The news that Adobe is to buy Macromedia — subject to the usual provisos like shareholder and regulatory approval — marks the biggest ever deal in the content creation and Web development sector.
The deal, valued at $3.4bn (£1.8bn) in stock, will produce a content creation giant that will dwarf its competitors and even make Microsoft look lacking. Although the deal was kept very well under wraps, with no leaks prior to Monday's announcement, analysts say that the departure of former Macromedia chief executive Rob Burgess in January 2004 paved the way for the deal and should give some indication of just how long ago negotiations began. (Burgess was replaced by Stephen Elop who will now become president of worldwide field operations for the new-look Adobe.)
Macromedia sells 36 individual products, spanning authoring tools; server software; e-learning; and of course its payer software, which includes Flash. Adobe lists over 40 individual products, which it groups under print and Web publishing; digital imaging; video and audio; and the Acrobat family, among others.
Adobe chief executive Bruce Chizen, who is no stranger to making layoffs — he fired 300 on joining Adobe seven years ago — is likely to make some big culls across both firms. In a statement announcing the planned purchase, Chizen talked of cost cutting measures to come; the notable areas of overlap between the companies' products are in graphics, where Adobe's Photoshop and Illustrator are the market leaders ahead of Macromedia's competing Fireworks and Freehand. For Web design, Macromedia has the established DreamWeaver against Adobe's more recent GoLive product.
"There have to be layoffs," said Ovum senior analyst Bola Rotibi. "If they want to be credible they have to be streamlined so it will be incredibly important for the market and for the customers that they achieve this. There is some overlap between the two companies' products but even in each individual portfolio there have been several different directions." Adobe for instance has three different page layout products: Pagemaker, Framemaker and InDesign.
But there will also be obvious synergies. In a conference call on Monday morning with press and analysts, Elop pointed to Flash and Acrobat as one pair of products that, he said, have particular potential if they can be developed together. "Designers and developers will see better workflow," he added. "And enterprise customers will have more complete solutions."
One hurdle facing the planned acquisition could be the competition authorities. "There's no two ways about it," said Rotibi. "There will definitely be competition questions, not so much around the question of revenue as around the markets they pull in." But Chizen disputes this. "We look at countries like Germany where CorelDRAW outsells both Freehand and Illustrator," he said. "We look at market where open source alternatives such as Killustrator (now replaced by Karbon 14 in KOffice) do well, and we don't think it [competition] is an issue."
Rotibi also pointed out the implications for Microsoft if the deal goes ahead. "What makes it more poignant for MS is that having those two companies together makes it a harder play for Microsoft in these areas. Microsoft should be worried." In the conference call, Chizen said he would be "keeping an eye out" for Microsoft.
Chizen added that Macromedia brand names are likely to be kept, but that there is unlikely to be a future for the Macromedia corporate brand. "It would be inappropriate to have two," he said. News:Adobe to buy Macromedia
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