Web design software maker Macromedia Inc. on Tuesday evening announced better-than-expected third-quarter financial results and said it had struck a $360 million deal to merge with Internet application server and software provider Allaire Corp.
Macromedia shares -- which closed up 2 1/16 to 44 -- fell as low as 38.50 following the surprise announcements and company guidance that fourth-quarter sequential revenue would be flat due to the uncertain economy.
"Strategically I think (the merger) makes sense. The products do fit well together," Robertson Stephens analyst Sasha Zorovic told Reuters.
Macromedia -- which was slated to report earnings on Wednesday -- posted third-quarter revenue that grew 61 percent from a year ago and has routinely beaten Wall Street forecasts.
"They said plainly, 'Don't look for a repeat,'" said Zorovic, who added that the company's third-quarter software revenue came in $2 million under his estimate for sales of $101 million and expects it to have several quarters of "anemic" growth.
"Okay. It's not going to be as fast, but it's still a growth company. ... We think there's an opportunity to grow earnings even more," Macromedia Chief Executive Rob Burgess told Reuters.
While Macromedia's core products are doing well, Burgess said, many of the company's customers have been affected by the softening economy.
Guidance overshadows earnings
For the quarter ended Dec. 31, San Francisco-based Macromedia posted pro forma earnings of $16.2 million, or 29 cents per diluted share, compared with $8.2 million, or 15 cents per diluted share, in the year-ago quarter.
Those results beat analysts' consensus estimate for third-quarter earnings of 27 cents, as compiled by First Call/Thomson Financial.
Macromedia said revenues grew to $103.3 million from $64.3 million a year ago after the company shipped new versions of Dreamweaver 4, Dreamweaver UltraDev 4 and Fireworks 4.
Macromedia -- which also sells multimedia playback and graphics development tools -- said the two companies had agreed to a $360 million stock deal that will add to Macromedia's earnings in its 2002 fiscal year.
Calling the merger a marriage of design and development, Burgess told financial analysts that "the combined company will enable Web professionals to efficiently build the look of a Web site and the application logic behind it -- creating the best possible user experience across multiple devices."
Under the merger deal, Macromedia will exchange 0.2 shares of its stock and $3 in cash for each Allaire share.
Including Allaire's results, Macromedia said it expects to report pro forma earnings of about $1.70 per share on revenues of $630 million for its 2002 fiscal year.
That is 13 cents higher than First Call's consensus forecast for fiscal 2002, when Macromedia's revenues were expected to be $537.8 million.
Allaire, of Newton, Mass., sells ColdFusion and Spectra software products that help companies build and manage interactive and secure e-business Web sites.
Analysts polled by First Call had expected Allaire, on average, to post a loss of 49 cents per share on revenues of $148.56 million. Forecasts for Allaire's 2002 earnings and revenues were not available.
Allaire shares closed 7/16 higher at 7 15/16 on Nasdaq and were up to 10.125 in extended trading following the merger announcement.