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Adobe Systems Agrees to Buy Macromedia for $3.4 Billion

TMO Reports - Adobe Systems Agrees to Buy Macromedia for $3.4 Billion

by , 7:10 AM EDT, April 18th, 2005

Graphic-design software maker Adobe Systems Inc. has agreed to buy Flash developer Macromedia Inc., the maker of Dreamweaver and Flash web-design software, for US$3.4 billion in stock, the companies announced Monday.

Under the terms of the merger, which has already been approved by both boards, San Jose, California-based Adobe Systems will pay 0.69 of its own shares for each Macromedia share. After the deal, Macromedia’s stockholders will own approximately 18% of the combined company on a pro forma basis.

The deal values Macromedia’s share at $41.86, 25% higher than Friday’s closing price of $33.45. Adobe also plans to buy back $1 billion of stock after the purchase. Adobe Systems’ CEO, Bruce Chizen, will retain his position, while Macromedia’s Stephen Elop will become president of worldwide field operations, Adobe announced.

"The primary motivation for the two companies' joining is to continue to expand and grow our business into new markets,'' Chizen said in the statement. The company said it expects the transaction to be "break- even to slightly accretive to earnings" in the first 12 months. It expects the deal to close in the fall of this year.

Adobe said second-quarter earnings and revenue would be at the high end of previous guidance. It also announced a $1 billion stock repurchase program to start after the deal has been completed.

Immediate's question arise as to what could happen to various software products of both companies that have been fierce rivals over the years. In a prepared statement, the two companies emphasized they are currently developing integration plans "that build on the cultural similarities and the best business and product development practices from each company." The statement did not elaborate on those plans or the future of certain products.

"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," Mr. Chizen said.

The deal still requires shareholder and regulatory approval.

Adobe Spokeswoman Jodi Warner declined to give further details until the company's press conference scheduled for 8 a.m. EST, Monday.

Observer Comments

Show: Subjects Only | Full Comments
Close Name:KitsuneStudios Posts: 2490 Joined: 25 Oct 2001
Subject:

Holy Monopoly, Batman!

While it would be nice to finally export vector files from Flash into After Effects without munging the colour pallette, who's the competition now? GIMP? Apple?

You pay through the nose for most of these software packages already (And there really is no substitute for some of these programs already, like Flash). What will be the competition to flash output, now that Adobe has no reason to keep backing SVG? Are they going to become the Microsoft of Multimedia?

Close Name:geoduck Posts: 1922 Joined: 30 Dec 2003
Subject:

I'm just hoping to end up with one web creation app with the power of Dreamweaver and the ease of installation of GoLive. I stopped using DW a few years ago because their software assurance essentially made Dreamweaver impossible to install. No matter what I did, no matter how many calls I made to Bagalore India to get tech support, it just insisted I already had installed the software elsewhere.



Last edited by geoduck on Mon Apr 18, 2005 8:49 am; edited 1 time in total
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Close Name:mrmgraphics Posts: 825 Joined: 05 Sep 2003
Subject: Oh...my...God....

+

Umnn...umnnn....er.........

If this was 17 days earlier, I'd be sure this was a joke. Wow....

What's most interesting, IMHO, is the opportunity for true synergy here. Macromedia is the undisputed leader with multimedia (Flash, Director), and the entrenched standard for web development (Dreamweaver). Adobe, meanwhile, is the undisputed leader of graphics packages (Illustrator, Photoshop), and (IMHO) a strong contender with web development (GoLive).

So...what happens with web development packages now? might we see the best of Dreamweaver/ColdFusion/GoLive in one package, with full Illustrator/Photoshop integration???

Wow...count me as stunned....

Close Name:Guest
Subject: watch as dreamweaver and illustrators prices soar

this is bad for graphics biz as freehand and illustrator's competition forced innovation. without any competition, i expect to see innovation in professional drawing programs slow as prices rise. having used both at times for 13 years, mostly adobe for last 7, im sure this will piss off a lot of freehand users when adobe inevitably kills freehand down the road.

Close Name:fultonkbd Posts: 123 Joined: 02 Mar 2004
Subject: I like Adobe products but…

Man I really dislike the idea of not having Macromedia around. Though since going to OS X, Macromedia's software has been less then stellar on my computer. Stability issues mostly and since losing that law suite about the palette interface a couple of years ago.

