QuarkVSInDesign.com Archive

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

Who's Watching the Adobe-Macromedia Merger?

As Adobe and Macromedia await word of DOJ rulings on the impending merger and what will become of the companies' competitive products, both move forward with stockholder votes. But if applicationsDreamWeaver, GoLive, FreeHand, FireWorks, or Homesitehave to sell, who is likely to buy?

Adobe and Macromedia logos
If the DOJ says sell, what will be sold and who will buy?

At 3:00 pm PDT on Wednesday, 24 August 2005, Adobe and Macromedia will hold simul­ta­ne­ous meet­ings to allow stock­hold­ers to vote yay or nay on the pro­posed merg­er of the two cre­ative appli­ca­tion giants. Announced 18 April of this year, San Jose, Calif.-based Adobe Systems, Inc. (Nasdaq: ADBE) plans to acquire com­peti­tor San Francisco-based Macromedia, Inc. (Nasdaq: MACR) in an all-stock trans­ac­tion val­ued at approx­i­mate­ly $3.4 bil­lion.

The pro­posed merg­er is still under inves­ti­ga­tion by, and pred­i­cat­ed upon the approval of, the Department of Justice, who request­ed addi­tion­al infor­ma­tion from the par­ties on 11 July. The infor­ma­tion request­ed by the DOJ’s Additional Information and Documentary Materials (a “sec­ond request”), was specif­i­cal­ly relat­ed to the two com­pa­nies’ web design and vec­tor draw­ing appli­ca­tions, Adobe prod­ucts GoLive and Illustrator and Macromedia appli­ca­tions DreamWeaver and FreeHand. Web design and con­struc­tion and vec­tor draw­ing are the only areas in which the two com­pa­nies direct­ly com­pete.

Industry ana­lystsand would be buy­ersare wait­ing to see whether the DOJ will insist upon the divesti­ture of one prod­uct in both class­es pri­or to approv­ing a merg­er. Both GoLive and DreamWeaver are active­ly devel­oped and aggres­sive­ly mar­ket­ed as com­pet­ing appli­ca­tions, and each has a sub­stan­tial installed user base. In the inter­est of con­sumers, the DOJ may require one or the oth­er to be sold before the acqui­si­tion as it did pre­vi­ous­ly with FreeHand.

What's likely to sell.

When Adobe acquired Aldus, then-owner of FreeHand, in 1995. Aldus Corp. was forced to sell FreeHand back to Altsys, its orig­i­nal devel­op­er, who was imme­di­ate­ly there­after gob­bled up by Macromedia (for­mer­ly MacroMind). At the time, FreeHand was a vir­ile and aggres­sive com­peti­tor to Adobe’s Illustrator. Today, how­ev­er, FreeHand (cur­rent­ly in 2002 “MX” ver­sion) is sev­er­al years out of date, and no longer as strong a com­peti­tor to Illustrator in terms of either fea­tures or num­ber of installed users. If the infor­ma­tion pro­vid­ed by Macromedia to the DOJ reflects these fac­tors, QuarkVSInDesign​.com pre­dicts that the DOJ will like­ly allow FreeHand to be includ­ed as an asset of the merg­er with­out requir­ing its sale to a third-party.

Related appli­ca­tions, Macromedia’s FireWorks and Homesite, a vec­tor and raster draw­ing appli­ca­tion and an HTML code edi­tor, respec­tive­ly, are expect­ed to be non-issues regard­ing the merg­er because, even more so than FreeHand, their tech­nolo­gies are out­dat­ed and their user mar­kets very small com­pared to the oth­er appli­ca­tions at issue. Homesite, in par­tic­u­lar, which was adopt­ed by Macromedia dur­ing its acqui­si­tion of Allaire (who had pre­vi­ous­ly pur­chased it from cre­ator Bradbury Software), has not been sig­nif­i­cant­ly updat­ed since Macromedia took own­er­ship of it. Moreover, its func­tion­al­i­ty is, by and large, already superced­ed by Macromedia’s own DreamWeaver. FireWorks, orig­i­nal­ly con­ceived as a joint com­peti­tor to Adobe’s Photoshop and Illustrator, nev­er achieved such a sta­tus. Although FireWorks cus­tomers are pas­sion­ate­ly vocal about their appli­ca­tion, it’s effec­tive use in the mar­ket place is hum­ble.

