Technology

Adobe's Executive Shuffle


In January, Stephen Elop sat on a chair in a plush conference room and talked about his decision to sell Macromedia to Adobe (ADBE). He was calm and jovial, describing the process of Adobe Chief Executive Bruce Chizen "courting" him. Elop talked about their first "date" at a cheesy Italian restaurant in Santa Clara, Calif.

He went on about Chizen's assurances that Adobe needed not only Macromedia's market-leading Web design software (Flash and Dreamweaver), its developing mobile business, and sales contacts at big corporate customers, but the Macromedia DNA. What Chizen was after, Elop recalled, was the hipper, scrappier spirit that pervades the San Francisco company and that was lacking the relatively stodgier San Jose-based Adobe. "(Bruce) wasn't just using us for our Flash," joked Elop at the time (see BusinessWeek.com, 2/13/06, "A Flashy New Adobe").

Or was he? During Adobe's June 15 second-quarter earnings call with analysts, the company disclosed that Elop will be stepping down as president and head of worldwide sales by yearend. Many analysts shrugged off the news. After all, it's common for CEOs of acquired companies not to stick around once a deal is done. The news certainly didn't roil the company's stock, which was up slightly, to close at $29.12, on June 16, even though revenues for the quarter were lower than expected and Adobe reduced its forecast for the rest of the year.

SWANKY DIGS. Several people close to the company and on Wall Street had expected a showdown between Elop and Adobe's No. 2 executive Shantanu Narayen, president and COO. But what shocked many insiders and analysts was that many thought Elop was winning, given how the integration of the two companies was progressing (see BusinessWeek.com, 12/27/05, "Tough Choices Ahead for Adobe").

After all, Chizen was making some big moves to prove how important Macromedia was. He kept Macromedia's swanky San Francisco digs, taking an office there himself. Half of the 700 or so employees laid off last December came from Adobe. In addition to big titles for Elop and Macromedia's Chief Software Architect Kevin Lynch, former Macromedia executives were named as heads of Adobe's three fastest-growing business units: Acrobat, enterprise software, and mobile applications. At the time, Chizen said the moves were even a shock to pre-merger Adobe employees: "I think….it was upsetting to many of them, (but) I get paid to make sure Adobe does well in the future."

That could mean less Macromedia DNA, not more. People close to the company say more departures—voluntary or involuntary—could follow. "He (Elop) was the in-house representative of the blue jeans and ponytails [culture] of Macromedia," says Gene Munster of Piper Jaffray. "The reality is that [Elop] leaving complicates things for Adobe exponentially. It doesn't mean things will fall out of bed. But it definitely adds a cultural dimension that was probably the last thing they want to worry about."

"NOT COMPLETELY SURPRISED."Elop himself downplays the impact. "The cultural integration continues to go well," he said in a statement to BusinessWeek.com. "My situation is somewhat unique, in that there are opportunities for me to lead companies as I had begun to do at Macromedia as its CEO. That period of time was the most rewarding of my career, and I would like the opportunity to do that again."

Chizen also says it was simply a personal matter. "(Elop) wasn’t shy about his desire to have another shot at being a CEO or president and COO of a larger company," he said after the announcement. "The reality is that was probably not in the cards at Adobe. I’m disappointed but not completely surprised."

Still, Elop will be a loss for Adobe. Elop is regarded as a talented road warrior with a knack for closing deals with big businesses—a skill Adobe has lacked. Now worldwide sales will go back to Narayen, who used to run sales for Adobe. It will be back to the pre-merger status quo. "A bonus was getting an enterprise sales organization that was in some ways further along than Adobe's," Chizen says.

KEEPING THE TALENT. With Elop’s departure, the sales organization is in flux. Chizen wasn’t happy with it before the deal, and he says Macromedia’s strengths haven’t solved it. Says Chizen: "I’m not the most patient person in the world, and it’s still an area of focus for us," he says. "It’s not where I would like it to be."

Chizen also must reassure concerned parties he wants to hold on to from the Macromedia camp—the most important of which is Lynch, the brains behind Flash and Dreamweaver. "The major asset we were buying from Macromedia was the synergies between their products and our products—I want to be real clear on that," Chizen says, referring mainly to Adobe's Creative Suite products, and Macromedia's Web design offerings—both of which are typically sold to the same customer base and represent the bulk of the combined company. Adobe could have trouble taking advantage of those synergies without the skills of some key Macromedia people such as Lynch.

Other management changes could be brewing as well. Adobe has grown fast: The company forecasts it will reach $2.6 billion in revenue this year, more than $1 billion larger than Adobe was two years ago. And pre-merger Macromedia was even smaller—with just under $500 million in revenues.

THE JURY'S OUT. Not all of the management team may be suited for that kind of growth, Chizen says. "If I had to bet, we will continue to see some adjustments," he notes. "We'll continue to make the appropriate changes because we are a changing company."

If more of the old Macromedia management team exits, it would be hard not to see it as a big loss for Adobe and Chizen. In December, it seemed the "Macromedians", as Elop used to call them, were taking over the entire company. Now, just a few months later, the fate of many of Elop's people seems far from certain. And, despite early optimism, Chizen may not have deftly sidestepped the biggest reason most software mergers fail: culture clash.


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