April 18 (Bloomberg) -- Adobe Systems Inc., the world's largest maker of graphic-design software, agreed to buy Macromedia Inc. for about $3.4 billion to add Flash Web-design programs to its offerings.
San Jose, California-based Adobe will pay 0.69 share, worth $41.86 at Friday's close, for each Macromedia share, Adobe said in a statement today. The transaction values San Francisco-based Macromedia at 25 percent more than Friday's closing price.
Macromedia's Flash Player, which displays moving images and sound on Web pages, is installed in more than 98 percent of Internet-connected desktop computers. By buying Macromedia, Adobe Chief Executive Bruce Chizen, 49, is reducing reliance on his flagship Acrobat software, used by graphics professionals.
``Strategically, it makes a lot of sense,'' said Stuart O'Gorman, who helps manage $700 million of technology stocks including shares in Adobe and Macromedia at Henderson Global Investors in London. ``It gives them a very broad-based suite of products.''
Forecast
Adobe, which also makes Photoshop software, said it expects fiscal second-quarter profit to be at the high end of its forecasts after ``strong demand'' for Acrobat, which lets users create, view and print documents. Macromedia said fiscal fourth- quarter sales beat its own estimates.
Adobe said the Macromedia purchase, Adobe's biggest-ever takeover, brings together two ``complementary'' products. Adobe is paying 43.8 times operating profit and 7.5 times sales for Macromedia, according to data compiled by Bloomberg.
Macromedia stock peaked at $120.875 in July 2000 and fell as low as $5.80 in August 2002. In the past five years, the shares have dropped 63 percent, compared with a 20.7 percent increase for Adobe.
Adobe shares traded at the equivalent of $58.93 at 11:32 a.m. in Germany, down 2.9 percent from Friday's close, on volume of 1,632 shares. Macromedia traded at the equivalent of $39.47, up 18 percent from Friday, on volume of 1,991 shares.
Chizen said in the statement ``the primary motivation'' for the deal ``is to continue to expand and grow our business into new markets.''
Adobe Chief Financial Officer Murray Demo said in an interview last month there are ``too many software providers out there chasing too few dollars.'' He said ``customers basically want to have fewer relationships with software vendors.''
Stock Buyback
The company expects the transaction to be ``break-even to slightly accretive to earnings'' in the first 12 months. The deal should close in the fall of this year. Adobe also plans to buy back $1 billion of stock after the purchase.
Spokeswoman Jodi Warner declined to give further details until the company's press conference scheduled for 8 a.m. New York time.
Macromedia Chief Executive Stephen Elop, who was promoted from chief operating officer in January, will join Adobe as president of worldwide field operations. Macromedia, founded in 1992, employs about 1,500 workers. Adobe, with 4,000 employees, is a decade older.
Macromedia said today sales for the three months ended March exceeded the range provided in January of $108 million to $113 million.
In January Macromedia said fiscal third-quarter sales climbed 15 percent to $108.6 million. Net income in the three months ended December was $15.3 million compared with $10.3 million a year earlier.
Adobe said last month it expected earnings per share for the fiscal second quarter ending June 3 of 51 cents to 55 cents from sales of between $475 million and $495 million. First-quarter profit rose 23 percent after demand for the company's Acrobat product drove sales to a record.
I never learned how to use Dreamweaver got the software but never learned how to use it.