If the DOJ does take issue with these two appli­ca­tions, Macromedia will like­ly offer Homesite back to Bradbury Software, who cur­rent­ly makes TopStyle, a stealth com­peti­tor to its own Homesite tech­nol­o­gy. Bradbury, should it reac­quire Homesite, will prob­a­bly kill it off. Having Homesite back in the fold, how­ev­er, would release Bradbury from the fea­ture restric­tions imposed on TopStyle by the company’s deal with Macromedia. TopStyle, a pop­u­lar and full-featured HTML edi­tor in the guise of a sim­ple CSS code edi­tor, has suf­fered stunt­ed growth because of Bradbury’s inabil­i­ty to include func­tions that com­pet­ed direct­ly with Homesite.

FireWorks, if whose acqui­si­tion by Adobe is con­strued by the DOJ as anti-competitive, may be killed out­right as was Aldus’s PhotoStyler, a Photoshop rival in the mid-1990s, or sold for a song.

Who might buy.

Confidential sources reveal that fac­tions with­in Quark, Inc., the Denver, Colo.-based mak­er of desk­top pub­lish­ing appli­ca­tion QuarkXPress, are push­ing for acqui­si­tion of FreeHand and pos­si­bly even FireWorks in an effort to shore up the company’s mar­ket stand­ing against an increas­ing­ly com­pet­i­tive Adobe Creative Suite, which includes InDesign, the QuarkXPress com­peti­tor, as well as Photoshop, Illustrator, GoLive, and Acrobat. There is also inter­est there, say sources, in pick­ing up GoLive or DreamWeaver if either hits the open mar­ket. Quark has recent­ly strayed from its print pub­lish­ing roots into online pub­lish­ing in the form of the QuarkCommerce prod­uct as well as HTML cre­ation fea­tures of its flag­ship QuarkXPress lay­out appli­ca­tion. With a full-featured web site devel­op­ment appli­ca­tion like GoLive or DreamWeaver, Quark could rein­vent itself into the next Macromedia and stake out a ter­ri­to­ry in cross-platform pub­lish­ing.

Additionally, Ottawa-based Corel Corp., mak­ers of would-be Illustrator and FreeHand com­peti­tor CorelDRAW! as well as oth­er hob­by mar­ket rivals to Adobe, Macromedia, and Microsoft soft­ware, could also be sniff­ing around FireWorks. FreeHand, though, would be a dif­fi­cult buy for Corel as such a pur­chase would also be anti-competitive.

Some spec­u­late that Microsoft, whose timid cre­ative appli­ca­tion offer­ings have so far remained square­ly with­in the per­son­al and hob­by use mar­kets, may make a bid for FreeHand, FireWorks, and pos­si­bly even GoLive, which is the more like­ly of the web appli­ca­tions to be divest­ed should such be a con­di­tion of DOJ approval of the Adobe-Macromedia merg­er. The merg­er is seen by most ana­lysts, includ­ing QuarkVSInDesign​.com, as a con­sol­i­da­tion of pow­er in prepa­ra­tion for war with Microsoft over the mobile con­tent pub­lish­ing mar­ket. Some believe that Microsoft, who has recent­ly gone after Adobe’s almost total dom­i­na­tion of the glob­al elec­tron­ic forms mar­ket, may use an acqui­si­tion of high-end draw­ing and web cre­ation soft­ware to attack Adobe’s flanks as a dis­trac­tion from the main bat­tle of mobile device pub­lish­ing.

