One software heavyweight is taking over another in a $1.8 billion deal that may result in a handful of layoffs now but ultimately could lead to more jobs in Utah.
Adobe Systems Inc., the world's largest graphic-design program maker, will acquire Orem-based Omniture Inc., which makes software that helps companies measure the effectiveness of their online ads.
Omniture CEO and co-founder Josh James, who will become a senior vice president and report to the Adobe CEO after the acquisition, told the Deseret News Tuesday that of the 600 employees based in Orem, "the vast majority of people are going to be retained, and in fact our business will grow. Our footprint will grow. I expect to see more people at Omniture than less."
Adobe, which makes Flash, Acrobat and Photoshop software, said Tuesday during an earnings report it will buy Omniture for about $1.8 billion, or $21.50 per share in cash, a premium of 24 percent to Omniture's closing stock price Tuesday.
Trip Chowdhry, an analyst with Global Equities Research, said the deal would allow Adobe, which is based in San Jose, Calif., to create new streams of revenue even as its existing businesses face a decline. The recession and the corresponding decline in technology spending has hurt Adobe's profit and revenue, as many companies have put off upgrading costly software packages.
Though he called the deal "very timely," Chowdhry believes Adobe is overpaying for Omniture, especially because that company's paid products have been losing market share to Google's analytics service, which is free. He said $12 to $13 per share — rather than $21.50 — would have been a fair value for the company.
The deal is expected to close in November. Between now and the closing, James said negotiations are still under way and he didn't know if any Utah employees would have to move to the Bay Area, but he noted that Utah salaries tend to be lower, and Adobe may not want to transfer people.
Employees will likely benefit as being part of the Adobe company, James said. Fortune magazine named the company No. 11 on its most recent list of the top 100 companies to work for among companies with 2,500-10,000 U.S. employees. "They have sabbatical programs," he said, "and good benefits. They really care about people."
Omniture offers a variety of Web traffic analysis and other products for companies to improve their marketing over the Internet. Its customers include Apple Inc., Time Warner Inc. and Walt Disney Co.
James, the Omniture CEO, said the acquisition will result in automation of Omniture's services.
"Big companies use (Adobe program) Dreamweaver to make Web sites," he said. "In order to make the (Omniture) analytics work, you have to have HTML code that says 'Send this data to Onmiture servers.' So in order to make that work today, it's a very manual process."
Specifically, Omniture representatives spend months with customers typing HTML code into every single page on a customer's Web site.
"Going forward (with the acquisition), it automatically puts that code on the pages, so you don't have to go back to do that later," James said.
Flash is Adobe's movie and interactive software, and it is behind 80 percent of all videos online. Omniture can tell companies what video and how much of it people are watching, James said.
"If you, say, spend $1 million with your ad agency to make a really cool flash video to show your products, you'll want to know if people watched it, the whole thing through or just 10 seconds of it," he said. "If they watch 5 seconds or 10 seconds of it, maybe you shouldn't put that on your home page."
In addition to integrating products, Omniture will get to take advantage of Adobe's markets.
"They have over 60 percent of business outside the United States," James said. "Whereas ours is 25 to 30 percent. So that's a big opportunity for us overseas. Our government business is fairly small business for us, but it's a large business for them. Mobiles is a small business for us. But Flash is on 90 percent of the smart phones out there."
For the third quarter, Adobe earned 35 cents per share, a penny above what analysts polled by Thomson Reuters were expecting.
Wall Street closed before the announcement was made. Adobe stock had closed regular trading up 43 cents at $35.62.
Omniture's shares, meanwhile, soared $4.47, or 25.8 percent, to $21.79 after-hours. The stock closed earlier at $17.33, up 33 cents.
Contributing: Rochelle Garner, Bloomberg News
e-mail: lhancock@desnews.com