Merger Works for Adobe, But Customers May Suffer

[AlbertPacino]

Analysts seem to be of one mind about the pending acquisition of Macromedia by Adobe Systems: It's good for Adobe, and Microsoft should watch out.

Joe Wilcox, an analyst at Jupiter Media, said the Macromedia Inc. acquisition will do more to fill in gaps for Adobe Systems Inc. than it will to create overlapping solutions.

"This is going to make Adobe's offering much, much richer for the enterprise market and in competing with Microsoft," Wilcox said. "They'll be getting online conference, eLearning Suite, Captivate and other enterprise-type software Adobe hasn't been able to offer up until now. And this brings a whole new platform to Adobe because Macromedia is already in the cell phone and PDA space with its Flash products."

Adobe is strong with its industry-standard PDF platform, plus its Photoshop and Illustrator offerings. Meanwhile, Macromedia is known for its Flash software along with its Fireworks, Dreamweaver, FreeHand and Studio MX (a suite of those products), among other software programs.

At his keynote address April 7 at Flashforward 2005, Kevin Lynch, executive vice president and chief software architect at Macromedia, was talking all about sharing. He referred to Flash aficionados sharing with each other around code and community—but it looks like Macromedia will be doing a lot of sharing of its own now.

At the conference, Lynch said Flash player adoption reaches almost 98 percent with every release. "We're the only technology that has that much reach in the world. We're in a great position, and we just keep innovating."

Adobe has just about the same reach with its Adobe Acrobat Reader and the use of PDFs in the industry, according to Wilcox.

For those who work with both companies' products, some concerns will surround which products stay and which ones go.

Danny Riddell, creative director at Metaliq Inc., a development company that works with both Adobe and Macromedia around building innovative business solutions and Web sites, said he's excited at the prospect of the combined company but has a wait-and-see attitude about how the product lines will unfold.

"We're definitely excited for us because we work with both companies now," Riddell said. "Merging both groups of software, like with the video abilities Adobe has and what Flash can do from Macromedia, it could mean better workflow for us. We now use Photoshop and then port that over to Flash. One workflow would be so much better. These two companies together will be powerful."

But, Riddell said, the question is what tools Adobe will pick to keep—and will it drop the right ones.

"Are they going to drop products or are they going to be merging products and making a phenomenal product? FreeHand and Illustrator are competitors now, so the question is, will they take the best of those products and create an even greater product, or just brand over? There's great potential there, but will they be doing that? That's our question."

Paul Visco, a professor in the digital media arts program at Canisius College in Buffalo, N.Y., said he worries about competition, pricing and the future of graphic design.

"It seems as though much of the recent innovation between the two software giants was brought on by healthy competition. They had an array of software packages that had the same purposes, e.g. GoLive and Dreamweaver, Illustrator and FreeHand, Photoshop and Fireworks. If there is no longer any need to compete, then they might not continue to develop new products. It will effectively create a monopoly in graphic design."

Visco also voiced concerns about pricing. "Adobe can now say $1,000 for Photoshop, and companies and designers won't have any other choice. Look at Microsoft. Once you get really big like that, nothing matters."

Metaliq's Riddell said the branding issue concerns him. "It may be a tougher sell to some of our clients if there's a new brand on an older product. Is it the same thing or better or just rebranded?"

Wilcox talked about what else Adobe gets in this deal: new developers with different skills.

"Every business uses the PDF platform. Most of us just receive them as opposed to building them, but it's a cornerstone of business now," Wilcox said. "What makes this even more important to Adobe is now this exposes them to a whole new brand of developer.

"Microsoft has 48 percent of companies using their products from end to end. But Adobe now has a real opportunity to develop and serve the other 52 percent, the heterogeneous environments. And a whole new set of developers are going to get a chance to work with Flash."

So, despite there being overlapping products, Wilcox said he is convinced that this is a fit that's going to benefit both companies and make Adobe a major player against Microsoft for the heart of the enterprise business. "This acquisition just makes them so much stronger."

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