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Streaming Media
Adobe Completes Macromedia Acquisition
Posted Dec 9, 2005 Print Version     Page 1of 1

When Adobe announced its plans to acquire Macromedia prior to NAB 2005, speculation immediately began regarding which tools from Macromedia and Adobe would survive and which would see end-of-life announcements. After Adobe announced completion of the Macromedia acquisition on December 3, the combined company wasted little time answering the question. The initial results are a bit surprising.

Adobe's press release, noting the completion of the acquisition and the share conversion of 1.38 Adobe shares to 1 Macromedia share, stated that the "company will begin executing the planned integration of the two companies' operations, networks and customer care organizations to ensure a smooth transition and immediate value for customers . . ."

That "immediate value" took the form of three bundles: a Design Bundle, which includes Adobe Creative Suite 2 (CS2) and Macromedia Flash Professional 8; a Video Bundle, which will be released in 2006 and is expected to combine Adobe Premiere and Macromedia Flash Professional 8; and a Web Bundle. Adobe's Web Bundle is the most ambitious of the three bundles, combining the full Adobe Creative Suite 2 (CS2) Premium suite of products with the full Macromedia Studio 8 suite. Adobe's online store price for the Design Bundle is $1,599 for the full retail version and $949 for an upgrade version; the Web Bundle sells for $1,899 (full) and $899.00 (upgrade).

Interestingly, Adobe is not yet choosing between its own products and those it acquired in the Macromedia deal. Since the Web Bundle contains both CS2 and Studio 8, it contains two Web development programs-Adobe's GoLive CS2 and Dreamweaver 8-as well as two photo manipulation programs, Photoshop CS2 and Fireworks 8. This means the pricing of the combined Web Bundle is approximately $300 less expensive than purchasing the Creative Suite Premium 2 and Studio 8 separately. But some customers--those who only need the Web design or photo manipulation software, for instance--may consider that less of a bargain than Adobe anticipates, given that the standalone versions of GoLive CS2, Dreamweaver 8, Photoshop CS2, and Fireworks range in price from $300 to $650.

Flash 8 will play a prominent role in Adobe's strategy, as each bundle contains Macromedia Flash Professional 8. The press release hints at Adobe's strategy, noting that he completion of the acquisition "accelerates Adobe's strategic initiative to advance a powerful software platform, based on PDF and Macromedia Flash technologies, that scales from mobile devices to high-end servers."

This scalability puts Adobe in a position to compete directly with other all-in-one solutions in the digital media and content space. Flash Professional 8 not only contains a robust interactive programming language but also an emerging high-quality video alternative to Real, Windows Media, MPEG-2, and MPEG-4. The Flash Professional 8 video codec was licensed from On2 and is known in On2 branding as VP6.

"The explosion of digital content, combined with the accelerating proliferation of mobile phones, wireless devices and the growth of broadband are transforming the way the world engages with information," said Bruce Chizen, chief executive officer of Adobe. "Adobe and Macromedia are at the center of this trend, and together we will build on our combined heritage to redefine the way people and businesses communicate."

Adobe has shifted its focus toward winning the corporate market, while Macromedia's focus has remained on the creative professional. This had raised previous questions about the potential flight of Macromedia's engineering team and the potential cultural rifts between the two companies. To that end, Adobe has structured its new management team to address some of these issues. Macromedia's Stephen Elop has joined Adobe as president of worldwide field operations while Macromedia's chairman, Rob Burgess, has joined the Adobe Board.

Finally, Adobe's "love / hate" relationship with Apple, especially in recent days under Chizen, as well as the company's move toward a Windows-centric approach on several flagship products, fuel speculation that the Macromedia acquisition may be a pre-emptive strike against Apple's heavy push into several of Adobe's categories. Apple's recent release of Aperture paves the way for Apple to field a Photoshop-like product to stand alongside Motion, which has some of the same features as Adobe's AfterEffects. Final Cut Pro, formerly a Macromedia product, has also been a runaway success for Apple.

The company will hold a conference call on December 15, 2005 at 2 p.m. Pacific Time to discuss the cost of the acquisition and its impact on Adobe's financial targets for 2006.

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