Macromedia is going to play through, even though the
odds might seem long.
Irwin Soonachan correspondent
It's not that unusual, if you're a golfer in San Francisco, to
find yourself on an indoor putting green on a chilly January morning.
It's slightly more unusual to line up a putt on a large swath
of Astroturf as you stand in the break room of a publicly traded
corporation. Such is life at Macromedia.
The putting green, merry-go-round, pool table, video game arcade,
and laundry room (no quarters needed) help make Macromedia (www.macromedia.com)
a paragon of the San Francisco tech culture. The environs fit
even better with the traditionally quirky culture of graphic design,
of which Macromedia is an integral part.
Graphic designers and Web developers across the world have relied
on Macromedia products such as Flash, Dreamweaver, Director Shockwave
Studio, and Fireworks to build some of the most stunning designs
on the Internet. At the very least, their software probably powered
the coolest Web page that ever inspired you to hit the "skip intro"
option. With so much success, what more could a company want?
A slide to take you from the third floor to the second? Macromedia
already has one, but do not be fooled by the child-like accoutrements
and hipper-than-thou interior design. The playhouse veneer belies
a corporate drive for more influence, more products, and more
"Over the last 10 years we've evolved from being a freewheeling
software company into a serious business," says Tom Hale, Macromedia's
senior vice president of corporate strategy. "We started left
of center 10 years ago, but we're probably a little right of it
Sketching the outline
Macromedia was formed in 1992 by the merger of Authorware and
MacroMind-Paracomp. Founded in 1987, Authorware produced self-titled
authoring software for building learning applications. Paracomp
was a late-1980s concern that built high-end graphics tools for
Macs. The earliest beginnings of Macromedia, though, stretch back
to 1984, when MacroMind was founded to bring multimedia experiences
to PCs. At the time of its IPO in 1993, Macromedia was a leader
in the growing CD-ROM market with Director, its multimedia design
and development tool. But within three years, the company found
itself at a crossroads.
In 1996, Macromedia's chief executive officer, Bud Colligan, stepped
down. Colligan, who had been the chief executive officer of Authorware,
had kept Macromedia on the CD-ROM route, but the company, like
the CD-ROM industry, saw its revenue dropping. Colligan's replacement,
Rob Burgess, was ready to take a deep breath and risk it all on
To his credit, Colligan (who declined to be interviewed for this
piece) had left Burgess, formerly vice president of Software at
Silicon Graphics, with a few products with which to start in a
new direction. Chief among these products were Shockwave, a tool
for viewing animation clips over the Internet, and FreeHand, a
design tool acquired along with its parent company, Altsys. Burgess,
though, was not content to tack on a piece here and a plug-in
there to Macromedia's Internet-oriented offerings.
"Rob Burgess said, 'It's not just one product team or one effort
around the Web; it's the whole company,'" Hale says. "He gave
the company a dramatic new focus to start new product initiatives
to go after the Web. It wasn't, 'Let's evolve what we've got,'
it was 'Let's find new products for this opportunity.'"
While other companies that had success marketing pre-Web design
and development tools tried to adopt their products for the Internet,
Burgess looked for new-school, best-of-breed answers, and what
he couldn't build, he bought.
Under Burgess, the company launched Dreamweaver and Fireworks,
now mainstays in the Web design world. In 1997, Macromedia purchased
FutureWave, a company that had a product called FutureSplash Animator.
Macromedia decided to relaunch it with a slightly catchier name:
Flash. The rest, of course, is Internet history.
Though now struggling to turn a profit during the recession, Macromedia's
income at its peak hovered around $400 million per year, and it
employs more than 1,500 people. But the recession is not the only
problem facing Macromedia. Recession or not, the company is at
For several years, Macromedia has tried to break out of its Web
design mold and venture into the application server and development
markets that form the foundation for its products. In the future,
they envision businesses turning to Macromedia for a nearly complete
website building package. For Macromedia, this is a much wider
- and more profitable - scope than just site design and graphics
The company has made several forays in this direction. UltraDev
evolved from a product called Drumbeat, which Macromedia purchased
from a smaller company, and it consistently receives high marks
in the trade press. Other products, like Sitespring and Spectra,
have been as forgettable as their names. As yet, Macromedia has
not scored a major hit with this new initiative.
"Macromedia has been trying for a long time to get out of being
seen just as a Web page development company and into being a website
development company," says Meta Group analyst Craig Roth (www.metagroup.com;
Stamford, Connecticut). "They've constantly pushed in that direction,
but they haven't been able to get any traction."
Enter Jeremy Allaire (Q&A on p. 44). Allaire and his brother J.J.
formed their own company, eponymously called Allaire, behind ColdFusion,
one of the original application servers for the Internet. Allaire
also developed JRun, a popular Java runtime environment. In 2000,
Allaire recorded a respectable $119 million in revenue.
In early 2001, Macromedia acquired Allaire, the company, for $360
million, and acquired Jeremy Allaire, the person, as its chief
technology officer. It is hard to say whether the product line
or the man will have a greater impact on Macromedia, but one thing
is certain: Macromedia is deadly serious about growing the scope
of its business.
