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The Following is Archived and Preserved from QuarkVSInDesign.com, 2003–2009.

Adobe-Macromedia Deal to Seal on Saturday

Tomorrow, smoothest software company acquisition in recent memory to close.

Following Friday’s confirmation of regulatory approval in all necessary jurisdictions, Adobe Systems, Inc. (Nasdaq: ADBE) will complete the more than $3 billion acquisition of Macromedia, Inc. (Nasdaq: MACR) on Saturday, 3 December 2005.

Shares of both firms soared to yearly highs following the news, with Adobe gaining $1.09, or 3.2%, to end at $34.97 and Macromedia rising $1.76, or 3.8%, to close at $48.26.

When the ink dries tomorrow, the all-stock transaction will net holders of Macromedia common stock 1.38 shares of Adobe common stock per each share of Macromedia common stock owned.

Despite several competing applications and technologies between Adobe and Macromedia and a July inquiry from the DOJ, the acquisition proposal sailed through regulatory approval in the United States, Europe, and all other markets in which the multi-national companies have offices. Adobe created the vector drawing program Illustrator, while Macromedia owns its only serious competitor, FreeHand, which Adobe owned for all of five minutes during the 1994 $525 million all-stock acquisition of FreeHand’s then-owner, Aldus Corp. Immediately following that acquisition, the U.S. Federal Trade Commission, prompted by a suit from original FreeHand creator Altsys, forced Adobe-Aldus to sell FreeHand back to Altsys, who was immediately thereafter gobbled up by Macromedia. This time, however, the FTC doesn’t appear to care about the fate of FreeHand.

Although FreeHand is still actively sold by Macromedia, it hasn’t been updated in three years. Languid development has seen the veteran vector application falling further and further behind it’s Adobe rival. In fact, FreeHand was conspicuously missing from this year’s update to Macromedia’s product suite, Studio 8.

While FreeHand offers some advantages over Illustrator in terms of integration with other Macromedia products–most notably the ubiquitous Flash, with which Adobe has never been able to compete despite half-hearted attempts with Adobe LiveMotion (defunct after version 2.0) and enhancements to the star of professional titling and video compositing, Adobe AfterEffects–it’s unlikely that the ailing FreeHand will survive the year.

As one of only two surviving members of the aged Aldus product family that included page layout pioneer PageMaker (R.I.P 1986-2004), and long deceased PhotoStyler, Photoshop’s only ever serious competitor, and Persuasion, a graphical slideshow presentation application universally regarded as better than Microsoft PowerPoint–even, in many cases, against today’s version of PowerPoint–when FreeHand does finally kick the bucket, it will leave Adobe AfterEffects as the only survivor of Aldus’s released product line. Fans of Paul Brainerd’s Aldus, Corp. will mourn FreeHand’s passing, but rejoice in knowing that AfterEffects will continue, as will Aldus’s greatest achievement, InDesign, which was still in initial production at the time of the 1994 merger.

The path to resolving the other direct competition between Adobe and Macromedia is not so clear. Both companies make vibrant, active Web design applications, GoLive and Dreamweaver, respectively. GoLive integrates tightly into the entire Adobe line of creative professional products, including Illustrator, Photoshop, and InDesign, while Dreamweaver works just as closely with Macromedia’s Flash, Flex, Contribute, and the ColdFusion database system.

Surprisingly, no objection was raised regarding anti-competitive practices by consolidating under one roof both applications, which sail far above the only other contender, Microsoft’s much disdained FrontPage. Even more surprisingly, recently leaked information about the next versions of Adobe’s Creative Suite indicates that both GoLive and Dreamweaver will continue to thrive as separate programs for the near future, with both having a place in variations of Creative Suite 3.

Whether the information, published earlier this week in an online survey by AbsolutData Research & Analytics on behalf of an undisclosed client, bears fruit is anyone’s guess. Until the merger officially closes, both Adobe and Macromedia are mum on plans to integrate the companies’ products and technologies. Although Adobe’s COO, Shantanu Narayen, did comment vaguely in an interview today with Forbes:

The benefit is when you put things together. Look at our four major customer segments. For the creative designer/developer customer, we want to offer the best of Dreamweaver, Flash and Photoshop. Creative Suite [a software design package combining various related image applications] has blown away our expectations because the Adobe platform is standardized and integrated with best-of-breed products. We will continue to provide more. For example, Web site designers can work with Photoshop and then switch over to Dreamweaver to create the site. We can make this all work seamlessly.

For the knowledge worker, we want Acrobat to be one of those essential desktop applications–just like e-mail. People are increasingly relying on Acrobat as the desktop application for sharing information. Macromedia’s Breeze [Web video-conferencing software] allows for asynchronous collaboration, which means that workers don’t have to be in the same place at the same time. That can facilitate much faster productivity.

Finally, there is mobility: The possibilities inherent in alternate devices excite me the most. There are a billion people in China and India who are never going to connect to the Internet using a PC. They’re going to connect through a cell phone or an alternate device. We have the opportunity to also provide an environment for people to engage with that information on those devices like what Macromedia has done with Flash Lite [for cell phones] and we have done with DoCoMo [by bringing Adobe Acrobat to its cell phones]. There are so many opportunities.

Read the complete Forbes Shantanu Narayen interview.

Adobe announced its affirmative intent to acquire San Francisco-based rival Macromedia on 18 April, 2005. At just over seven months from notice of intent to full shareholder and regulatory approval, this will go down as one of the smoothest software company acquisitions in recent memory.

Important upcoming dates relevant to the merger:

  • 3 December, 2005: The Adobe-Macromedia merger to officially close.
  • 15 December, 2005: Adobe to discuss the combined company’s fiscal 2006 outlook as part of its fourth quarter and fiscal 2005 year-end earnings conference call 2:00PM Pacific Time.
  • 31 January, 2006: Adobe to outline technology strategy to analysts and investors in New York.

Adobe, Macromedia, Flash, Illustrator, FreeHand, GoLive, Dreamweaver, Aldus, ADBE, MACR

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