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Avid Acquiring M Audio


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Associated Press

Avid Tech to Buy M-Audio for Cash, Stock

Friday August 13, 8:42 am ET

Avid Technology to Buy M-Audio for $80 Million in Cash, 2 Million Shares, Assumption of Options

 

TEWKSBURY, Mass. (AP) -- Digital media software maker Avid Technology Inc. said Friday that it signed a definitive agreement to acquire Midiman Inc. for $80 million in cash, 2 million Avid shares and the assumption of all Midiman stock options, which will cover about 325,000 added Avid shares.

 

Midiman, which does business as M-Audio, provides digital audio and MIDI services for electronic musicians and audio professionals. Founded in 1988, the Irwindale, Calif.-based M-Audio has about 200 employees in the United States and Europe. M-Audio's revenues for the fiscal year ended Jan. 31 were about $51.5 million, and are expected to grow more than 30 percent in fiscal 2004.

 

Avid said it may pay earn-outs of $20 million and $25 million to M-Audio shareholders for the periods ending Jan. 31, 2005, and Dec. 31, 2005, respectively, based on reaching certain financial milestones relating to the sale of M-Audio products. The earn-out payments will be paid in stock based on Avid's stock price at the time the earn-outs are paid.

 

M-Audio will become a unit of Avid's Digidesign audio division and market its line of computer audio peripherals, PCI sound cards, keyboard controllers and control surfaces, microphones, speakers, and distributed software and sound libraries alongside Digidesign's digital audio workstations for the professional and home/hobbyist markets.

 

The company expects to close the deal later this month, and said M-Audio is projected to add more than $20 million to Avid's revenues in 2004. Avid doesn't expect the acquisition to add to third- and fourth-quarter results during the integration process.

 

Looking ahead, Avid forecast third-quarter earnings of 47 cents on revenues of $143.5 million, and fourth-quarter profits of 51 cents on revenues of about $162.5 million. Fiscal 2004 earnings are expected to be $1.88 on sales of $573 million.

 

Excluding one-time items, Avid said it expects pro forma earnings per share to be about 52 cents in the third quarter, 60 cents in the fourth quarter and $2.04 for the full year. The acquisition of M-Audio is expected to significantly add to Avid's top-line in 2005, taking the company's revenues to more than $700 million, and add to 2005 revenue on a pro forma basis. Excluding charges, Avid said 2005 earnings should be in the range of $2.60 per share on about 37.5 million shares outstanding.

 

Shares of Avid closed Thursday at $42.25 on the Nasdaq National Market.

I took this from the duc, posted by da BaSsTaRd ( see this thread for reference on the duc )
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This reminds me of a recent event.

 

At the January NAMM show in LA...M-Audio had their booth directly across from Digidesign's. The M-Audio booth was packed, like, significantly packed, all weekend with great guest artists and LOTS of curious info seekers.

 

It reached it's zenith when Earth Wind and Fire took to M-AUdio's small stage to do a 60 minute set. That whole area of the hall just stopped doing demos and everything while EWF started funking up the place. It was awesome. People were climbing on top of other vendor's booths to get a look, tons of video cameras were rolling, and that wing turned into a huge party, all centered around M-Audio.

 

The Digidesign folks were seething. Particularly this one b*tchy woman, who kept asking people to leave their booth, please don't stand in our area to watch "their" show, etc. She was a real PIA. She (and some others, perhaps?) complained the most to NAMM officials, and EWF's 60 minute set was cut short about 15 minutes into it.

 

I loathed the "Digidesign" attitude from that moment on.

 

Now, 8 months later, they own M-Audio. Mind boggling.

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From M-Audio's Website:

 

Q and A's For M-Audio Customers

 

1. Why did Avid decide to pursue this acquisition?

 

Avid is continuously seeking to offer its customers tools that make them more creative and productive. This acquisition expands Avids leadership in digital audio and represents an attractive growth opportunity for Digidesign in that market. M-Audios line of products aimed primarily at musicians and recording enthusiasts complements Digidesigns strengths in the home and professional markets. Overall, the acquisition puts Avid in a position to reach an increasingly broad spectrum of audio customers, from music hobbyists with simple home studios to facility owners, recording artists, audio engineers, and film sound professionals. When the acquisition is complete, we will have strengthened our investment in the overall home studio market segment, the fastest growing portion of our audio business, where we achieved roughly 40% year-over-year growth in Q2 of 2004.