For its part, Allaire, the company, adds another steady revenue
stream to Macromedia. ColdFusion has a long-standing, devoted
cadre of users, while JRun has grown thanks largely to its budget-friendly
pricing. Moreover, ColdFusion brings an established name.
"ColdFusion has name recognition and therefore power," Roth says.
There are problems, though. In the Internet Stone Age, ColdFusion
was built in its own language, CFML. Now users want compatibility
with Microsoft- and Java-based tools, something Macromedia plans
to add to ColdFusion in the spring. CFML will remain intact, but
application deployment on Java- and .Net-based servers, if Macromedia
delivers, will soon be possible. Macromedia also has bundled ColdFusion
with UltraDev to create a more potent application server.
"Combined with UltraDev, they might be able to do it," says Roth.
Jeremy Allaire might yet prove to be the most important part of
the acquisition. According to Roth, ColdFusion, while it provides
name recognition, brings little else to the table that Macromedia
needs. He thinks the most significant long-term benefit of the
deal may have been making Allaire the chief technology officer.
"Macromedia has tried this over and over again, so maybe putting
in someone new as the CTO will make the difference," he says.
"Because you have to ask yourself, what is different now from
the past attempts they made? Having Jeremy Allaire there is the
only difference I can see."
Steve Frankel, managing director of the Boston-based investment
bank Adams, Harkness & Hill (www.ahh.com)
also likes what Jeremy Allaire brings to the table.
"Jeremy Allaire is very sharp and really has a vision about the
Web," he says. "He clearly can add value to Macromedia."
Neither Frankel nor Roth is convinced, however, that Macromedia
will reap a long-term benefit from the Allaire transaction. Roth
wonders if Macromedia only purchased Allaire because it was desperate
to broaden its scope and none of the other available companies
that could help them accomplish that, such as Silverstream or
Bluestone, were within their price range.
"Macromedia just keeps taking shot after shot at trying to expand
their development footprint," Roth says. "This was the next shot
they had. I don't think they had enough money lying around to
purchase a more major Web development company."
With a spotty history and a new product that needs to reinvent
itself, analysts have doubts about whether the Allaire deal will
take Macromedia where it wants to go. Frankel puts it in a nutshell:
"The jury is still out on how much leverage Macromedia can gain
from the Allaire transaction. The upcoming release of ColdFusion
is critical - can Macromedia build a meaningful presence in server-side
Still long odds?
Not surprisingly, conflicting data points have led analysts to
If Roth were given an imaginary $100 with which to place a bet,
and he could bet on Macromedia to succeed in expanding its range,
to not succeed, or on the lowly Chicago Cubs to win the World
Series for the first time since 1908 he would put $70 on Macromedia
not making it, $20 on them succeeding, and $10 on the Cubs. For
Roth, the latter two bets both have enough historical precedent
to warrant low-risk investments.
Frankel, on the other hand, is betting real money on Macromedia.
He has rated the company a strong buy, so Adams, Harkness & Hill
clients are hoping Macromedia's new products outperform the Cubs.
Even the bearish Roth sees the market opportunity for Macromedia.
"I see a need for a company like this that focuses on the Web
database publishing side of things," he says. "It's a market that
I think is very underserved. You've got static Web page development,
you've got complex, multi-tier Web development, which is where
all the app servers are, but there has to be something in between.
You've got a database out there, you want to develop a nice, quick
application to put the database on the screen, you type in a few
fields, you show the answer, and it's up. It's nice quick hit
stuff, very good ROI for a company, but no one is focusing on
If Macromedia fails to grow its business, at least it won't be
for lack of persistent and bold attempts. The company with the
arcade and indoor golf area does not fool around when it comes
to dollars and cents. The gallery is watching closely, the water
hazard looms, and Macromedia is going for the green.
Macromedia Director 8.5 profile.
Kevin Self associate editor | firstname.lastname@example.org
Although Macromedia Flash may very well be the most popular Macromedia
product, you might want to take a look what Director 8.5 Shockwave
Studio and Shockwave Player are bringing to the Internet. Director
8.5 Shockwave Studio is becoming the standard for creating interactive,
rich-media content and provides developers with a flexible, content
creation solution. The following are two examples of the caliber
of work Shockwave is capable of creating:
The "Geep Sim" game (www.gorillaz.com)
was created on Macromedia Director 8.5 Shockwave Studio by the
London-based developing house, Zombie. The interactive game was
enough to catapult Gorillaz's website to one of five sites nominated
for the "Web Award" at the MTV Europe Music Awards 2001. The game
puts users in the driver's seat of the band's jeep as it snakes
around a twisting 3-D highway while the band's latest single provides
the soundtrack for the road trip.
Power Puck (www.tampabaylightning.com)
was developed at MindComet also using Macromedia Director 8.5
Shockwave Studio. It is an online 3-D interactive game created
for the Tampa Bay Lightning hockey team. Perhaps the troubled
NHL franchise will have better luck online than they do in the