FOOL PLATE SPECIAL
Macromedia Inhales Allaire

Web design software company Macromedia hopes the purchase of Allaire will boost its business, but economic effects that have damaged the company's customer base will nevertheless lead to slower growth in the upcoming fiscal year.

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By Dave Marino-Nachison (TMF Braden)
January 17, 2001

Last week, Web-design software products company Macromedia (Nasdaq: MACR) announced the formation of the "Flash Advertising Alliance," a panel of companies whose first move was to unveil a system for tracking the clickthroughs for online advertisements using the company's Flash software for creating animated Web content.

That news becomes more interesting given today's release of fiscal third-quarter (ended Dec. 31) financial results and forward guidance. Online advertisements -- as best demonstrated by the recent earnings woes of Yahoo! (Nasdaq: YHOO) and DoubleClick (Nasdaq: DCLK) -- are media non grata these days as ad buyers and sellers alike struggle to put a number on their value and effectiveness.

That wasn't enough to stem a steep morning share price slide as the company said it expects Q4 revenues excluding shockwave.com's -- Macromedia once hoped to spin off the entertainment venture but, following its purchase of AtomFilms, will now record its results as an equity interest rather than as part of its own operations -- to be "similar to" Q3's $103 million "due to softening macroeconomic conditions."

The outlook for the next fiscal year is a little muddier as the company today announced the purchase of Web applications platform developer Allaire (Nasdaq: ALLR), which owns the HomeSite webpage editor and the ColdFusion application server for developing scalable e-business software. Macromedia will exchange 0.2 shares of its stock and $3 in cash for each Allaire share -- another deal signifying the renewed importance of hard green as equity returns to earth -- for a total value of about $360 million. The cash is expected to boost Macromedia earnings in its 2002 fiscal year.

Now Macromedia is guiding investors toward combined revenues of $630 million, which would represent about 60% growth over the $394 million projected for the current fiscal year. Combined full-year EPS for fiscal 2002 is seen at about $1.70. 

Investors no doubt took note of the impact the aforementioned "macro effects" seem to be having on the company's business, as the pre-Allaire company turned in top line growth of 72% during the last completed fiscal year. That shouldn't surprise many folks, though, as many of Macromedia's customers -- web design firms, consultancies, companies that operate their own websites and more -- have tightened or even removed belts amid the dot-com collapse.

Thoughts on this deal and Macromedia's outlook? Share them on our Macromedia discussion board.

This story has been updated. An earlier version mistakenly said Macromedia's Jan. 11 press release detailing the "Flash Advertising Alliance" was issued yesterday.