Adobe's Macromedia Buy Will Boost Enterprise Applications

G00127323

Analyst(s): | | | | |

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Summary

Adobe will acquire Macromedia to gain much-needed technology for e-forms and other rich client capabilities. The deal will also help Adobe gain favor with developers and help ward off challenges from Microsoft.

News Analysis

Event

On 18 April 2005, Adobe Systems announced a definitive agreement to acquire Macromedia in a $3.4 billion all-stock transaction. Adobe expects to close the deal in 3Q05.

Analysis

This deal brings together two dominant desktop formats — Adobe's Portable Document Format (PDF) and Macromedia's Flash — that are used in free, downloadable applications for document and Web content viewing and Internet applications.

These two application providers derive most of their revenue from creative content development products. Unifying those products under one company will not, by itself, create major new opportunities in their dominant product domains. The bigger opportunity arises from a development environment with Extensible Markup Language (XML) markup and intelligent user interactions that can reach a larger enterprise user base.

With this deal, Adobe will gain:

  • A proven solution to Adobe's long effort to deliver rich client capabilities. Macromedia's Flex leverages the ubiquitous Flash plug-in to address the limitations of using a Web browser as a user interface, while providing the total-cost-of-ownership and desktop management benefits of a thin Web browser.

  • A way to extend its capabilities with XML-enabled e-forms. Adobe already has e-forms capability, acquired through its integration of Accelio. Adobe has coupled e-forms with its PDF format, enabling them to be filled with Reader, but it has had trouble winning contracts with this capability. Adobe can use Macromedia's XML modeling and client-side processing to augment its e-forms capabilities.

  • Favor in developers' hearts and minds. If this acquisition makes Adobe more popular with developers, it will be a major win for commercial and enterprise development. Adobe has been trying to convince users that PDF is not just for viewing and final-form output, and that its XML strategy works. While Microsoft's InfoPath is not the dominant e-forms application, Microsoft's popularity with developers has kept Adobe at bay.

The deal also will help push Adobe products onto every desktop in a revenue-generating form — a goal that both companies have struggled to attain for years.

Recommendations

  • Creative and development users: Adobe's and Macromedia's core products are complementary, not conflicting. You will need to continue to work with both. Expect some noncore products to be eliminated.

  • Enterprise developers: Expect Adobe to offer much stronger Web development tools when the acquisition is completed. Adobe may become a stronger competitor in the e-forms market.

Analytical Sources: Rita Knox, Ray Valdes, David Yockelson, Toby Bell, Simon Hayward and Gene Phifer, Gartner Research

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