Adobe Systems Inc., the world’s biggest maker of graphic-design software, agreed to buy Omniture Inc. for $1.8 billion, expanding into programs that track the performance of Web sites and online advertising campaigns.
Adobe will pay $21.50 a share for Omniture, 24 percent more than the closing price yesterday. Adobe fell the most in almost three months in Nasdaq trading today, a day after announcing the deal and forecasting sales that missed some analysts’ estimates.
Recommended Stories
Chief Executive Officer Shantanu Narayen is pushing Adobe into new businesses at a time when customers are pulling back on purchases of the company’s design software. Omniture gives Adobe a steady source of revenue and may mean investors will focus less on periodic upgrades to products such as Adobe Creative Suite, said Michael Olson, a Minneapolis-based analyst with Piper Jaffray & Co.
“Adobe is trying to diversify beyond being just a maker of development tools,” Olson said. “Any time you do a big acquisition, the acquirer’s shares are down because of the element of risk that some investors aren’t comfortable with.”
Adobe, based in San Jose, California, dropped $2, or 5.6 percent, to $33.62 at 9:37 a.m. on the Nasdaq Stock Market. It fell as low as $33.31, the most since June 22. The shares had gained 67 percent this year before today.
Omniture jumped $4.31, or 25 percent, to $21.63 in its biggest gain since becoming a public company in June 2006.
Omniture is Adobe’s second-biggest purchase, after its 2005 acquisition of Macromedia Inc. for $3.4 billion. Goldman Sachs Group Inc. advised Adobe and Morgan Stanley worked with Omniture, according to a regulatory filing.
Falling Sales
Adobe said third-quarter net income fell 29 percent to $136 million, or 26 cents a share, from $191.6 million, or 35 cents, a year earlier. Sales dropped 21 percent to $697.5 million in the period ended Aug. 28.
Revenue this quarter will be $690 million to $740 million, Adobe said. Analysts on average estimated $723.6 million, according to a Bloomberg survey.
Omniture’s software will help Adobe’s advertising and Web site design customers handle online campaigns. Sales at the Orem, Utah-based company rose 22 percent last quarter to $87.6 million, while its loss narrowed to $4.88 million.
Adobe is paying about 18 times Omniture’s anticipated earnings for 2010, before interest, taxes, depreciation and amortization, estimates Sasa Zorovic, an analyst at Janney Montgomery Scott LLC in Boston.
Not Outrageous
“It’s an expensive acquisition, but not an outrageous one,” Zorovic said in an interview. “Omniture’s shareholders ought to be pleased with the deal they struck. Adobe paid a decent valuation, but it’s not a steal.”
Adobe plans to combine its programs that create media and Web sites with Omniture’s technology, Narayen said on the call.
“The inability to monetize media on the Web is a pain point we hear, especially from customers in advertising, media and entertainment industries,” he said.
Paul Weiskopf, who oversees Adobe’s acquisitions, declined to comment on whether the company will add Omniture’s technology to future versions of Creative Suite or the Acrobat software.
“It’s premature to comment on future product releases, but there’s opportunity to integrate,” he said in an interview.
The purchase will contribute to earnings, excluding some costs, in the next fiscal year, Adobe said. Omniture will become a unit and its CEO, Josh James, will become a senior vice president, reporting to Narayen. Adobe expects the deal to close in its fiscal fourth quarter, which ends in November.
Adobe’s customers, including advertising agencies and publications, have curbed spending amid the worst U.S. recession since the 1930s. U.S. ad spending fell 15.4 percent in the first half of the year, compared with a year earlier, according to market research firm Nielsen Co.
