Macromedia Reveals Upgrade, Deal With IBM

The company expects the upgrade to its Web-development product line to reverse its falling revenue.



Macromedia Inc. unveiled Monday a major upgrade to its Web application development product line that it believes will drive future revenue, making up for a poor finish to the previous fiscal year. Macromedia MX includes new versions of the company's ColdFusion server, Dreamweaver Web-design software, Flash animation creation and display tool, Fireworks graphics software, and FreeHand illustration tool.

Macromedia also revealed a new deal with IBM that calls for IBM to sell ColdFusion MX with its WebSphere application server, which is running neck and neck with BEA Systems Inc.'s WebLogic as the market leader. IBM and Macromedia also will work together on development, marketing, and technical support. Financial terms of the deal were not released.

Macromedia last week reported a fiscal fourth-quarter net loss nearly four times greater than the same quarter a year ago. Revenue for the quarter ended March 31 dropped 15%, as business spending on technology remained weak. Nevertheless, Macromedia officials believe the product upgrades will drive a 10% revenue increase this quarter from last. In addition, the company expects to post a profit each quarter this fiscal year. Investors apparently agree. Macromedia shares are trading almost 22% higher this year, selling for $22.20 Monday on the Nasdaq.

With the product upgrades, Macromedia is following a trend toward giving Web-site visitors pages that contain audio, animation, video, and dynamic content, says Yankee Group analyst Rob Perry. "They have a very good vision, and they're rolling it out very well," Perry says. One of the biggest factors in Macromedia's favor is the widespread use of the Flash animation plug-in in Web browsers and corporate intranets. In addition, a Yankee Group survey conducted in August found ColdFusion used in Web development by 13% of enterprises polled, second only to Microsoft products. Macromedia is moving deeper into markets where Microsoft competes, but it's too early to say whether that will have any significant impact on the smaller company. "They will be getting Microsoft's attention," Perry said. "There's no doubt about that."

Macromedia tools are focused on building the presentation layer of Web applications, leveraging the company's ubiquitous Flash animation plug-in, which is found in the majority of Web browsers. In March, the company started shipping Flash 6.0, which contained features that make it possible to transmit audio and video and to act as a user interface for Web applications running on centralized servers. "We think we have a unique offering by combining rich content and applications together to create much more compelling experiences for the end user" on the Web, says Jeremy Allaire, Macromedia's chief technology officer.

The ColdFusion server has been rebuilt from a proprietary scripting engine into one that can integrate with Java-based application servers, including WebSphere, WebLogic, and Sun Microsystems' iPlanet. While ColdFusion handles the presentation layer, such as delivering dynamic content to the browser, the application servers can handle higher-level services such as transactions and database connections. Macromedia Studio MX, which sells for $799, includes all of the company's development tools in an integrated environment. For deploying applications, Macromedia offers two versions of ColdFusion MX Server: a professional edition for $799 per server and an enterprise edition for $4,999 per server.

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