

Adobe to buy Omniture for $1.8 billion - ojbyrne
http://www.omniture.com/press/777

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SwellJoe
This strikes me as a poor fit, way too expensive, and betting on the future of
the Internet playing out in ways that are bad for open standards and thus bad
for consumers. Betting on bad outcomes for consumers is a dangerous business.

Every major player _except_ Adobe wants to see changes to how video and rich
content are delivered on the web, and some of those changes (the standards-
based ones like HTML video) tend to align with what consumers want (more
widespread availability of video and rich content on their phones, netbooks,
other operating systems, etc.)...and this acquisition is betting that Flash
and Adobe content delivery mechanisms will become _more_ important to the web
ecosystem in the future. $1.8 billion is an awful lot to spend on something
that seems very likely to decline in importance going forward.

Of course, I could be misunderstanding Omniture's value and how diverse their
products are. Their website is a bit vague and confusing. Then again, I don't
have an MBA, so I might just be missing something.

~~~
netsp
_betting on the future of the Internet playing out in ways that are bad for
open standards_

I understand why you think _adobe_ is betting against open standards and
against consumers, but why do you think that _this move_ is doing that?

BTW, I am definitely not an expert on this matter, but it seems to me that
people can get pretty dogmatic about standards. Adobe managed to get more
options in to most people's browsers in a way that works. Even standards might
benefit from a little competition.

 _way too expensive_

Can you elaborate? Stock is at a relative low. Omniture's revenue is about 1/6
of sale price (they are not profitable, but they are growing).

 _This strikes me as a poor fit_

I don't know a huge amount about this company, but judging by their income
statement, they seem like a services company at least as much as a product
development one.

    
    
      -                     31-Dec-08       31-Dec-07            31-Dec-06
      Revenue               295,613         143,127              79,749  
      Cost of Revenue       125,940         53,364               31,826  
      Research Development  36,966          17,257               8,732  
      Selling General & Admin175,851  	85,828               47,334
    

The interesting thing is that Adobe has bought a company that looks like it is
primarily a consulting/customisation/sales company.

~~~
SwellJoe
_I understand why you think adobe is betting against open standards and
against consumers, but why do you think that this move is doing that?_

I'm just wild-ass guessing, as usual.

My impression is that Omniture's unique strength is in Flash video analytics,
in particular. But I may be wrong about that. I don't know much about them,
actually.

The graphic Adobe provided led me to believe that they view this as fitting
analytics into Adobe's existing content workflow, which includes
Flash/Flex/Air/whatever, and not a lot of standards-based approaches to the
web (they work with standards, too, but it always seems an after-thought and
an also-ran technology). So, if they envision this as a way to further lock
companies into the Adobe web deployment silo, which is what it seems like to
me, then I think it's a bad move...because it's betting against open standards
and consumer freedoms winning in the end, and I always consider that a suckers
bet.

 _Can you elaborate? Stock is at a relative low. Omniture's revenue is about
1/6 of sale price (they are not profitable, but they are growing)._

They're a service business, as you noted, and a service business that isn't
profitable (but growing) seems like the old, "We're losing money on every
sale, but we'll make it up in volume!", philosophy. If growth doesn't result
in increased efficiency, as it rarely does to a significant degree, in a
service-based business, it seems like growth isn't a useful metric.

I wouldn't think this would be a good fit for Adobe _because_ their value to
the market is product-based, and this gives them a (currently money-losing)
service-focused business to manage.

But, as I said, I have no idea what I'm talking about. I just choked a bit on
the 1.8 billion number for a company that I can't imagine being worth that
much (and it is entirely plausible that I'm showing a lack of imagination).

~~~
netsp
I actually don't know what to make of acquisitions when it's two public
companies.

That $1.8b is more or less a market price. Think the market is over inflated?
What difference does that make if you're own assets are valued by this
mechanism also?

~~~
SwellJoe
Yeah, the market is dumb sometimes.

