Jun 14, 2005

Adobe: No Flash in the pan

Source: CNNMoney
Written By Paul R. La Monica, CNN/Money senior writer

The stock’s down on concerns about the Macromedia deal and competition from MSFT. It’s time to buy.

NEW YORK (CNN/Money) – It would appear to be a software marriage made in heaven.

Adobe (Research), maker of the popular digital imaging software tool Photoshop and Acrobat, the standard program used for creating and reading portable document format files (PDFs), is acquiring Macromedia (Research), the developer of the Web animation software Flash.

The combined company should be a graphics software powerhouse.

But some investors have started to worry about the merits of the deal lately. They’re also fretting over the possibility of some competition from a little software outfit called Microsoft (Research) in the not-so-distant future.

There was a double dose of what could be seen as bad news last Friday. First, there was a financial restatement from Macromedia that spooked investors. The company cut its reported earnings for fiscal years 2002, 2003 and 2004.

And second, Microsoft unveiled a beta version of a new graphics and illustration tool, codenamed Acrylic. That apparently scared some Adobe investors, as they feared Photoshop would soon have a new rival from a company with a reputation for crushing its challengers.

Shares of Adobe sunk more than 4 percent Friday and are now about 8 percent off their 52-week high. But several Wall Street analysts think the dip in Adobe’s stock was an overreaction.

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