Other sources sug­gest Apple may try to acquire the appli­ca­tions to help it break Adobe’s suprema­cy of the cre­ative mar­kets, which run pri­mar­i­ly on Apple’s Macintosh line of com­put­ers. This sce­nario is, how­ev­er, unlike­ly in the opin­ion of QuarkVSInDesign​.com. Such a move would not be con­sis­tent with Apple’s strat­e­gy of estab­lish­ing itself as a lifestyle brand inno­va­tor.

Given the siz­able mar­kets for both DreamWeaver and GoLive, it’s like­ly that the DOJ will force Adobe and Macromedia to divest itself of one or the oth­erprob­a­bly GoLive. Doubtful either would both­er Adobe; estab­lish­ing desktop-level web design dom­i­nance is a low pri­or­i­ty in the acqui­si­tion of Macromedia. And, regard­less of who snatch­es up any oth­er appli­ca­tions the two com­pa­nies are forced to sell, it’s unlike­ly the con­sol­i­dat­ed Adobe could be sig­nif­i­cant­ly harmed by the com­pe­ti­tion.

Both com­pa­nies are con­fi­dent that share­hold­ers will approve the pro­posed merg­er in the 24 August meet­ings, and that the deal will close in the Fall of this year.

A joint proxy statement/prospectus will be mailed on or about July 22, 2005 to both com­pa­nies’ stock­hold­ers of record as of July 19, 2005. All Adobe and Macromedia stock­hold­ers of record as of July 19, 2005 are enti­tled to vote on the trans­ac­tion.

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7 Responses

  1. James Graphics Pro says:

    Adobe is so mon­ey hun­gry,. CS is a poor excuse and Full “Paid” ver­sions lock up like an unreg­is­tered ver­sion. Remember when you at least got 30days cus­tomer ser­vice.!

    Macromedia will soon suck as much as Adobe.

  2. Pity about the whole merg­er real­ly. I think they both keep each oth­er hon­est. At least a lit­tle bit. If DW or GoL get tak­en away the oth­er will drift along and few­er incen­tives to con­tin­ue with devel­op­ment at the cur­rent rate.
    Interested in your com­ment about web lay­out being low pri­orty, what prod­ucts are they after oth­er than Flash, I would think DW is far supe­ri­or to GoL with many many exten­tions to enhanced it’s few short com­ings.

  3. Hi, Peter.

    Interested in your com­ment about web lay­out being low pri­orty, what prod­ucts are they after oth­er than Flash, I would think DreamWeaver is far supe­ri­or to GoL with many many exten­tions to enhanced it’s few short com­ings.

    As a hand-coding web design­er, I’m not ful­ly qual­i­fied to eval­u­ate DreamWeaver against GoLive, so I’ll defer to the com­mon wis­dom that DreamWeaver is a bet­ter appli­ca­tion in gen­er­al. GoLive still has tighter inte­gra­tion with the oth­er Creative Suite appli­ca­tions, mak­ing it a bet­ter appli­ca­tion for use with Photoshop, Illustrator, InDesign, and Acrobat. For exam­ple, DreamWeaver has no equiv­o­lent to GoLive’s Smart Objects tech­nol­o­gy.

    Regardless of which appli­ca­tion sur­vives the merg­er (if not both), future ver­sions of Web edit­ing appli­ca­tions from Adobe will ben­e­fit from the com­bined tech­nol­o­gy of Adobe and Macromedia. Even if DreamWeaver is divest­ed, future ver­sions of GoLive will have DreamWeaver’s strengths and be atleast as good as cur­rent ver­sions of DreamWeaver. The inverse would be true if DreamWeaver is retained and GoLive divest­ed.

