Adobe has announced an agreement to acquire Macromedia in an all-stock transaction valued at $3.4 billion. Graphics software giant, Adobe, will acquire the web and application development software company Macromedia at the close of fourth quarter 2005. A press release issued today said the two companies will provide customers with a 'more powerful set of solutions for creating, managing and delivering compelling content'. Bruce Chizen will continue as chief executive officer (CEO) and Shantanu Narayen will remain president and chief operating officer. Stephen Elop, president and CEO of Macromedia, will join Adobe as president of worldwide field operations.

Press Release:

Adobe to Acquire Macromedia

Combined Company to Deliver Industry-Defining Technology Platform for Rich, Interactive Content

SAN JOSE, Calif. - April 18, 2005 - Adobe Systems Incorporated (Nasdaq: ADBE) today announced a definitive agreement to acquire Macromedia (Nasdaq: MACR) in an all-stock transaction valued at approximately $3.4 billion.

The combination of Adobe and Macromedia will provide customers a more powerful set of solutions for creating, managing and delivering compelling content and experiences across multiple operating systems, devices and media. Together, the two companies will meet a wider set of customer needs and have a significantly greater opportunity to grow into new markets, particularly in the mobile and enterprise segments.

"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," said Bruce Chizen, chief executive officer of Adobe. "By combining our powerful development, authoring and collaboration software - along with the complementary functionality of PDF and Flash - Adobe has the opportunity to bring this vision to life with an industry-defining technology platform."

Under the terms of the agreement, which has been approved by both boards of directors, Macromedia stockholders will receive, at a fixed exchange ratio, 0.69 shares of Adobe common stock for every share of Macromedia common stock in a tax-free exchange. Based on Adobe's and Macromedia's closing prices on Friday, April 15, 2005, this represents a price of $41.86 per share of Macromedia common stock. Upon the close of the transaction, Macromedia stockholders will own approximately 18 percent of the combined company on a pro forma basis.

In the combined company, Chizen will continue as chief executive officer and Shantanu Narayen will remain president and chief operating officer. Stephen Elop, president and chief executive officer of Macromedia, will join Adobe as president of worldwide field operations. Murray Demo will remain executive vice president and chief financial officer. Dr. John Warnock and Dr. Charles Geschke will remain as co-chairmen of the Board of Directors of the combined company and Rob Burgess, chairman of the Macromedia Board of Directors, will join the Adobe Board.

"Both Macromedia and Adobe are passionate about creating and enabling great experiences across a wide range of devices and operating systems," said Stephen Elop, president and chief executive officer of Macromedia. "Our combined teams will be a powerful force for innovation around cutting-edge platforms for delivering content and applications."

Integration
The two companies are developing integration plans that build on the cultural similarities and the best business and product development practices from each company. The companies will make additional details and information about the acquisition click here.

"While we anticipate the integration team will identify opportunities for cost savings by the time the acquisition closes, the primary motivation for the two companies' joining is to continue to expand and grow our business into new markets," said Chizen.

The acquisition, which is expected to close in Fall 2005, is subject to customary closing conditions, including approval by the stockholders of both companies and regulatory approvals. The transaction will be accounted for under purchase accounting rules.

Due to the absence at this time of estimates of the acquisition-related restructuring costs and the allocation of the purchase price between goodwill, in-process R&D, other intangibles and equity-based compensation expenses related to SFAS 123R, Adobe is currently unable to provide GAAP estimates on future earnings.

The transaction is currently expected to be break-even to slightly accretive to earnings in the first twelve months after closing on a non-GAAP basis. The company's target of break even-to-slightly accretive to earnings on a non-GAAP basis assumes no adverse impact from the loss of deferred revenue in the first twelve months following the close due to purchase accounting.

Stock Repurchase Program
Adobe also announced its Board of Directors has approved a post-acquisition stock repurchase program of $1 billion. "After a review of the combined companies' financial position, our Board concluded that the repurchase program is consistent with our overall commitment to deliver value to our stockholders," Chizen added.

The repurchase program is in addition to the Adobe's existing stock repurchase programs and is expected to commence following the completion of the acquisition. The repurchases will be funded from available working capital.

About Adobe Systems Incorporated
Adobe is the world's leading provider of software solutions to create, manage and deliver high-impact, reliable digital content. For more information, click here.

About Macromedia
Experience matters. Macromedia is motivated by the belief that great experiences build great businesses. Our software empowers millions of business users, developers, and designers to create and deliver effective, compelling, and memorable experiences - on the Internet, on fixed media, on wireless, and on digital devices.

Adobe Systems Incorporated

• MARKET: Graphics, video and business document software
• FOUNDED: 1982
• HEADQUARTERS: San Jose, Calif.
� CHIEF EXECUTIVE OFFICER: Bruce Chizen
• STOCK: ADBE (Nasdaq)
• EMPLOYEES: Approximately 4,000
• REVENUE: $1.67 billion in fiscal 2004
• CUSTOMERS: Creative professionals, enterprises and governments, photo and video hobbyists
• MARKET PRESENCE:

  • More than a half-billion copies of Adobe Reader have been distributed worldwide.
  • The world’s top 10 PC manufacturers ship their systems with Adobe PDF technology pre-installed.
  • More than 700 thousand copies of Adobe Creative Suite shipped in its first year (October 2004).

Macromedia, Inc

• MARKET: Web and application development software
• FOUNDED: 1982
• HEADQUARTERS: San Francisco, Calif.
• FOUNDED: 1992
• CHIEF EXECUTIVE OFFICER: Stephen Elop
• STOCK: MACR (Nasdaq)
• EMPLOYEES: Approximately 1,500
• REVENUE: $422 million in CY 2004
• CUSTOMERS: Web and application developers, business users, mobile ecosystem
• MARKET PRESENCE:

  • Macromedia Flash Player is installed on more than 98% of Internet-connected desktops and more than half a billion users have the Flash client installed.
  • More than 25 million Flash-enabled devices have shipped.
  • Macromedia products are used by 90 percent of Fortune 1000 companies.