Adobe to Acquire Macromedia

Combined Company to Deliver Industry-Defining Technology Platform for Rich, Interactive Content

Press Release

Adobe to acquire arch rival and web devel­ope­ment soft­ware leader Macromedia

SAN JOSE, Calif. — April 18, 2005 — Adobe Systems Incorporated (Nasdaq: ADBE) today announced a defin­i­tive agree­ment to acquire Macromedia (Nasdaq: MACR) in an all-stock trans­ac­tion val­ued at approx­i­mate­ly $3.4 billion.

The com­bi­na­tion of Adobe and Macromedia will pro­vide cus­tomers a more pow­er­ful set of solu­tions for cre­at­ing, man­ag­ing and deliv­er­ing com­pelling con­tent and expe­ri­ences across mul­ti­ple oper­at­ing sys­tems, devices and media. Together, the two com­pa­nies will meet a wider set of cus­tomer needs and have a sig­nif­i­cant­ly greater oppor­tu­ni­ty to grow into new mar­kets, par­tic­u­lar­ly in the mobile and enter­prise segments.

“Customers are call­ing for inte­grat­ed soft­ware solu­tions that enable them to cre­ate, man­age and deliv­er a wide range of com­pelling con­tent and appli­ca­tions – from doc­u­ments and images to audio and video,” said Bruce Chizen, chief exec­u­tive offi­cer of Adobe. “By com­bin­ing our pow­er­ful devel­op­ment, author­ing and col­lab­o­ra­tion soft­ware – along with the com­ple­men­tary func­tion­al­i­ty of PDF and Flash – Adobe has the oppor­tu­ni­ty to bring this vision to life with an industry-defining tech­nol­o­gy platform.”

Under the terms of the agree­ment, which has been approved by both boards of direc­tors, Macromedia stock­hold­ers will receive, at a fixed exchange ratio, 0.69 shares of Adobe com­mon stock for every share of Macromedia com­mon stock in a tax-free exchange. Based on Adobe’s and Macromedia’s clos­ing prices on Friday, April 15, 2005, this rep­re­sents a price of $41.86 per share of Macromedia com­mon stock. Upon the close of the trans­ac­tion, Macromedia stock­hold­ers will own approx­i­mate­ly 18 per­cent of the com­bined com­pa­ny on a pro for­ma basis. 

In the com­bined com­pa­ny, Chizen will con­tin­ue as chief exec­u­tive offi­cer and Shantanu Narayen will remain pres­i­dent and chief oper­at­ing offi­cer. Stephen Elop, pres­i­dent and chief exec­u­tive offi­cer of Macromedia, will join Adobe as pres­i­dent of world­wide field oper­a­tions. Murray Demo will remain exec­u­tive vice pres­i­dent and chief finan­cial offi­cer. Dr. John Warnock and Dr. Charles Geschke will remain as co-chairmen of the Board of Directors of the com­bined com­pa­ny and Rob Burgess, chair­man of the Macromedia Board of Directors, will join the Adobe Board.

“Both Macromedia and Adobe are pas­sion­ate about cre­at­ing and enabling great expe­ri­ences across a wide range of devices and oper­at­ing sys­tems,” said Elop. “Our com­bined teams will be a pow­er­ful force for inno­va­tion around cutting-edge plat­forms for deliv­er­ing con­tent and applications.”

Integration

The two com­pa­nies are devel­op­ing inte­gra­tion plans that build on the cul­tur­al sim­i­lar­i­ties and the best busi­ness and prod­uct devel­op­ment prac­tices from each com­pa­ny. The com­pa­nies will make addi­tion­al details and infor­ma­tion about the acqui­si­tion avail­able at (here) .

“While we antic­i­pate the inte­gra­tion team will iden­ti­fy oppor­tu­ni­ties for cost sav­ings by the time the acqui­si­tion clos­es, the pri­ma­ry moti­va­tion for the two com­pa­nies’ join­ing is to con­tin­ue to expand and grow our busi­ness into new mar­kets,” said Chizen.