    Mobile con­tent pub­lish­ing (MCP) is the big moti­va­tor behind the merg­er. MCP is heat­ing up as a media and indus­try; it’s one that cer­tain oth­er giants (Microsoft most notably) are hell bent on con­trol­ling. Neither Adobe nor Macromedia real­ly has all the pieces in place to ade­quate­ly pre­vent Microsoft from steam­rolling over MCP com­peti­tors. Combined, how­ev­er, with Macromedia’s con­tent deliv­ery tech­nol­o­gy and Flash, com­bined with Adobe’s size, mon­ey, and the loy­al­ty of its immense cus­tomer base, just might be able to pre­vent Microsoft’s dom­i­nance of MCP.

    I’m not one of these fanat­ic Microsoft-haters, but I am a prag­ma­tist. Microsoft’s busi­ness mod­el is not focused on cre­at­ing con­sumer choice or even answer­ing exist­ing mar­ket needs. Whatever mar­ket Microsoft dom­i­nates is forced, to some degree, to do things the way Microsoft has decid­ed is best.

    Adobe, by con­trast, spends mil­lions of dol­lars on efforts to under­stand cur­rent and future mar­ket needs. Adobe also helps cre­ate choice. To wit: Adobe invent­ed PostScript fonts and PDF, both of which are open spec­i­fi­ca­tions that are used by oth­er com­pa­nies to com­pete with Adobe prod­ucts. Microsoft guards its patents like a junk­yard dog.

    Critics of the pro­posed Adobe-Macromedia merg­er often claim that com­pe­ti­tion is the only thing that dri­ves inno­va­tion. In most cas­es, with most types of prod­ucts and most com­pa­nies, that’s true. However, Adobe oper­ates on a dif­fer­ent phi­los­o­phy. Look at Photoshop. For ten years Photoshop has been a vir­tu­al monopoly--every pro­fes­sion­al uses Photoshop for raster editing--yet Adobe has nev­er slacked off on Photoshop inno­va­tion or effort. Adobe still invests a lot of time and mon­ey in talk­ing to Photoshop users, learn­ing users’ work­flows, under­stand­ing pain points and fea­ture requests.

    Now, if that isn’t enough to con­vince you, con­sid­er what’s real­ly at stake. MCP will, by all accounts, be as big a rev­o­lu­tion as the Web was. MCP is the pre­cur­sor to a rev­o­lu­tion in broad­cast­ing, when hyper­text tele­vi­sion will become a real­i­ty. Who ever becomes the dom­i­nant force in MCP in the next five years will like­ly be the one that defines much of the future of inter­ac­tive broad­cast media and the next major con­tent pub­lish­ing rev­o­lu­tion. Macromedia is the only com­pa­ny at the moment with mature tech­nol­o­gy capa­ble of achiev­ing that poten­tial, but Macromedia doesn’t have the mon­ey, user base, or relat­ed tech­nolo­gies to be able to win against Microsoft in all out war for MCP and its future. So, rather than focus on the poten­tial draw­backs of the merg­er, ask your­self who you would rather see in con­trol of MCP and its future, Adobe or Microsoft?

  4. James Graphic Pro:

    Adobe is so mon­ey hun­gry,. CS is a poor excuse and Full “Paid” ver­sions lock up like an unreg­is­tered ver­sion. Remember when you at least got 30days cus­tomer ser­vice.!

    Yeah, that was today.

    Those with legal copies of the soft­ware have no dif­fi­cul­ty with “lock up”.

  5. Hi Pariah,
    I post­ed your link in my About forum (About DTP) and some­body else also made an inter­est­ing com­ment. Interesting to me at least as I was won­der­ing why the merg­er was hap­pen­ing in the first place. As I said in the forum though, if Quark tarts buy­ing Macromedia “unused” appli­ca­tions, then it could become too much of a prob­lem to Adobe. Is Mobile Content Publishing worth the risk?

  6. Quark india has revoked the approx. 400 offer let­ter of fresh recruit­ed by the for 2005.what are their future for stduents they are not worried.what a good orgni­sa­tion who first hire can­di­dates nd fired at tie of joining.what will the can­di­date do who suf­fered due to quark.

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