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Last Updated: Monday, 18 April, 2005, 16:38 GMT 17:38 UK
Adobe buys Macromedia for $3.4bn
Adobe office in San Jose
Adobe wants to add Macromedia features to its products
Shares in Macromedia have risen 10% on news its US rival Adobe is to buy it for $3.4bn (1.8bn) and integrate its software with its own.

The agreement marks the latest move in the consolidation of the software industry. In December Symantec agreed to buy Veritas in a $13.5bn deal.

Under the terms of the acquisition, US-based Macromedia's shareholders will own 18% of the combined business.

It will be run by Adobe's chief executive, Bruce Chizen.

Better together

With the addition of Macromedia's products - which include computer animation, and Dreamweaver and Flash web-design software, for use on the internet and mobiles - Adobe hopes to meet the need from businesses for more integrated software.

The deal will be an all-share transaction in which Macromedia shareholders will get 0.69 of an Adobe share for every share they own.

Science Alberta Foundation's Wonderville 3D science learning system
Macromedia is putting animation creation software on mobiles too

This represents a premium of 25% a share to Macromedia's $33.45 closing share price on the US' Nasdaq market on Friday.

Although Macromedia's shares rose on the news Adobe's were down more than 11% early in the day.

Some analysts see Adobe's move as designed to strengthen its position against Microsoft, which is working on software that could challenge Adobe's Acrobat document display software.

Separately, Adobe said it would buy back $1bn of its shares after the Macromedia deal was completed in the autumn.

Big deal

Microsoft and Adobe could go to head to head over office-document creation software for businesses, because Adobe wants a larger share of this market, analysts said.

Customers are calling for integrated software solutions that enable them to create, manage and deliver... compelling content.
Bruce Chizen, chief executive of Adobe

Moreover, Macromedia's web-design software is one of the leading products for creating websites and both Adobe and Macromedia are starting to put their products on mobile phones.

If Adobe's and Macromedia's cultures meld well, they could present Microsoft with significant competition.

"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 UK's Aberdeen Asset Management, which owns Adobe shares.

However, he added that Adobe does have a very good cashflow situation.

The company also has a large presence in the consumer market through the use of its Photoshop photo editing software, as well as a growing stake in the magazine and newspaper design business with Indesign.

"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 Mr Chizen, Adobe's chief executive.

The firm said Macromedia's president and chief executive Stephen Elop will become president of worldwide field operations at the enlarged company.




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