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Macromedia: Never Good Enough

Last week, it was particularly brutal for companies that were posting their earnings. Even if the reports were "blow-outs," it really didn't seem to matter.

A prime example is Macromedia . True, the stock has had a tremendous run-up and was due for some type of correction. But on Friday, it seemed like overkill.

The company is not an upstart; rather, it is a pioneer of the PC software industry, founded when there were such things as floppy disks and the DOS operating system.

Since then, the company has been continuing to grow its business. Here's a look at the latest earnings report. In the past quarter, revenues were $94.8 million, which was an 85% increase from the same period a year ago. Pro forma earnings were $14.5 million, which was up from $3.5 million in the same period a year ago. The earnings translated into 26 cents per share, which was above the 21 cents for the consensus estimates for First Call.

But this was not good enough, as the stock plunged. By the end of trading, the stock was at $79-1/16, down 29-11/16. The stock was as low as $63-3/4.

Of course, it was not helpful that several analysts went negative. The reason? Well, Macromedia will be releasing some major programs later this year. Thus, there should be a slowdown, as customers hold-off on purchasing. What's more, summer tends to be a slow period for software companies.

But the fact is that Macromedia is a company that has been able to effectively transition itself towards the Net. The two main products include Dreamweaver, which allows for the design of Web sites, and Flash, which adds pizzazz to Web sites.

Actually, the company released a new version of Dreamweaver, called UltraDev. This allows developers to create database Web applications using visual tools. The software works with JavaServer Pages, Microsoft Active Server Pages and ColdFusion.

As for Flash, this is becoming a global standard. n the last quarter, there were 180 million downloads.

If anything, Macromedia is still in the beginning stages of realizing the benefits of the Net. With the move towards broadband, the company's graphics solutions will become even more valuable. Moreover, the company's products are proving to be versatile, such as expanding into e-business and wireless. So, if anything, the recent downfall is a great opportunity to buy a franchise Net company at a great price.