I heard a rumor awhile back that Macromedia is primed for a buyout. Just thought it was a rumor. Guess not…

Will the next Adobe Creative Suite contain Dreamweaver and Flash instead of GoLive? Probably!!!

Close Name:Guest
Subject: Microsoft to the rescue?

As outrageous as this may sound, I hope Microsoft moves in to this market in a big way to provide some competition. There has been talk of them doing this for a long time so I hope they take this as the opportunity. If they leverage their Mac Business Unit expertise, they could create applications that allow files to be moved seemlessly between Mac and Windows like they do with their Office suite. We can only hope...

Close Name:imothepixie Posts: 12 Joined: 11 Jun 2004
Subject: free hand with Freehand

Freehand went to Macromedia when Adobe aquired Aldus. mmm where does it go now? hope it doesn't dwindle into nothing.... as it's my preference over illustrator ( give me multiple pages and find and replace!)....so i sit on the edge of my seat to see how this news unfolds!

To me Freehand MX seems more stable and snapier than illustrator CS on OS X (I use both everyday) and Adobes recent update (no installer ...just fiddle around with the folders in the app bundle yourself!) didn't exactly fill me with confidence as to their commitment to this side of the business.



Last edited by imothepixie on Mon Apr 18, 2005 9:32 am; edited 1 time in total
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Close Name:Guest
Subject: In all seriousnes

skip intro

Maybe they will pull Flash from the market . Those Flash based web sites will eventually have to be overhauled and they will finally get some decent navigation.

Close Name:jfbiii Posts: 109 Joined: 06 May 2004
Subject: Oh crap!

I don't want to use PhotoShop for web graphics. Photoshop sucks for production-level work. It's great for complex graphics that I then pull into Fireworks to optimize, but it's not an everyoday workflow-friendly product.

There's a potential upside, I suppose, but the potential downside is huge. I'm not too optimistic. And no doubt the price for "integrated" products will soar.

Close Name:Guest
Subject: Hey Editor!

What the heck does "Immediate's question arise as to what could happen..." mean?

Close Name:Guest
Subject: Great.

I think there is a great upside to this merger / purchase. I really like aspects of both product lines and I use both regularly. An integrated productline between a web design, flash design, layout, illustrator, and graphics software would really be nice for the end user. I have often wished i could have features of Macromedia in the adobe products. I would have never bought both in this case.

Close Name:mshoaf Posts: 112 Joined: 02 Dec 2002
Subject: FUD on competition/innovation/pricing

Normally, I'd be wary of some things others have commented on regarding the idea that pricing will get out of control, innovation will slow down, etc. when there is no competition. But looking at the track record of both Adobe and Macromedia, this seems unlikely to me. Photoshop hasn't had a REAL competitor in a long time (if ever), yet pricing has increased only slightly in the last 10 years or so. Macromedia's Flash can make a similar claim.

I think both organizations realize that if they stop (or slow down) innovation, or drastically raise pricing, such actions would just be asking for serious competition.

Close Name:Guest
Subject: OH, #@!*!$#!

I have for years preferred FreeHand to Illustrator, due to the interface. Now it looks as if that choice is being taken from me. When I first heard this on the radio news as I was waking up, I HOPED I was having a bad dream . . .

Close Name:AyaSofya Posts: 137 Joined: 11 May 2004
Subject: Nothing will happen in the short term

The merger has to be approved by stockholders and regulating agencies, that could take a little bit of time.

As to combing products that would probably fairly time consuming and I don't feel that it would happen this year. For the time being Adobe would probably just sell the former Macromedia products as they are.

Close Name:Guest
Subject:

[quote="mshoaf" Photoshop hasn't had a REAL competitor in a long time (if ever), yet pricing has increased only slightly in the last 10 years or so.[/quote]

Interesting to note that the upgrade price to Photoshop CS was $169 and the price to Photoshop CS2 is $149. That means the upgrade price has actually decreased, yet the upgrade features are terrific (for my work, anyway).

Close Name:Bookman Posts: 543 Joined: 22 Apr 2002
Subject:

I hope they do spin a few Macromedia products off to some smaller company, especially Freehand. Fireworks would also be a nice product to sell off, as it clearly has no place in the Adobe family.

