Adobe logs on to Macromedia in $3bn takeover

Adobe Systems, the Silicon Valley business that Web users know thanks to its Acrobat software application, has bought fellow technology group Macromedia in a $3.1bn (£1.6bn) deal.

The acquisition will bring together two of the most important software companies for internet users in a new corporation aimed at competing with rivals that have been growing rapidly through recent consolidation of the software sector.

Adobe's Acrobat and Reader software have made using the internet meaningful for millions of users. Acrobat converts any computer file into the portable document format - or PDF - so it will look as the sender intended, both on screen and when printed. Its Reader software allows users to open an Adobe document.

Without the software, sending files over the internet would be hugely inconvenient.

Macromedia's most famous software is its Flash product that allows users to view moving pictures and animation on a website. It is also used in website design.

Combining the companies is aimed mainly at growing revenues through product development rather than cost-savings. Adobe, like many of its rivals, is keen to develop its software into wider technology platforms that users rely on exclusively, in a similar way that Microsoft made its Windows software the operating system for personal computers.

Bruce Chizen, Adobe's chief executive, said: "Customers are calling for integrated software solutions that enable them to create, manage and deliver a wide range of compelling content and applications - from documents and images to audio and video. By combining our powerful development, authoring and collaboration software - along with the complementary functionality of PDF and Flash - Adobe [can] bring this vision to life with an industry-defining technology platform."

Macromedia shareholders will receive 0.69 Adobe shares for each Macromedia share, valuing Macromedia stock at $37.79per share. Its shares jumped 9.8 per cent on Wall Street to $36.72 while Adobe shares fell 9.7 per cent to $54.77.

Analysts welcomed the deal but warned there could be anti-trust issues. Bola Rotibi of Ovum said: "Ultimately both Adobe and Macromedia have superb cross platform technologies and if they can exploit the ubiquity of the PDF reader and Flash, and really emphasise the 'any client anywhere' theme they will be in a formidable position to dictate industry directions in future."

Software's Brooklyn bomber

¿ Bruce Chizen, the chief executive of Adobe Systems, has embarked on a mission to make Adobe a much greater force in the software industry before larger rivals, notably Microsoft, decide to invade its space.

Brought up in Brooklyn, the 49-year-old is a former Microsoft man himself, although he left the company in 1987 - and therefore made a lot less money out of the company's subsequent share price surge than those who chose to stay with Bill Gates.

He joined Adobe as a marketing man when it was still run by its founders, John Warnock and Charles Geschke, who, while passionate about technology, were less commercially minded than some other software engineers.

However, he became chief executive in 2000 and focused the company much more on sales, which have now reached $2bn. Yesterday's deal is an attempt to consolidate its position in internet-related software.