Feb 8, 2006

A Flashy New Adobe

In merging with Macromedia, the aim was to import its DNA as well as its product

Source: Business Week

A year ago, Stephen A. Elop had just become CEO of Macromedia Inc. and was getting ready for one of the most pivotal — and clandestine — dinner dates of his life.

He was apprehensive as he drove down Highway 101 from the gourmand paradise of San Francisco to a cheesy Italian restaurant in San Jose — one he says he’d never be caught dead in now. “It wasn’t the Olive Garden, and no one was singing Happy Birthday at the next table, but we had to go someplace where we wouldn’t be seen together,” he says. His date? Adobe Systems Inc. (ADBE ) CEO Bruce R. Chizen. Only a few months after they began flirting, they were engaged to be merged, on Apr. 18, 2005. They tied the knot on Dec. 3 in a $3.4 billion deal, one of the largest in the rapidly consolidating software landscape.

Even before meeting Chizen, Elop knew a merger made strategic sense. Both companies make the bulk of their money selling to creative professionals. Their software — in both cases widely used on personal computers worldwide — was complementary. In terms of products they were more like twins separated at birth than competitors, with Adobe, pioneer of the PDF, more rooted in documents and Macromedia in the fast-growing world of Web design and mobile content. And Chizen’s record spoke for itself. Since taking Adobe’s helm in 2000, he’d built a steady, professional profit-maker: Revenues have leaped some 70%, to $2 billion, and the stock is up nearly 40%, landing Adobe at No. 28 on the BusinessWeek 50 list of top corporate performers.

Culturally, though, the companies were leagues apart. Macromedia’s home is a slick, loft-like space in San Francisco. Adobe is based in two San Jose towers that some Macromedia staffers scoff “look like a bank.” Creativity was prized at Macromedia, but its frenetic pace led to many late nights. Adobe execs had perhaps fewer moments of exhilaration but more dinners at home with their families.

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