Commentary: Adobe-Macromedia Merger--Will the Deal Go Through?

Adobe announced Monday that it had struck a deal with Macromedia's management to merge for $3.4 billion in Adobe stock. It seems like a good deal for both firms but is this a good deal for consumers of their products? Together, their competitive products dominate several media/graphics software markets, like web authoring (GoLive-Dreamweaver) and illustration (Illustrator-Freehand), and their combine will have a clear monopoly. On the other hand, many of their other products are either not totally overlapping, like Photoshop and Fireworks, or are complementary, like Acrobat and Flash.

Here is their explanation:

The combination of Adobe and Macromedia strengthens our mission of helping people and organizations communicate better. Through the combination of our powerful development, authoring and collaboration tools – and the complementary functionality of PDF and Flash – we have the opportunity to drive an industry-defining technology platform that delivers compelling, rich content and applications across a wide range of devices and operating systems.

By combining the passion and creativity of two leading-edge companies, we will continue driving innovations that are changing the ways people everywhere are experiencing and interacting with information.

We understand the power trip but don't buy the innovation smoke. We believe in the forces of competition and this merger seems more likely to squelch innovation than to "drive" it. Afterall, how innovative is powerful Microsoft? The best it can do is buy innovation, concomittantly stifling any competition.

The merger still has to be approved by shareholders of both public companies. It probably will be approved because forming a powerful, more efficient alliance that can crush any emerging competition is good for investors. The merger also has to be approved by federal regulators who are supposed to look out for the interests of consumers and maintain competition. We hope they do their job and give this deal a thumbs down. [Bill Fox]