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APRIL 19, 2005
Macromedia and Adobe: Finally One After flirting with a merger for years, the two companies' CEOs explain why they decided to team up now It doesn't take long to explain the rationale of the proposed merger between software makers Adobe Systems (ADBE ) and Macromedia (MACR ). Both outfits sell the bulk of their software to the same customers in the creative design and publishing professions, yet they have little overlap in products. Add to that strong revenue growth in 2004 and a complementary vision for which businesses will drive revenues (see BW Online, 4/19/05, "Flash Moves Spur Photoshop's Maker?"). Macromedia agreed to be acquired by Adobe for $3.4 billion. As with any multibillion merger, risks abound. BusinessWeek Online reporter Sarah Lacy spoke with Adobe CEO Bruce Chizen and Macromedia CEO Stephen Elop about the deal, its integration risks, and what the new Adobe will look like. Following are edited excerpts of the conversation: Q: There have been rumors about an Adobe-Macromedia merger for years. What finally made it happen? Chizen: For a number of years, I had casual discussions with Stephen and his predecessor Rob Burgess to see if it ever made sense for the two companies to get together. What held us back was we were focusing on some objectives, and both of us wanted to complete what we were doing before entertaining the idea. In a short period of time, both have been able to accomplish a lot and get better momentum. It was a better time to do the integration. Q: What were those objectives you were focusing on, and why don't they need as much attention now? Chizen: Speaking for Adobe, the big initiative was the document-management business. We're still focused on it, but we have enough of a foundation we can back off in terms of management focus. Elop: At Macromedia, our agenda was leveraging the Flash [multimedia] platform across the mobile world. There are actually lot of complementary aspects between the two. Q: What about integration risks? Elop: We're in a position of strength, both having strong financial results in the last year. You've got two strong companies with complementary agendas and employees cut from the same cloth. All of a sudden, risk associated with integration is far less of a concern. Q: But I've been talking to several creative professionals this morning, and there's concern that if Macromedia gets subsumed into a bigger company it might lose its innovative edge. Chizen: [The innovative edge is] why we bought Macromedia. We're not buying a distressed company. We're buying one with incredible assets, including customers, developers, and employees. The fact that Stephen [Elop] agreed to join us [he will be president of worldwide field operations for the combined company] and help with the customer-facing part of the organization -- along with a number of other key executives -- shows that. Betsy Nelson, Macromedia's CFO, is heading up the integration. Keep in mind that Adobe is a company that has literally decided not to do that many acquisitions in the past because we understood integration is a risk. The reason we moved ahead and felt comfortable [this time] is our ability to do the integration. Granted, it's never easy. But it's something very doable. We have similar visions, similar business models, and similar strategies. Q: Are you closing Macromedia's San Francisco office? Will Macromedia keep any of its brand identity? Elop: In terms of buildings and so forth, the Macromedia campus continue to be a vibrant center of development. Overall, the corporate name will be Adobe. Chizen: It wouldn't make sense for a company of our size to have two different brand names. Q: What about job cuts? Is the plan to combine sales forces? Chizen: It's too early to say, but there are a couple of things going in our favor. From a growth perspective, the opportunities are real, which means that even if an employee is in a redundant position, there's still the opportunity to take a new position with the combined company. That said, there will be some redundancies, and it's not yet determined where or what they'll be. Q: Will new and better products for the creative world come out of this merger? Elop: We can't answer specific questions about product futures, but when we will...listen to cues from our customers as the planning begins. 
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