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.

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