ADOBE BUYS MACROMEDIA FOR $3.4 BILLION

Interesting to see how this plays out. WSJ and ZDNet state how this deal is creating a showdown with Microsoft. Not sure if this is really making the dudes in Redmond sweat, but let's see how this plays out:

Adobe and Macromedia: Making Microsoft sweat?

Adobe's proposed buyout of Macromedia may be good for some of the combined companies' products, bad for others. Either way, it's going to present more formidable competition to Microsoft

The news that Adobe is to buy Macromedia — subject to the usual provisos like shareholder and regulatory approval — marks the biggest ever deal in the content creation and Web development sector.

The deal, valued at $3.4bn (£1.8bn) in stock, will produce a content creation giant that will dwarf its competitors and even make Microsoft look lacking. Although the deal was kept very well under wraps, with no leaks prior to Monday's announcement, analysts say that the departure of former Macromedia chief executive Rob Burgess in January 2004 paved the way for the deal and should give some indication of just how long ago negotiations began. (Burgess was replaced by Stephen Elop who will now become president of worldwide field operations for the new-look Adobe.)

Macromedia sells 36 individual products, spanning authoring tools; server software; e-learning; and of course its payer software, which includes Flash. Adobe lists over 40 individual products, which it groups under print and Web publishing; digital imaging; video and audio; and the Acrobat family, among others.

Adobe chief executive Bruce Chizen, who is no stranger to making layoffs — he fired 300 on joining Adobe seven years ago — is likely to make some big culls across both firms. In a statement announcing the planned purchase, Chizen talked of cost cutting measures to come; the notable areas of overlap between the companies' products are in graphics, where Adobe's Photoshop and Illustrator are the market leaders ahead of Macromedia's competing Fireworks and Freehand. For Web design, Macromedia has the established DreamWeaver against Adobe's more recent GoLive product. (full article)

UPDATE: More thoughts on this from Marc Canter, founder of MacroMind which became Macromedia. And from Om Malik.