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