Quark Inc. said late Tuesday it was willing to pay a premium to acquire all or part of Adobe Systems Inc., a company more than four times its size.
The graphics software maker's stock has been battered after officials warned of a slight loss or break-even results in the company's third fiscal quarter ending Aug. 28, including restructuring charges. Adobe also plans to cut 300 jobs, or 10 percent of its work force.
Shares of Adobe (Nasdaq:ADBE) closed at 24 9/16, down from their 52-week high of 53 1/8.
Adobe is blaming its problems on the economic turmoil wracking Asia as well as disappointing sales of its Illustrator and PageMaker software lines. The company now expects third-quarter revenue of $220 million to $225 million, well below both Wall Street's expectations and the software maker's year-ago revenue of $230 million.
"Bottom line: Slit their throat while they're down," said Chris LeTocq, an analyst with Dataquest.
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That's what Adobe's chief rival is apparently looking to do.
Bolt from the blue
Quark published the contents of a letter sent to Adobe, urging the company's board to "seriously reconsider" an acquisition proposal that Quark said it made last week.
Quark said Adobe's management had "summarily rejected" its proposal to meet.
Analysts estimate Quark's annual revenues at $200 million while Adobe had nearly $912 million in sales during its last fiscal year, ended November 1997.
But in a prepared statement, Quark founder and chairman, Tim Gill, said the proposed combination "would create considerable value and benefits through the synergies, cost-savings and cross-marketing opportunities realizable only through such a transaction."
Quark, which said it wanted to pursue a friendly takeover, did not detail how much of a premium it was willing to pay. Gill said that Quark was "pursuing this transaction with every intent to be fair to Adobe employees, stockholders and customers."
However LeTocq said the surprise offer "definitely fits the definition of hostile. The next question is what Adobe has done to protect itself."
That's still unclear, but Adobe said late Tuesday evening that it was not interested in Quark's offer. In a brief statement, Adobe said Quark's letters had failed to present any "material terms that would constitute a firm and bonifide offer, including price."
Adobe under pressure
However, the company may find itself under pressure from institutional investors. Ten of the 15 analysts who follow Adobe have lowered their rating to hold; only five have the company at a buy rating.
"By doing this, Quark removes its competition at the high end of the marketplace," LeTocq said.
Quark said it would sell Adobe's K-2 and PageMaker software programs to allay any antitrust concerns the proposal could raise with federal regulators.
ZDNN's Robert Lemos contributed to this report.