Trying to achieve critical mass, it took “two nanoseconds” to see potential

In a move designed to create critical mass in a market filled with small, struggling software companies, two San Francisco-based multimedia software companies — Macromind Inc., of Director and MediaMaker fame, and Paracomp, known primarily for its Swivel 3D and FilmMaker products — have signed a letter of intent to merge.

Both companies claim the move is indeed a merger and not a thinly veiled buyout. The new company will be called Macromind/Paracomp, already dubbed “MMPC.”

Two months, start to finish. Tim Mott, president and CEO of Macromind, said what began as discussions about joint promotions only two months ago turned almost immediately to the idea of a merger. According to Mott, it took their respective boards “about two nanoseconds” to realize the potential in such a deal.

Paracomp brings to the table its expertise in 3D graphics construction and animation, and Macromind provides its experience as a pioneer in media integration tools. For the “creative professional,” MMPC will continue to deliver tools for graphics, animations and multimedia presentations.

Though both companies’ products are well regarded within the industry, it’s widely known that they have found it difficult to be profitable in the nascent market for multimedia and graphics software. Macromind, in fact, now supplements its Director revenues by leading in-house training classes for new customers.

A changing world. In addition, competition is beginning to heat up for Director- and FilmMaker-style products; competitors are hot on the trail of creating easier-to-use multimedia authoring systems. Since 90% of Director and FilmMaker owners use both products, it was natural for Macromind and Paracomp to see the virtue in combining their reputations and resources to counter such threats.

Those more critical of the move believe that combining product lines is an easy way to avoid the higher cost of innovation while creating a larger market presence. But with MacroMind’s brand-new product and underlying architecture (see sidebar, page 19), that point may be hard to prove.

However, both companies have been struggling financially for years, and it’s said they want to take the combined company public some time next year. To do so, their balance sheets must look significantly better than they do today.

Product consolidation. While the initial opportunities will be in joint sales and marketing ventures, the two companies will ultimately combine their particular spheres of influence to create new products and solutions for multimedia producers.

Mott says that there are no immediate plans to scrap any products or merge them into a single entity. He explains that MacroMind’s research shows that creative professionals who use products such as Director and FilmMaker generally use same-genre products from many suppliers because they “understand the subtleties between programs, and will use whichever is right for the job.”

What’s closer to the truth, however, is that no firm making multimedia authoring tools has yet completely understood the needs of its users sufficiently to provide all the necessary functionality in a single product. We hope the combined knowledge of the two firms can remedy that problem.

Mott acknowledges the probability that MMPC will develop, over time, a more streamlined product line. That’s good news since no one, we believe, really wants to use two incompatible authoring systems. And MacroMind 3D is already functionally compatible with Swivel 3D Professional.

Who’s at the top? Mott will hold the title of CEO of the new company, while Bill Woodward, currently CEO of Paracomp, will serve as its chairman. They will share a so-called “Office of the President.” Mott will initially be responsible for international operations, finance and product development. Woodward will be responsible for U.S. sales and marketing.

Senior management will consist primarily of MacroMind veterans, including VPs of product development and marketing, as well as the CFO. The VP of sales comes from the Paracomp side.

Mott says that the final agreement will be signed in early August. MMPC plans to move into shared quarters by year’s end.

- David Baron, Denise Caruso