Close Name:Guest
Subject: The Effect on Apple

Perhaps a preemptive strike against Apple buying Macromedia?

Apple has definitely bitten into Adobe, going after the pro market. If the deal is approved, Adobe essentially controls the major design titles for the Mac platform. That does not seem like good news for Mac users.

Sadly, all the talk about better products for developers is nonsense - it is all about the bottom line, the stock price and the folks at the top. Don't expect any major innovations, and be prepared to say goodbye to some great products.

Close Name:geoduck Posts: 1922 Joined: 30 Dec 2003
Subject:

It would be nice if Apple came out with a good web authoring tool. I used Claris Home Page at first then went on to Dreamweaver and now GoLive when I needed Library Objects and CSS. It would be really nice if they came out with something with the basic features of a Dreamweaver.

Close Name:Jeff Kievlan -   TMO Mac Specialist Posts: 98 Joined: 01 Jul 2001
Subject: Freehand + Illustrator = Frustrator?

Well, I hope everyone likes the current state of web publishing and prepress software, because this pretty much means the end of market competition for the forseeable future if it goes through.

As monolithic as the related apps have become, the chances of a new player developing something competitive before getting bought out by Adobe are laughably slim. Guess they really are the MS of graphic design now.

Close Name:Guest
Subject: Bad Deal

Big companies lose sight of the consumer. Now Adobe will be even bigger... Macromedia products will dwindle to nothingness. Adobe will orphan them all.

Close Name:randompro42 Posts: 236 Joined: 25 Sep 2003
Subject: Oh Wow...

i cant believe this has happened

there is no competition in these fields now that the only competition has become one

this scares me-- without competition, why would these apps need to get better?

TRO

Close Name:DawnTreader -   TMO Staff Posts: 15039 Joined: 04 Jan 2002
Subject:

This merger was inevitable IMHO. Macromedia had little room for growth with Adobe in the way. In the end its the shareholders that matter. I know there are concerns about the loss of competition, but this merger is probably in the best long-term interest of the owners of both companies.

Close Name:allanimal Posts: 28 Joined: 18 Apr 2005
Subject:

Quote
DawnTreader wrote:
this merger is probably in the best long-term interest of the owners of both companies.


You said it right there - in the interest of the owners of the companies, not of the customers of the companies...

On the up side, maybe Adobe will kill flash and then we don't have to deal with those ÑŒber-annoying web ads...

Close Name:Guest
Subject: The new Adobe: "Macrosoft"

Yikes, this is not good news.

However, with the drop in competition between Adobe and Macromedia, there are opportunities for other players to develop software applications that don't cost more than the computer you're using them on...

Freehand replacements anyone? Maybe.... Canvas?
Photoshop replacements anyone? Maybe.... GraphicConverter? Painter? The GIMP? Photopaint?
Animation replacements anyone? Maybe.... Toon Boom Studio?
Desktop publishing replacements?? Quark? Uh.... Ragtime? Nisus? Pages? Stone Create? Hmm......
Web authoring replacements? Anyone? Maybe Stone Create?
At least on the video production front we have Apple's software like FCP, etc.

Still, this doesn't look so good....

Maybe Flash will die so we won't have those annoying web ads and "intro" pages.....

Well, it looks like there's going to be a big Adobe tax for everyone....

Perhaps some independent developers can take advantage of some opportunities here?

Does anyone have any suggested alternatives for the AdobeMedia products?

Close Name:Guest
Subject: I don't like it

I started using GoLive when it was GoLive Cyberstudio. It was great. Ever since Adobe bought GoLive there have been bugs in every release - and that's with competition from Dreamweaver!

This can't be good.

Close Name:Guest
Subject: Very worried

I have used dreamweaver since 1.0. I do not like using GoLive. I hope they will keep Dreamweaver over GoLive since there are many more users. What is the purpose of both? Except maybe to milk it, which they will do for a little while anyway. Please don't charge alot!

Close Name:Guest
Subject:

Quote
Guest wrote:
As outrageous as this may sound, I hope Microsoft moves in to this market in a big way to provide some competition. There has been talk of them doing this for a long time so I hope they take this as the opportunity. If they leverage their Mac Business Unit expertise, they could create applications that allow files to be moved seemlessly between Mac and Windows like they do with their Office suite. We can only hope...


