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Commentary: Macromedia-Allaire a match made in heaven

The planned acquisition of Allaire offers a strategy for Macromedia to expand beyond its traditional markets.

By Mark Driver, Gartner Analyst

The planned acquisition of Allaire offers a strategy for Macromedia to expand beyond its traditional markets.

Macromedia will add 550 Allaire employees to its own 1,200 and will merge its market-leading design products, such as DreamWeaver and Flash, with Allaire's popular developer-focused tools, such as ColdFusion and JRun. The Macromedia product line will support a combined base of 2 million developers, ranging from Web designers to systematic Java programmers who target comprehensive e-business solutions.

See news story:
Macromedia merges with Allaire, beats estimates

Both companies have traditionally targeted "mass enterprise" markets, where they focused on low-priced tools and technology, broad channels, short sales cycles and rapid application development-oriented features. Consequently, the two companies have compatible sales and support channels and customer profiles. Moreover, the companies' cultures are also compatible, and Gartner expects Macromedia to retain a high percentage of Allaire's employees.

This acquisition also comes at an opportune time for Allaire. Despite market leadership, the firm has posted losses for several consecutive quarters and has struggled to remain independent in a rapidly maturing, consolidating Internet tools market: Allaire's shares have traded at under $10 for months--down from a 52-week high of $92. Becoming part of Macromedia will infuse Allaire's customers with a needed dose of confidence and will curtail defections to competing companies' products.

Acquiring Allaire instantly propels Macromedia into a leadership position in the market for Internet application-development tools. More importantly, the deal establishes Macromedia as a visionary in emerging tools markets--that is, not just the traditional Internet market but also mobile and wireless devices, Web services, and e-business platforms.

However, the deal will create some problems. Namely, Macromedia's DreamWeaver and Allaire's Cold Fusion and JRun Studio overlap in a small way--both offer Java Server Pages--and all products have HTML design features and so on. One challenge will be to clearly articulate what product will be used for what problem and to consolidate tools when needed.

Moreover, Macromedia has established strong OEM and partnership channels with a number of companies (including IBM and WebGain) that will become more direct competitors after the deal closes. Macromedia must carefully foster its relationships with those vendors as it executes its own expanding tools strategy--a difficult proposition.

The combination of Macromedia and Allaire will create a significant synergy and will provide a better-rounded product strategy that will better support customers of both companies. Enterprises should view this deal as a positive step within the natural progression of maturing, consolidating tools markets.

(For related commentary on Macromedia's DreamWeaver product, see TechRepublic.com--free registration required.)

Entire contents, Copyright ? 2001 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.