418.gtadobeapr18/BNStory/Technology/\"]source: Globe Technology[/url]