The acqui­si­tion, which is expect­ed to close in Fall 2005, is sub­ject to cus­tom­ary clos­ing con­di­tions, includ­ing approval by the stock­hold­ers of both com­pa­nies and reg­u­la­to­ry approvals. The trans­ac­tion will be account­ed for under pur­chase account­ing rules. 

Due to the absence at this time of esti­mates of the acquisition-related restruc­tur­ing costs and the allo­ca­tion of the pur­chase price between good­will, in-process R&D, oth­er intan­gi­bles and equity-based com­pen­sa­tion expens­es relat­ed to SFAS 123R, Adobe is cur­rent­ly unable to pro­vide GAAP esti­mates on future earnings.

The trans­ac­tion is cur­rent­ly expect­ed to be break-even to slight­ly accre­tive to earn­ings in the first twelve months after clos­ing on a non-GAAP basis. The com­pa­ny’s tar­get of break even-to-slightly accre­tive to earn­ings on a non-GAAP basis assumes no adverse impact from the loss of deferred rev­enue in the first twelve months fol­low­ing the close due to pur­chase accounting.

Stock Repurchase Program 

Adobe also announced its Board of Directors has approved a post-acquisition stock repur­chase pro­gram of $1 bil­lion. “After a review of the com­bined com­pa­nies’ finan­cial posi­tion, our Board con­clud­ed that the repur­chase pro­gram is con­sis­tent with our over­all com­mit­ment to deliv­er val­ue to our stock­hold­ers,” Chizen added.

The repur­chase pro­gram is in addi­tion to the Adobe’s exist­ing stock repur­chase pro­grams and is expect­ed to com­mence fol­low­ing the com­ple­tion of the acqui­si­tion. The repur­chas­es will be fund­ed from avail­able work­ing capital.

Conference Call

The man­age­ment teams of both com­pa­nies will host a finan­cial ana­lyst and investor con­fer­ence call today at 8:00 a.m. ET (5:00 a.m. PT). The call can be accessed at 888–278-5324 (U.S.) or 706–643-3100 (out­side U.S.) with con­fer­ence call ID #5643249. A live Webcast of the call will also be pro­vid­ed at www​.adobe​.com/ADBE and www​.macro​me​dia​.com/MACR . For those unable to lis­ten to the live con­fer­ence call, a tele­phone replay will be avail­able at 800–642-1687 (U.S.) or 706–645-9291 (out­side U.S.) with con­fer­ence call ID #5643249. The tele­phone replay will be avail­able begin­ning April 18, 2005 at 9:00 a.m. ET through April 20, 2005 at 12:59 p.m. ET. A Webcast archive will also be avail­able on each com­pa­ny’s investor rela­tions Web site.

About Adobe Systems Incorporated

Adobe is the world’s lead­ing provider of soft­ware solu­tions to cre­ate, man­age and deliv­er high-impact, reli­able dig­i­tal con­tent. For more infor­ma­tion, vis­it www​.adobe​.com .

About Macromedia

Experience mat­ters. Macromedia is moti­vat­ed by the belief that great expe­ri­ences build great busi­ness­es. Our soft­ware empow­ers mil­lions of busi­ness users, devel­op­ers, and design­ers to cre­ate and deliv­er effec­tive, com­pelling, and mem­o­rable expe­ri­ences – on the Internet, on fixed media, on wire­less, and on dig­i­tal devices. 

