Adobe makes a big-time web deal for Omniture

Posted Sep 15th 2009 6:00PM by Tom Taulli
Filed under: Adobe Systems (ADBE)

Back in the mid 1990s, Josh James -- who was an undergraduate -- saw huge potential in the Internet. So he teamed up with a friend, John Pestana, to create a company that helps put together web pages. The company eventually became Omniture (Nasdaq: OMTR), which is a top player in web analytics .

Well, the bet has paid off. Today Omniture sold out to Adobe (Nasdaq: ADBE) for a cool $1.8 billion. Omniture's shares ended the day at $17.32.

While Adobe has a strong R&D capability, there are areas that the company has no choice but to make an acquisition. This was the case with the $3.5 billion acquisition of Macromedia back in 2005.

And, Adobe's deal for Omniture is another example. In fact, Omniture engaged in aggressive M&A to build its extensive analytics platform, which includes a portfolio of 12 products. There are more than 5,000 customers.

What's more, the growth has been torrid. From 2004 to 2008, revenues have gone from $20.6 million to $295.6 million. No doubt, the M&A activity was a big boost.

The deal for Omniture is not about cost synergies. Instead, it's a way to expand the revenue base, which will get lots of help from Adobe's distribution footprint. Of course, customers are looking for ways to monetize web assets -- and Omniture has the kinds of tools that allow for this.

Omniture will also give Adobe a strong cloud-computing platform as well as a recurring revenue model. True, the margins will be lower because of infrastructure costs. But over time, these should fall. For example, this has been the case with companies like Salesforce.com (NYSE: CRM).

Finally, Adobe anticipates that the Omniture deal will be accretive to non-GAAP earnings in fiscal year 2010.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: MA, omniture