Adobe Macromedia deal
Adobe Systems, the leading provider of graphics-oriented software, announced it had agreed to buy rival Macromedia for $3.4 billion, all in stock.
Adobe is best known for tools for graphic designers and publishers, including standard publishing tools Photoshop, Acrobat, Illustrator, InDesign, and PageMaker. The company also sells GoLive (a web authoring tool), InCopy (an editorial collaboration tool), Premiere and AfterEffects (video editing programs), Audition (an audio editing program), and the top set of digital typefaces.
Macromedia is best known for its video (Director 2004) and web design software (DreamWeaver, ColdFusion), as well as its Flash animation engine. The company also makes FreeHand, the major illustration program that competes with Illustrator. And it is the developer of education and training software, including Captivate, Author Ware, and eLearning Suite, as well as collaboration software (Breeze).
One of the big future advantages for Adobe is in the Flash technology, which is more and more being incorporated into mobile devices like cell phones and PDA. This will give Adobe a far wider reach, increasingly important has the traditional personal computer is being supplemented with other devices.
Software consolidation is picking up steam, as a few companies wrestle for the right to define interfaces, file formats, and standards for the next generation. Over the past year the acquisition of PeopleSoft by Oracle and of Veritas by Symantec were the billion dollar deals that were accompanied by many smaller mergers and acquisitions. The big issue in the current deal is Microsoft is more than ever a competitor with Adobe. In fact, many analysts see Adobe's move as a preemptive one, making sure that Microsoft couldn't threaten it in its base by buying Macromedia itself.
And Adobe will have some advantages. Flash software is on over 90% of all computers, while Adobe Acrobat Reader software is on nearly 80% of all machines. But Microsoft is looking to get into that territory, according an AP story (" Adobe's Macromedia deal sends Microsoft a message, 4/18/05):
Microsoft is expected to include technology in its next-generation Windows, code-named Longhorn, that could threaten Adobe's dominance with its Acrobat software and the portable document format it invented.
The biggest concern is that the merger will give users fewer choices, less innovation, and higher prices. In a PC Magazine article ("Analysts: Merger Works For Adobe, But Customers May Suffer", 4/18/05) one analyst is quoted as saying:
It seems as though much of the recent innovation between the two software giants was brought on by healthy competition. They had an array of software packages that had the same purposes, e.g. GoLive and Dream Weaver, Illustrator and FreeHand, Photoshop and Fireworks. If there is no longer any need to compete, then they might not continue to develop new products. It will effectively create a monopoly in graphic design....
Adobe can now say $1,000 for Photoshop, and companies and designers won't have any other choice. Look at Microsoft. Once you get really big like that, nothing matters.
