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Will Macromedia Soon Become Micromedia?

The rumor mill is churning, and it's producing a steady stream of speculation about Microsoft Corp. acquiring Macromedia Inc. Many experts understand why the takeover could happen, but most agree it won't. Not Daniel...

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By: Daniel Kastner
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February 25, 2003

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The rumor mill is churning, and it's producing a steady stream of speculation about Microsoft Corp. acquiring Macromedia Inc. Many experts understand why the takeover could happen, but most agree it won't. Not Daniel..."The rumor mill is churning, and it's producing a steady stream of speculation about Microsoft Corp. acquiring Macromedia Inc. Many experts understand why the takeover could happen, but most agree it won't. Not me.

It should go without saying that Macromedia is rife for takeover. Its top 20 institutional investors and mutual fund holders float 66% of the company. The company reaches 88% when additional institutional shareholders are factored in, leaving a minimal number of significant insider stakeholders. So the question is no longer if Macromedia will be acquired, but rather when and by whom.

I believe Microsoft should and will buy Macromedia because Flash stands to gain the most from Microsoft and Microsoft stands to gain the most from Flash. Combined with Microsoft's widespread distribution and commitment to R&D, Flash could quickly become the standard for rich visual applications.

Other companies rumored to be pursuing Macromedia include IBM and Adobe Systems Inc. If you are expecting one of these to steal Microsoft's thunder, you may instead hear a little more than whispers.

IBM isn't really a software company; it's a service company focused entirely on selling solutions. IBM bought Lotus and has steadily consolidated Lotus' products into solutions. As the Lotus VP for Solutions, Scott Cooper, put it, "Since our inception we have been a company that sells products to people who know how to apply them to projects ... [but since the acquisition] customers look to us to provide them with solutions -- to apply combinations of our products and services to their specific pains." Given IBM's solutions model, it is at best unlikely that it would attempt to acquire a product-oriented company such as Macromedia. It would also contradict the free-spirited and product-oriented innovation that Macromedia and its loyal developers value.

Casting further doubt on the prospects of IBM acquiring Macromedia are the raw numbers. In the software sector, IBM's growth is just 2% over the past six years, and that figure isn't adjusted for inflation. Alternatively, Microsoft has increased by 390% over the same time frame. Flash is a product, and Microsoft is a product company. Microsoft Research is clearly innovating visionary technologies, such as SPOT and OneNote, that will drive change in the industry, and Flash will help fuel their advancement.

Although many experts consider Adobe to be in the hunt for Macromedia, in reality the company is perhaps an even less likely suitor. Adobe sells e-paper and graphics applications. It offers no real application platform software tools. Some observers may argue for PostScript standards, but they have been all but forgotten in the Internet Vector Era.

Adobe positions itself as offering "graphic design, imaging and dynamic media authoring tools [that] enable customers to create, manage and deliver visually rich, reliable content." Rich content? Yes. Rich applications? No. Acrobat is not an application framework, but rather a document standard. Flash, on the other hand, is a front- and back-end standard. In other words, Flash is an application development solution that fits neatly into the .Net framework.

If you need more evidence to make a case against Adobe taking over Macromedia, look back to 1995 when Adobe passed on an opportunity to buy FutureSplash Animator, the predecessor to Flash, from a company called FutureWave. Adobe remains focused on Acrobat as the core of its product offerings, so it remains unlikely that it will want to do an about-face and base its business model on Flash. Incidentally, shortly after Adobe rebuffed FutureWave's offers, Microsoft began its pioneering use of FutureSplash to create a televisionlike experience for its MSN subscribers.

I believe the industry should celebrate if Microsoft buys Macromedia, drives the standardization of Flash, and drastically advances the Flash community's rich Internet cause. Predictably, detractors will raise antitrust flags, but acquiring Macromedia won't cause Microsoft to drop Linux support. In fact, continuing to support Linux only serves to extend Flash's reach, effectively enabling it to become the middleware "Windowing" standard for Linux through the browser and beyond.

Microsoft brings to the table standards in operating systems, desktop applications and Web browsers, as well as a tremendous application framework established with .Net. This powerful combination paves an ideal migration path for Flash, and it's rightfully positioned for the developer/designer community.

Finally, one could argue that Macromedia doesn't need Microsoft. Perhaps Macromedia could continue to go it alone and establish itself independently as a legitimate application framework contender with Java 2 Enterprise Edition and .Net (particularly given the capabilities of its ColdFusion MX platform). But consider for a moment the value of a Flash-embedded Windows CE operating system. Within five years there could be tens of millions of mobile phones based on Flash technology, which could be easily deployed with .Net tools. And that is just one application.

Flash will skyrocket with Microsoft at the helm. Of course, Microsoft will benefit. Macromedia will benefit. But the growing universe of Flash users and developers will benefit most.
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