Macromedia wants to combine its family of Web publishing technology with Elemental's Web application development products like Drumbeat 2000 and eStore to enable developers to build Web sites for e-commerce, corporate intranets, and personalized content.
For Macromedia, the deal "would seem to be consistent with their strategy in providing dynamic enterprise Web products," said Jay Vleeschouver, an analyst with Merrill Lynch. "They want to be able to offer more real time or database driven Web development products. Elemental helps them do that."
Under the terms of the agreement, Macromedia will exchange approximately 625,000 shares of its stock for all of the outstanding equity of Elemental, for a total purchase price of approximately $24 million. The transaction will be accounted for as a pooling of interests, and is expected to close within 45 days, subject to satisfaction of customary closing conditions and regulatory approvals, the company said.
Last month, Macromedia, which has scored a string of bundling wins that added support for its Flash technology to major operating systems and browsers, said RealNetworks would integrate its Flash 4 product into future versions of the RealSystem G2 multimedia software.
Macromedia also recently entered into an alliance with cable Internet access and content provider @Home, under which @Home's Enliven technology will be integrated into Macromedia's Flash and Shockwave players. Enliven is a rich-media advertising unit that @Home acquired last year.
For the Elemental acquisition, Macromedia will take a one-time charge of $3 million for expenses related to the acquisition in the current quarter.
With this acquisition, Macromedia now offers independent and corporate Web developers an HTML, Active Server Page, and Java Server Page package for visually developing Web content and generated Web sites and applications.
Elemental Software is a privately held company that develops and markets software that enables corporate users to build Web applications for e-commerce systems.
"This acquisition is an important step of our vision of adding life to the Web," said Rob Burgess, chief executive officer of Macromedia. Elemental "allows us to provide a solution for those people having difficulties building dynamic Web sites."
Macromedia will sell Elemental's Drumbeat and eStore products as separate tools, but later will integrate the tools into its DreamWeaver Web creation and management tool set. No specific shipping date for the integrated product was released.
Developers can create pages and manage sites in Dreamweaver, dynamically publish Web site graphics and animation with Macromedia's Generator, then link database content to Web pages with Drumbeat 2000, and easily create e-commerce storefronts with eStore Builder, Elemental's president and CEO Peter Hirshberg explained.
"For us to be able to have the reach and brand name of Macromedia is very exciting," Hirshberg said.