April 18, 2005
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Computer document company Adobe Systems said on Monday it agreed to buy multimedia software firm Macromedia for about $3.4 billion in stock, a move designed to extend its lead in the market for creating and distributing digital documents.
By Reuters
Adobe, best known for its Acrobat document-sharing software, said the deal would help it meet rising customer demand for audio and video options that are compatible with handheld devices.
Macromedia also gives Adobe access to the dominant animated graphics software on the Internet and fits into an aggressive expansion into mobile phones.
The deal is the latest move in the long-anticipated consolidation of the software sector. It was initially welcomed by industry watchers.
"Management is quite capable, but I think it is quite a big deal to be swallowing," said Robert Sellar, a technology fund manager at the U.K.'s Aberdeen Asset Management, which owns Adobe shares. "$3.4 billion is a lot of money to be spending but (Adobe) are hugely cash generative."
The deal, set to close in the autumn, would likely yield cost savings, said Adobe Chief Executive Bruce Chizen. He did not give further details.
Adobe said it was unable to provide any estimates on future earnings under generally accepted accounting principles (GAAP) due to uncertainty over restructuring costs related to the deal, but it said it would be breakeven to slightly accretive to earnings in the first 12 months on a non-GAAP basis.
Under the terms of the deal, Macromedia shareholders will get 0.69 share of Adobe, worth $41.86 at Adobe's closing price of $60.66 on Friday on Nasdaq, for each Macromedia share. That is a 25% premium to Macromedia's closing price of $33.45 on Friday, also on Nasdaq.
Chizen will stay in his position as CEO, Adobe said, while Macromedia President and CEO Stephen Elop will become president of worldwide field operations at the combined company.
At the same time, Adobe said second-quarter earnings and revenue would be toward the high end of previous guidance due to strong demand for Acrobat--more or less in line with analysts' estimates.
In March, the company said it expected earnings per share of between 51 cents and 55 cents and revenue of between $475 million and $495 million. Wall Street is expecting earnings of 54 cents per share, on average, and revenue of $489.8 million.
Separately, Macromedia said it expected net revenue for the fourth fiscal quarter, ended March 31, to exceed the $108 million to $113 million guidance it provided in January. Analysts are expecting revenue of about $111 million.
Adobe also announced a $1 billion stock repurchase program to start after the Macromedia deal has been completed.
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