Some people know how to get busy. Yesterday, Adobe Systems (Nasdaq: ADBE ) turned its third-quarter earnings report into a mere amuse-bouche for the main dish, which turned out to be an $1.8 billion acquisition.
Let's get the boring, workaday earnings data out of the way first: Sales fell 21.4% year over year to $697.5 million. GAAP earnings dipped 26% to $0.26 per share. CEO Shantanu Narayen called the results "solid" and issued mildly optimistic guidance for the next quarter.
More importantly, Adobe also issued a tender offer for Web analytics expert Omniture (Nasdaq: OMTR ) . It's an all-cash deal at $21.50 per Omniture share, financed both by Adobe's $2.5 billion in cash and short-term investments and its generous, largely untapped lines of credit. At the current cash-flow run-rate, it'll take about two years to refill the coffers again.
But if this deal works out as Adobe imagines, the company will replenish that cash even more quickly. Management expects that Omniture will add to Adobe's non-GAAP earnings right away, even without a whole lot of synergistic cost-cutting. Folding Omniture's traffic monitoring into Adobe's Flash media products could be the spark that ignites monetization of that rich medium.
Narayen said that Adobe's customers have been asking for help analyzing the value of their Flash-based assets, and this deal could create "a continuous feedback loop to maximize business results."
All of this puts Adobe and Google (Nasdaq: GOOG ) in a very interesting relationship.
Google's YouTube displays its videos using Flash technology, and Google has a competing Web analytics platform. Will Adobe and Google figure out some way to hook everything together, so that the biggest stage for Flash to show its flash could harmonize Omniture's money-making features with Google's market-leading ad platform?
Or would Google prefer to use a competing technology, now that Adobe is becoming a more direct competitor? No, not Microsoft (Nasdaq: MSFT ) SilverLight, silly. But the latest version of Google's Chrome browser supports HTML 5 standards, which can display video content without any fancy third-party plug-ins. If Google starts pushing hard to get that technology adopted by the unwashed masses, it could be a side effect of this acquisition.
The buyout is also a nice exit for Stock Advisor subscribers. The Gardner brothers have recommended Omniture three times, starting way back in 2006 and ending this summer -- with market-beating results. Only Netflix (Nasdaq: NFLX ) and Marvel Entertainment (NYSE: MVL ) have been re-picked more often than Omniture. Now here’s hoping shareholders of Adobe realize the same gains from this tie-up that Omniture’s shareholders are enjoying today.