Omniture to be acquired by Adobe for $1.8 billion

Adobe Systems Inc plans to pay $1.8 billion for fast-growing business software maker Omniture Inc as the maker of Photoshop and Acrobat looks to turn around declining sales.

Adobe, which announced the deal on Tuesday as it reported lower quarterly sales and profit, has been struggling over the past year as the recession hurt technology spending and customers declined to upgrade older versions of its programs.

The acquisition would give Adobe a new stream of revenue to offset that decline. Omniture charges customers fees based on monthly website traffic, so sales are less sensitive to economic swings than Adobe.

"There is no way Adobe can grow organically. This is a smart move," said Global Equities Research analyst Trip Chowdhry.

Advertising agencies and companies use Omniture's software to analyze how consumers use websites. It is the biggest provider of such services, competing with Google Inc and other smaller players. The vast majority of all professional websites are built with Adobe's Creative Suite line of design software.

Janney Montgomery Scott analyst Sasa Zorovic said Adobe's customers will not necessarily choose to subscribe to Omniture's services simply because its technology is embedded into Creative Suite.

"It will require some selling, but I think the opportunity is there," he said.

Adobe, whose software competes with products from Microsoft Corp and Apple Inc, agreed to pay $21.50 per share in cash for Omniture, a 24 percent premium over Omniture's closing price on Tuesday.

Omniture shares soared 25 percent to $21.74 in after-hours trading, while Adobe shares slid 4.5 percent to $34.06.

The deal would be Adobe's second-largest acquisition after its $3.4 billion purchase of Macromedia in December 2005.

Omniture would become a unit of Adobe, headed by its current chief executive, Josh James. Adobe said the deal should close in the fourth quarter of fiscal 2009 and would add to Adobe's per-share earnings in fiscal 2010.

Adobe said it would be paid a fee of $64 million by Omniture if the deal is terminated, according to a regulatory filing.

Adobe also reported on Tuesday that fiscal third-quarter earnings, excluding items, fell to 35 cents per share from 50 cents per share a year ago. That beat Wall Street's average forecast by a penny, according to Thomson Reuters I/B/E/S.

Second-quarter sales fell 21 percent to $697.5 million, but beat analysts' average forecast of $686.2 million. For the fiscal fourth quarter, not counting any effect of the Omniture deal, Adobe forecast revenue and earnings, excluding items broadly in line with analysts' estimates.

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Recession hit Adobe, shuts US operations down for one-week

Adobe Inc, the world’s biggest maker of graphic-design software, shut down North American operations this week, part of a plan to cut operating costs as the recession crimps sales.

Adobe told employees in March it would impose one-week closures in the second, third and fourth quarters, and asked staff to take paid vacation time, the company said today.

“These are in addition to the normal holiday shutdown” between Christmas and New Year’s Day, San Jose, California-based Adobe said in an e-mail.

The company has frozen salaries, trimmed bonuses and variable compensation plans, and curbed travel expenses, Chief Executive Officer Mark Garrett said in an April interview. In December, the company fired about 8 percent of the workforce to help rein in costs during the economic slump.

Second-quarter sales fell 21 percent as customers held off upgrading to the latest version of Adobe’s Creative Suite programs, which account for about 60 percent of revenue. Sales in Europe trailed expectations, the company said on a June 16 conference call.

Adobe advanced 62 cents to $28.62 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have gained 34 percent this year.

Worldwide spending on information-technology products will shrink 9 percent this year as the economy contracts, according to Goldman Sachs Group Inc.

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Has software piracy in India gone up to $2.7 billion?

Global software makers lost an estimated $2.76 billion to illegal software trade in India, a study.

According to a BSA-IDC Global Software Piracy Study, even as piracy in the country has seen a one point drop to 68 per cent in 2008, it has resulted in loss of billions of dollars for software majors like Adobe, Autodesk and Microsoft globally.

"With the various initiatives taken by the government and the firms, piracy has gone down to 68 per cent and in the coming year also, we expect this to continue as people become more informed about licenced software," BSA Vice-President and Regional Director (Asia-Pacific) Jeffrey J Hardee told reporters afetr releasing the study.

The dollar-rupee fluctuation resulted in the increase in value terms.

Hardee also said the rapidly growing user base for assembled PC units and easy availability of pirated software on the Internet, is a major concern.

However "with software firms offering services to the SMBs and more portable PCs being shipped, piracy should come down," he added.

The study noted a rise in piracy levels globally. While it has gone up to 41 per cent globally from 38 per cent last year, piracy also remains high in the Central and Eastern Europe (66 per cent), Latin America (65 per cent) and Asia-Pacific (61 per cent).
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