If M&A activity is a good indicator of the health of the economy, there's hope for a recovery, at least in tech. Newsworthy acquisitions are becoming more frequent and yesterday saw a billion-dollar deal with Adobe's announcement that it is purchasing business optimization software provider Omniture.
The deal, which is valued at $1.8bn, was hailed by Adobe CEO Shantanu Narayen as "a game changer for both Adobe and our customers". And it better be, as Adobe's offer of $21.50 per share for Omniture stock represents a 24% premium to Omniture's closing price on Tuesday.
But while analysts and observers might question whether Adobe is paying too much for Omniture, the acquisition makes a lot of sense. Adobe's Q3 earnings showed continued weakness in the company's primary market as the recession trimmed demand for Creative Suite 4. All told, revenue declined 29% year-over-year in the third quarter, although Adobe was able to beat analyst expectations slightly.
But Adobe's future growth may not be as dependent upon software sales. How does Omniture fit in to Adobe's plans? Narayen explained:
Adobe's Creative Suite products and Flash platform help customers create and deliver engaging experiences. The addition of Omniture's online marketing suite will help customers measure, analyze and optimize the impact and value of those experiences.
It's a smart move for Adobe and one that may mean more to the company's future than many expect. Tom Sullivan, who writes a blog called No Turn on Red, has some insightful comments that speak to this:
First, realize that Omniture is not just an analytics company. Sure, that may be what they are known for – but they have many components of their software suite that work seamlessly with each other. Omniture also does merchandising, recommendations, website testing, and site survey – all tasks that are analytic driven. Many of these components are used by e-commerce retailers and I know several retailers that love their packages.
Second, realize that Adobe has already stepped into the e-commerce world when they acquired Scene7 in 2007. Scene7 is a fantastic solution for managing images for retailers. (I’m not rehashing some Adobe marketing, I’m speaking as a developer who’s used Scene7 – I really like this software). Scene7 is now used by many, many retailers around the world to dynamically serve their images.
Sullivan predicts that by the end of 2010, there will be a "major acquisition by Adobe of an e-commerce platform". To him, going after the e-commerce market head on is a no-brainer for Adobe.
While I won't make any bold predictions of my own, I agree with the general belief that Adobe is no longer just a vendor of expensive software. It does have significant opportunities in other markets and through some strategic acquisitions over the years has positioned itself to take advantage of them. If it does, watch out.
In the meantime, let the M&A (and chess games) continue.