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 applications–DreamWeaver, GoLive, FreeHand, FireWorks, or Homesite–have 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 analysts–and would be buyers–are 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 other–probably 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.

web de­sign

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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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