Regardless, my primary concern, if I were at the helm at Adobe, would be
trying to figure out how to make this seeming odd couple work out right. I
don't see how it can possibly add $1.8 billion to the value of Adobe, but
maybe I'm short-sighted.

~~~
netsp
Well, assuming that it is worth somewhere around $1.8b (either because of its
intrinsic value or because you could sell it for around that), it has already
added about that even if they do nothing but just own it.

If they have any sort of plan for really integrating (I think they might have
a history of doing this), it probably means they want the mature
sales/consulting/customisation part of the business. The technology side, as
mentioned elsewhere, is not that interesting.

------
mbreese
I know Adobe, but I don't know Omniture. This may be a dumb question, but what
do they do?

And how does this mesh with Adobe's product line? Based upon initial comments,
it looks like this may be the bigger question.

~~~
mikeryan
Omniture's main product is web analytics software (a hosted solution)

They're trying to move that model into more traditional apps as well. Like
tracking flash or AIR apps, they even do some analytics on some connected game
consoles.

On the surface its a strange fit.

~~~
imajes
Yeah, no kidding. Plus, adobe doesn't seem to have the money up front-
remember, they asked their staff to take unpaid vacation this year-- this
seems like a very strange way to say 'screw you' to their investors.

~~~
asdlfj2sd33
3 weeks unpaid time off, if my recollection is correct. And then they go spend
that kind of cash on an acquisition, I doubt it will create a lot of good will
inside the company.

~~~
dschobel
I know a few companies which have cut benefits to their employees while at the
same time acquiring other companies and it makes perfect sense.

1) It's a buyers market because a lot of companies are looking for an out even
at reduced valuation. 2) Employees are similarly not going anywhere in a
climate like this so you can cut benefits for the time being because everyone
is cutting benefits.

Look at the acquisitions as a long term investment whereas the reduced
benefits are a band-aid.

~~~
aaronblohowiak
"makes perfect sense" -- if you don't mind really high turnover when "good
times" return AND low productivity for your captive employees.

~~~
dschobel
you're assuming that the companies won't reassess when the situation recovers.
that's why I specifically said 'band-aid' as in a temporary measure.

and when the benefit reductions are in lieu of lay-offs, morale shouldn't be
affected. people should be far-sighted enough to realize that everyone has to
scale back.

if the companies don't readjust later then it goes without saying (or so I
thought...) that they will lose employees.

the bottom line is that there is good sense in it.

~~~
aaronblohowiak
"when the benefit reductions are in lieu of lay-offs, morale shouldn't be
affected" -- in isolation, i agree. I think good will is easily lost and hard
to re-earn, and spending a ton of cache while asking people to cut back is
pretty harsh in my book.

"if the companies don't readjust later" .. i don't think people forget so
soon. Also, the most effective people still have options in the downturn and
are the ones you really can't afford to lose.

Mergers are really hard to get right, and you need buy-in from on high all the
way down through the effected organization.

The bottom line is that you need to account for the ill will internally when
you are considering making a decision like this. It may very well be the
optimal choice for increasing short-term shareholder value, which is a
publicly traded company's number 1 priority.

Now, if Adobe also announced that they'd pay doubletime for vacation for
employees that took the unpaid time off and stuck it out, that'd be a Good
Thing.

------
startingup
What this acquisition demonstrates is that there is a lot of established
vendors who have cash burning a hole in their pocket, but no organic sources
of growth. Years of bureaucratic culture - I would have said marketing culture
but Apple does marketing well, so it would be a disservice to real marketeers
to call Adobe's a marketing culture - has destroyed the technology soul of the
company. Result: clueless management goes and overpays, aided and abetted by
investment bankers (public) or VCs (private).

This disease abounds in the industry. Sun overpaid for a series of companies
over a 7 year period; Intuit has acquired and done nothing with a whole lot of
them; the less said about Yahoo the better; and VMWare + SpringSource ($400
million?) ...

I guess there is hope for a lot of start-ups yet ;-)

~~~
netsp
Adobe has a reasonable good record with acquisitions.

~~~
paraschopra
Yup, the acquisition of Macromedia comes to my mind. They have leveraged that
pretty well.

------
frig
Hypothesis: adobe is the content-creation-tools company (and has flash).

