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Adobe to acquire Macromedia

Associated Press

SAN JOSE, Calif. — Combining two of the largest makers of software for creating and delivering digital content, Adobe Systems Inc. said Monday it will acquire Macromedia Inc. in an all-stock transaction valued at approximately $3.4 billion.

Macromedia shares rose more than 10 percent in early trading, while Adobe shares sank nearly 11 percent.

Both companies said the long-rumored acquisition was not to consolidate and cut costs but to help Adobe expand into new markets, particularly in the area of providing content to mobile phones and other handheld devices.

“This is not a consolidation play. This is all about growth,” said Bruce Chizen, Adobe’s chief executive. “We’re doing this because we believe the combined offerings will be even more compelling to our customers given the challenges they’re going to face in trying to communicate information in this very complex environment.”

San Jose-based Adobe’s software includes the popular Acrobat program for creating and reading documents that can be viewed on a variety of systems, including PCs and cell phones, as well as the popular Photoshop program for working with digital photographs.

Macromedia, based in San Francisco, makes the Dreamweaver Web-design program and Flash, which is used to animate and add interactivity to Web sites. The company recently announced tools for expanding its reach into mobile devices as well.

Neither company, however, would speculate Monday on actual product plans.

Under terms of the deal, approved by the companies’ boards of directors, Macromedia stockholders will receive 0.69 shares of Adobe common stock for every share of their Macromedia common stock. That will result in Macromedia stockholders owning about 18 percent of the combined company when the deal closes.

Shares of Adobe lost $6.49, or 10.7 percent, to $54.17, in Monday morning trading on the Nasdaq Stock Market. Macromedia shares gained $3.48, or 10.4 percent, to $36.93.

The transaction, contingent upon the approval of both companies’ stockholders, is expected to be completed by the fall. It also requires the approval of federal regulators.

The companies, up until about 2001, were bitter rivals, squabbling over the look of the interfaces used in their software. Still, financial analysts and customers have been speculating about a merger for years.

Afterward, both struggled as Internet boom ended, said Steven Elop, Macromedia’s chief executive.

“We were largely focused inward, making sure we had the strategies in place for the next generation of activities,” he said. “We both, in parallel, developed visions that turned out to be very complementary, and we established a track record of success that puts us in a much stronger position to look outward.”

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