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Macromedia already sold tools for computer-based video production and desktop publishing. Now, all the com-pany needed was a sophisticated sound-editing tool such as Deck, and it would have all it needed to be known as the only complete source for computer media production tools.
After a couple of initial meetings, and two weeks of deliberation on Macromedia's part, the two companies reached a stock trade agreement worth more than $2 million. OSC would become a Macromedia division, run by Rosen.
OSC would have its Cinderella ending after all, it seemed. Deck, the wonderful tool that had brought music publishing to Everyman, would continue to be developed. The company, that wonderful group of friends whose diverse personalities had managed to click into a magical synergy, would stay together. And the business details that seemed to sap the grooviness from the OSC boys' idealistic exercise would suddenly go away.
Besides, $700,000 apiece didn't look half bad to a trio of guys who had been surviving on peanuts.
Bud Colligan, current chairman of the board and former president of Macromedia, is something of an expert at mergers and acquisitions. His company has grown at a lightning pace for the past five years, thanks, in large part, to a buying spree of small technology companies in Silicon Valley and elsewhere. While patient and courteous, Colligan talks just as a man would if he were tired of explaining over and over again that the recent collapse of his company's share price was a normal adjustment given changes in his industry, and that he is diminishing his role in the company not because of a lack of shareholder confidence in his management skills, but because he'd like to spend more time with his family.
He speaks more enthusiastically when discussing how firms can merge and take advantage of business synergies.
"You have to first of all have a common vision about where things are going. Second of all, it's good to get some good short-term wins as a common entity, so that both parties, the acquirer and acquiree, are having joint success as an entity. It's critical to have a long-term strategic fit," says Colligan. "Did I mention chemistry? Part of that is sharing a common vision. If you have a shared vision, the likelihood of good chemistry is much, much better."
The story of OSC's final months is the story of a corporate acquisition gone terribly awry, a merger that violated most of Colligan's rules.
The transaction seemed straightfor-ward enough. According to a Macromedia press release, the deal would enhance Macromedia's role as the exclusive hardware store of San Francisco's Multimedia Gulch, creating the sound, graphics, and motion-picture-producing tools for the city's burgeoning computer-media business.
The company's Deck software would allow Macromedia to "offer a complete solution for musicians, sound technicians, and video professionals who make up the growing audio side of the multimedia industry," the release said.
Rosen, Dalton, and Myrberg received 225,000 shares of Macromedia stock in exchange for all rights to OSC, according to Macromedia documents. The deal was described in Macromedia investor materials as being worth $2.8 million.
But by the spring of 1996, at the trough of Macromedia's stock plunge, the shares involved were worth less than $600,000 -- about what you'd pay in San Francisco for a low-rent-neighborhood delicatessen.
The collapse of Macromedia stock prices didn't merely diminish the value of the holdings of its three newest shareholders, Rosen, Dalton, and Myrberg. That free fall led to a dramatic reconsideration by Macromedia's board of directors of how the company would do business.
By 1996, the computer "multimedia" market wasn't centered around production of infotainment compact discs, as in-dustry planners had believed it would be five years previously, but on the World Wide Web. The Web required small, quick programs that could be easily transported over telephone lines. Macromedia's products largely con-sisted of disc-gobbling programs designed for people using computers to produce magazines, records, movies -- old media. If it was to survive, the company's fate had to be tied to the growth of the Internet, company directors decided. The old multimedia wheel would have to be reinvented.
From OSC's perspective, this was a truly unfortunate chain of events. Though there was some talk of turning Deck into a Web product, the truth was that it was a large, sophisticated program designed for the sort of super-high-fidelity audio production that isn't yet part of the Web universe. What's more, OSC's band of entrepreneurial punk-techno rockers wasn't exactly a good fit with Macromedia's new, all-out-panic corporate culture.
"They didn't really know what to do with us," Tommy King recalls.
There were efforts to integrate. Souvignier was given a "contract" to do some technical writing. King was given a desk and told to call all the Macro-media sales representatives and inform them they were carrying Deck, and call the OSC representatives to explain that they weren't.
Mats Myrberg, the Swedish genius, was put to work on "temporary" Web-oriented projects, and never seemed to have enough time to work on the planned "Deck 3.0" upgrade. Josh Rosen struggled to maintain the groovy OSC workplace -- the time off for music composition, the ideological fervor, all the other old-OSC accouterments -- and failed. John Dalton went his own way. So did Jeff Moore.
The countercorporate Shangri-La that the OSC boys felt they were creating at the company's old SOMA offices crumbled before their eyes at Macromedia.
From in-house sound studios, leather jackets at trade shows, midafternoon pot breaks, and officewide jam sessions, the boys now found themselves amid cubicles, suits, corporate titles, and petty office jealousies. Worse, Macromedia didn't seem to be doing near enough to market their product.
After less than a year, Macromedia decided to abandon development of Deck 3.0. In engineer-per-dollar-of-income terms, Deck wasn't as profitable as other Macromedia products, and keeping it alive didn't seem to make sense, Macromedia executives say. The company reassigned as many OSC engineers as would stay, and it let go personnel who did not easily fit into the company's new, Web-centric strategy.