No...!!!! Hell No. F8ck Microsucks. Hello? FrontPage? They are the last company you want to start creating multimedia software for 'competition' (??!!?)

Close Name:geoduck Posts: 1922 Joined: 30 Dec 2003
Subject: Re: The new Adobe: "Macrosoft"

Quote
Anonymous wrote:
Freehand replacements anyone? Maybe.... Canvas?


I've used Canvas since v3.5. Currently I'm using Canvas 8 for a fair amount of graphics, picture editing (cropping, light touch up etc), vector graphics, and lettering (IMHO it handles type better than anything else and gives you font adjustment options up the wazoo).

They've changed something in Canvas 9 though. I am having trouble getting it to do what I want. The pallets just don't work right. I place a bit-mapped graphic and it ends up locked so I can't edit it or unlock it. Lasso and rectangle tools don't work the way I expect them to. Type functions don't want to do what I expect them or want them to do. Something is wrong in Canvas9-town.

Close Name:Jonkun227 Posts: 238 Joined: 02 Mar 2004
Subject:

AdobeMedia alternatives:

GIMP has a LOT of potential. Fully unrealized potential. It's nowhere near ready for prime time, but I know enough amazing open source developers to know that it will go somewhere eventually.

I can't believe nobody has mentioned Corel. I abhor Illustrator. I find FreeHand tolerable. Corel Draw is the best illustration program on the market. They backed out of the Mac market which pisses me off, but I have had the feeling for a while that as Mac popularity continues to grow that they would start mac development again. Now with Freehand and Illustrator under the same banner they'd be crazy not to. Illustrator has a MUCH bigger and MUCH more vocal following than Freehand; it's obvious which will be shelved. The great thing about switching from Freehand to Draw: the interface is similar. (The main reason I prefer it over Illustrator.)

Photoshop alternatives: who needs one? I once-upon-a-time preferred PhotoPaint to Photoshop, but that changed when I really learned Photoshop. The better question is, "Does anyone know any good fireworks alternatives?" Sorry, don't have a good answer to that, as I don't do that type work.

I love Dreamweaver. I'd hate to see it cast aside. Can't say much about GoLive, because I haven't used it enough, but I haven't used it because of the negative reviews from those who have.

Quark? Why go back to Quark? Have you used In Design? The day I downloaded the free trial I knew I'd never run Quark again.

Flash alternatives: Adobe doesn't have anything remotely close to Flash. Flash is hugely popular, and becoming more so as more and more hardcore developers learn the advanced scripting uses and database integration it offers. Adobe would be insane to eliminate it. (Doesn't mean it won't happen.) More likely we'll see better integration with other tools like Illustrator & Photoshop. Good, too, because I hate drawing in Flash; I much prefer to import artwork from elsewhere. Here's hoping all we see are improvements to Flash.

"Maybe then we'll stop seeing stupid 'Skip Intro' pages and annoying ads." Get real. A) annoying ads will never go away. Perhaps if we launched a huge public service notice to educate people about online ads and more importantly online scams, we may be able to cut out their effectiveness and therefore pervasiveness. Not likely, though. B) Flash offers some amazing design and navigational methods that aren't available with any other technology. It would be a shame to see them lost because of a merger or ignorant "designers" who don't know how to incorporate them and therefore annoy the world with bad flash. Still, even if Adobe stopped development, we'd still have our current versions and could continue to produce amazing work, the potential for which has not been realized even in the current version.


I agree that this looks more bad than good, but I'm not sure it's the end of the world as we know it. Most of us here know how to cope in a world dominated by Microsoft; I doubt any of us will be trampled in a world ruled by Adobe.


- Jon

Close Name:Guest
Subject: RIP Fireworks

I haven't used Photoshop since 1998. Every time a new version comes out I give it a test run, then go back to Fireworks. I'm a web designer, not a graphic designer. I need a quick workflow, not every tool in the most inconvienient places. I don't have a $3k monitor, or the kind of screen real estate needed for all the junk. I just want to get 'er done.

If Fireworks is EOL'd, I think I will cry.

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