Forward Looking Statements

This press release includes “forward-looking state­ments” with­in the mean­ing of the safe har­bor pro­vi­sions of the United States Private Securities Litigation Reform Act of 1995. Words such as “expect,” “esti­mate,” “project,” “bud­get,” “fore­cast,” “antic­i­pate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “pre­dicts,” “poten­tial,” “con­tin­ue,” and sim­i­lar expres­sions are intend­ed to iden­ti­fy such forward-looking state­ments. Forward-looking state­ments in this press release include, with­out lim­i­ta­tion, fore­casts of mar­ket growth, future rev­enue, ben­e­fits of the pro­posed merg­er, expec­ta­tions that the merg­er will be accre­tive to Adobe’s results, future expec­ta­tions con­cern­ing avail­able cash and cash equiv­a­lents, Adobe’s expec­ta­tions with respect to future stock repur­chas­es fol­low­ing the merg­er, includ­ing the tim­ing and amount of such repur­chas­es, and oth­er mat­ters that involve known and unknown risks, uncer­tain­ties and oth­er fac­tors that may cause actu­al results, lev­els of activ­i­ty, per­for­mance or achieve­ments to dif­fer mate­ri­al­ly from results expressed or implied by this press release. Such risk fac­tors include, among oth­ers: dif­fi­cul­ties encoun­tered in inte­grat­ing merged busi­ness­es; uncer­tain­ties as to the tim­ing of the merg­er; approval of the trans­ac­tion by the stock­hold­ers of the com­pa­nies; the sat­is­fac­tion of clos­ing con­di­tions to the trans­ac­tion, includ­ing the receipt of reg­u­la­to­ry approvals; whether cer­tain mar­ket seg­ments grow as antic­i­pat­ed; the com­pet­i­tive envi­ron­ment in the soft­ware indus­try and com­pet­i­tive respons­es to the pro­posed merg­er; and whether the com­pa­nies can suc­cess­ful­ly devel­op new prod­ucts and the degree to which these gain mar­ket accep­tance. Actual results may dif­fer mate­ri­al­ly from those con­tained in the forward-looking state­ments in this press release. Additional infor­ma­tion con­cern­ing these and oth­er risk fac­tors is con­tained in Adobe’s and Macromedia’s most recent­ly filed Forms 10‑K and 10‑Q.

Adobe and Macromedia under­take no oblig­a­tion and do not intend to update these forward-looking state­ments to reflect events or cir­cum­stances occur­ring after this press release. You are cau­tioned not to place undue reliance on these forward-looking state­ments, which speak only as of the date of this press release. All forward-looking state­ments are qual­i­fied in their entire­ty by this cau­tion­ary statement.

Additional Information and Where to Find It

Adobe Systems Incorporated intends to file a reg­is­tra­tion state­ment on Form S‑4, and Adobe and Macromedia, Inc. intend to file a relat­ed joint proxy statement/prospectus, in con­nec­tion with the merg­er trans­ac­tion involv­ing Adobe and Macromedia. Investors and secu­ri­ty hold­ers are urged to read the reg­is­tra­tion state­ment on Form S‑4 and the relat­ed joint proxy/prospectus when they become avail­able because they will con­tain impor­tant infor­ma­tion about the merg­er trans­ac­tion. Investors and secu­ri­ty hold­ers may obtain free copies of these doc­u­ments (when they are avail­able) and oth­er doc­u­ments filed with the SEC at the SEC’s web site at www​.sec​.gov . In addi­tion, investors and secu­ri­ty hold­ers may obtain free copies of the doc­u­ments filed with the SEC by Adobe by con­tact­ing Adobe Investor Relations at 408–536-4416. Investors and secu­ri­ty hold­ers may obtain free copies of the doc­u­ments filed with the SEC by Macromedia by con­tact­ing Macromedia Investor Relations at 415–252-2106.

Adobe, Macromedia and their direc­tors and exec­u­tive offi­cers may be deemed to be par­tic­i­pants in the solic­i­ta­tion of prox­ies from the stock­hold­ers of Adobe and Macromedia in con­nec­tion with the merg­er trans­ac­tion. Information regard­ing the spe­cial inter­ests of these direc­tors and exec­u­tive offi­cers in the merg­er trans­ac­tion will be includ­ed in the joint proxy statement/prospectus of Adobe and Macromedia described above. Additional infor­ma­tion regard­ing the direc­tors and exec­u­tive offi­cers of Adobe is also includ­ed in Adobe’s proxy state­ment for its 2005 Annual Meeting of Stockholders, which was filed with the SEC on March 14, 2005. Additional infor­ma­tion regard­ing the direc­tors and exec­u­tive offi­cers of Macromedia is also includ­ed in Macromedia’s proxy state­ment for its 2004 Annual Meeting of Stockholders, which was filed with the SEC on June 21, 2004 and Macromedia’s proxy state­ment for a Special Meeting of Stockholders, which was filed with the SEC on October 6, 2004. These doc­u­ments are avail­able free of charge at the SEC’s web site at www​.sec​.gov and from Investor Relations at Adobe and Macromedia as described above.