Macromedia Inc. to purchase the Allaire Corp. for 6.52 times revenue

Weekly Corporate Growth Report, Jan 29, 2001

The Deal: Macromedia Inc. has agreed to purchase the Allaire Corp. for $360 million in cash and stock. The transaction is an effort by Macromedia to add application-server technology to its list of Web multimedia programs. After the news of the acquisition was announced, shares of Macromedia fell 11 percent to $39, while Allaire shares gained 28 percent to close at $10.13.

Discussion: Macromedia Inc. offers a host of Web design software, including multimedia playback and graphics development tools. AOL Time Warner, Apple Computer and Microsoft have all integrated Macromedia graphics and animation software into their products. The company also makes interactive learning products, and is intensifying a run into the consumer entertainment Web site market. Macromedia's Shockwave.com unit offers games, music and animated comics. Shockwave.com's growing popularity has Macromedia making plans to spin the operation off as a separate company.

The Allaire Corp. makes development tools for producing sophisticated e-commerce Web sites without intensive coding. Its flagship ColdFusion software lets developers quickly build transaction-oriented Web sites and applications. Allaire's Spectra software offers content management, ecommerce and personalization tools as a packaged application, marking a strategic move away from development tools. Allaire's HomeSite HTML editor remains a popular program for creating Web pages. Over half of sales come from its network of 1,500 consultants, resellers and distributors.