SAN JOSE, CA – Two of the largest makers of software for creating and delivering digital content are soon to become one. Adobe Systems Inc announced that it will acquire Macromedia Inc in an all-stock transaction valued at approximately $3.4 billion.Macromedia, known for its Dreamweaver and Flash programs, saw its shares rise 8% in early trading, while Adobe’s shares dropped 11%.
Adobe’s most popular software includes the Acrobat program for creating and reading documents in PDF format, and Photoshop, for manipulating digital photographs.
Both companies stated that the acquisition was primarily to help Adobe expand into new markets, especially in regards to providing content for cell phones and other handheld devices. The companies denied rumors about consolidation and cost-cutting.
“This is not a consolidation play. This is all about growth,” said Bruce Chizen, Adobe’s chief executive. “We’re doing this because we believe the combined offerings will be even more compelling to our customers given the challenges they’re going to face in trying to communicate information in this very complex environment.”
The transaction is still contingent upon the approval of regulators and the shareholders of both companies, and is expected to be completed by the fall. The combined company will retain Adobe’s name and San Jose headquarters.
The two companies had been rivals until about 2001, and financial analysts had been speculating on a merger for years.
As the internet boom ended, both companies struggled, said Steven Elop, Macromedia’s chief executive.
“We were largely focused inward, making sure we had the strategies in place for the next generation of activities,” he said. “We both, in parallel, developed visions that turned out to be very complementary, and we established a track record of success that puts us in a much stronger position to look outward.”
Adobe expects sales and profits to reach the higher end of the range of its previous estimates. Macromedia also expects to exceed its previous forecast.
“It’s a lot easier to combine two companies that are healthy and doing really well with lots of growth than it is to try to acquire and integrate a company that is broken,” Chizen said. “That is the piece that gave us comfort in taking the next step.”
