Accelio Buy Gives Adobe Inside Track In Form Field
BY PATRICK SEITZ
INVESTOR'S BUSINESS DAILY
investors.com
Desktop publishing king Adobe Systems Inc.(ADBE) made its third key deal in two months Friday. It agreed to buy electronic-forms company Accelio Corp.(ACLO)
Adobe, the second largest desktop software maker behind Microsoft Corp. (MSFT), is using the industry slowdown to make acquisitions and bulk up in key growth areas.
In December, Adobe bought privately held Fotiva Inc., which makes image management software, and it licensed technology for creating digital video discs from Sonic Solutions (SNIC).
Adobe will use its purchase of Accelio to broaden its ePaper business. The deal combines Adobe's Acrobat and Portable Document Format technologies with Accelio's Web electronic forms.
"It's a good, complementary addition to Adobe's Acrobat solution," said Keith Gay, an analyst with Thomas Weisel Partners. Adobe outbid Open Text Corp. (OTEX) for Ottawa-based Accelio.
Investors reacted positively to the news. Adobe rose about 7% to 35.93 on heavier volume than usual.
The ePaper business is Adobe's fastest-growing segment. Last quarter, sales were up 41% vs. the year-earlier period. Adobe also sells popular graphics software, including Photoshop and Illustrator.
Accelio fits into Adobe's vision for "network publishing," said Shantanu Narayen, Adobe's executive vice president of worldwide products. "A key component of that is to ensure that businesses and governments can move their business processes online to reduce costs and increase productivity."
Adobe's $72 million deal will speed its efforts to bridge the gap between paperwork and electronic forms, Narayen says.
Combining the two companies will let Adobe provide a more complete offering to customers, he says. Adobe's PDF technology is the industry standard for creating and exchanging electronic documents.
In October, Adobe estimated that the electronic documents and forms market could be worth more than $3 billion by 2004.
Analysts expect to see more small acquisitions by large software companies in the months ahead.
"The established software companies are sitting on hoards of cash and are in a nice position to make selective acquisitions," Gay said. San Jose, Calif.-based Adobe had $582 million in cash and short-term investments as of Nov. 30.
Adobe has a better distribution and sales network than Accelio, Gay notes. Accelio didn't have the scale to be successful in the long term as a stand-alone company. It's lost money the last three years.
Accelio brings 7,000 customers of its own and has expertise in large deployments.
Adobe plans to use its broader set of software to tap more large corporate customers. It's marketing its products as a way to improve efficiency and cut costs.
The company expects to record an acquisition charge of $12 million to $15 million in the current quarter. The purchase will cut into Adobe's profit margin this year, but will be accretive in 2003.
Adobe had sales last year of $1.23 billion vs. about $66 million for Accelio.
Adobe faces challenges in combining with Accelio, Gay says. One is technical. Adobe will have to integrate Accelio's proprietary e-forms software with its own products. The deal also will bring Adobe a new set of competitors in the electronic-forms field.
The acquisition of Accelio is still subject to customary transaction documents and closing conditions. And it will need regulatory and shareholder approval. It's expected to close in late March.
With four weeks remaining in its fiscal quarter, which ends March 1, Adobe Thursday reaffirmed sales and earnings targets.
The company expects to have revenue of $265 million to $280 million and pro forma earnings per share of 20 to 22 cents. It will report fiscal first-quarter results March 14. |