Omniture+Adobe leads to: deeply integrated content+analytics, eg the ability
to author web or flash content with very fine-grained data capture and
analytics.

~~~
callmeed
That's a lot money to spend on an analytics platform for Flash.

I can see that it might be big for video analytics (since most web video is
Flash/FLV), but ...

Perhaps Adobe is hedging it's bet on Flash being a dominant web platform in
the future? ... maybe they have plans for other (HTML5?) web publishing
products/services?

~~~
frig
It is if it's just that.

I was thinking it'd be also like pdf and that other format adobe's been
working on for ebooks (basically similar to pdf but better about reflowing
text for different screen sizes) would wind up having fine grained analytics
platforms built in (obviously in supported readers only) @ the chapter and
paragraph levels or whatnot.

That kind of thing.

------
amadiver
Maybe Adobe will invest a few bucks in making the code/documentation behind
Omniture's tracking system less like beholding something from an H.P.
Lovecraft novel.

~~~
bonaldi
Yep, the marketdroids running Adobe are definitely going to invest money in
R&D and improving their code. Look at CS4! Oh, right.

Definitely seems like a baffling move from the outside, but to be honest
virtually everything Adobe's done in the past few years has been bizarre and
counter-productive. Frustrating, because skunkworks projects like Lightroom
(sorry, Adobe Photoshop Lightroom) show that the engineering heart of the
company beats on. It's just got arteries clogged with bullshit, nonsense and
Flash.

~~~
seldo
I agree with everything, except that I think Flash is also a great product.
FutureSplash Animator (oh, those were the days) was a revolutionary product
that blew the crap out of the only other web multimedia solution at the time
(which was Shockwave). It was vector based (truly revolutionary in 1996!),
small, fast even on computers of the time. Even after the acquisition by
Macromedia, the introduction of simple video streaming to Flash completely
changed the economics and hence the popularity of online video, which produced
YouTube, Hulu, and other game-changer online companies.

Since the second acquisition (by Adobe), Flash has been buried under the
mountain of bullshit you've mentioned, but Flash was and is a great product,
as evidenced by its ubiquity -- 98% of desktops in the world have Flash
installed, more than have Microsoft Windows. Pretty amazing stuff.

~~~
bonaldi
There are a lot of great products in the Adobe stable -- Photoshop defined an
industry, InDesign has redefined one, PDF revolutionised a lot of things
(storming barricades put up by Postscript, which is also an Adobe product).
The problem is that Adobe's dreadful stewardship means they all go to
bloatware shit in the end.

Flash may have been a great product, but it certainly isn't anymore. And its
ubiquity simply shows the popularity of things people have done with it --
video being the big driver -- and doesn't prove that it is "great", any more
than the number of Windows seats prove its greatness.

The Flash runtime on the Mac is so poor that even their Flash PR-blogger
suggests you get a flashblocker (there are also rumours that ClickToFlash was
originally an inside job -- thanks for taking pity on us!) to deal with it.
All the while he protests that Adobe doesn't need to do anything to improve it
to deal with the challenges of HTML 5, because only "minority" browser vendors
care about that, and IE will always be king. He'd better hope so.

------
chaosmachine
Hm, $1.8 billion. That's roughly 2.5 million copies of Photoshop CS4.

~~~
Tichy
That's not even that much... (2.5 million I mean).

------
dtap
It is good to see the M&A activity picking up. Zappos, Mint, now Omniture. The
fact that companies can get enough cash to make acquisitions is a good sign
the worst is behind us.

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zaidf
I don't know too much about Omniture. But I recently met the chief of online
marketing of Lenovo and after much prodding about how big companies manage
their marketing, he told me they all use Omniture.

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vibhavs
I definitely didn't see this one coming.

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paraschopra
I think Adobe has bought Omniture's sales fleet, not its technology. Omniture
sales team has significant reach across all big publishers on the web. Almost
every big player knows or has used Omniture's testing, targeting or analytics
solutions. Adobe may well utilize that reach to cross-sell its proprietary
technology.

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hypermatt
This buyout doesn't make a ton of sense. Hopefully adobe is buying it to make
the flash integration better since ad tracking is so important and omniture
never worked great with flash.

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foulmouthboy
To me, this is Adobe's play at being everything that it takes to build
websites. Start with the tools and popular platforms and move right into the
measurement and optimization.

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zaidf
I really respect Adobe for its acquisition acumen.