 

2. How much will Avid pay for M-Audio?

 

At closing, Avid will pay approximately $80 million in cash, issue approximately 2 million shares of Avid common stock, and assume all outstanding M-Audio stock options, which will cover approximately 325,000 additional shares of Avid common stock. Earn-outs of $20 million and $25 million may be payable to M-Audios equity holders, for the periods ending January 31, 2005, and December 31, 2005, respectively, based on the successful achievement of certain financial milestones relating to the sale of M-Audio products. The earn-out payments will be paid in stock based on Avids stock price at the time the earn-outs are paid. All shares issued in the acquisition will be registered for resale following the closing.

 

3. Will M-Audio operate as a division of Avid?

 

When the acquisition is complete, M-Audio will operate as a business unit of Digidesign, Avids audio division.

 

4. What areas of Digidesign and M-Audio will merge?

 

Digidesign and M-Audio will not merge. When the acquisition is complete, M-Audio will be a business unit within Digidesign, and will continue to function as it has in the past.

 

5. Will M-Audio move its headquarters to Daly City or Tewksbury?

 

No, M-Audios headquarters will remain in Irwindale, CA, and there are no plans to relocate this facility as a result of the acquisition.

 

6. Are pricing changes planned?

 

No pricing changes are planned for either M-Audio or Digidesign products as a result of this acquisition.

 

7. How will Digidesigns products, such as Pro Tools, integrate with M-Audio systems?

 

Many of M-Audios products such as keyboards, MIDI interfaces, microphones, and speakers are already in use in conjunction with Pro Tools systems. Other M-Audio products, such as computer peripherals, are not currently compatible with Pro Tools. While the companies may discuss these types of combinations in the future where they make sense, there are no plans to integrate Digidesign and M-Audio products as part of this acquisition announcement.

 

8. Does Digidesign plan to develop a Pro Tools application for M-Audio hardware?

 

Currently the Pro Tools LE software application is written specifically to operate with Digidesigns line of LE hardware interfaces for reliability, performance, and ease of setup. Digidesign also includes industry standard drivers (Core Audio and ASIO) with LE products, so that any piece of compatible software can use them for audio recording and playback. While the companies may discuss integrated product development initiatives in the future where it makes sense, there are no plans to develop Pro Tools for M-Audio hardware as part of this acquisition announcement.

 

9. Are there plans to brand M-Audio gear as Digidesign and eliminate the M-Audio name from the MI landscape altogether, as Apple did with E-Magic?

 

There are no plans to change M-Audio branding or product names as a result of this acquisition announcement. Once the acquisition is complete, the M-Audio product line will remain intact and retain the M-Audio brand identity. In addition, M-Audio is a respected brand name that appeals to musicians and home recording enthusiasts. While Digidesign has also been extremely successful in this market segment with its LE line of home products, the combination of our product lines following the acquisition will extend our reach to touch more customers in this key growth area. Retaining the M-Audio name will allow Digidesign to reach a wider range of audio customers overall, but will not confuse brand identities in different market segments.

 

10. Will M-Audio customers have new sales/support contacts within their respective regions?

 

After the acquisition is completed, M-Audio customers will retain the same sales and support contacts as they have had in the past. No changes are currently planned for local offices in different regions and geographies.

 

11. Will there be changes to the technical support that M-Audio customers receive?

 

No changes in customer support are expected as a result of this acquisition announcement.

 

12. Will Digidesign be launching any upgrade/exchange promotions to M-Audio customers?

 

There are no plans for exchange programs for M-Audio customers as a result of this acquisition announcement. Once the acquisition is complete, Digidesign may consider offering exchange programs to M-Audio customers that are comparable to the hardware exchanges currently available to Digidesign customers.

 

13. Where will M-Audio customers go for technical support?

 

Once the acquisition is complete, M-Audio customers will continue to contact M-Audio for all technical assistance as they have done in the past.

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Originally posted by ryst:

So now Avid will own M-Audio and Digidesign? I have no idea what to think of this or if it will affect Ableton at all. I know M-Audio only distributes LIVE but I'm getting worried and I don't know why. Someone hold me...... please?

Donchya think it means Ableton will eventually only work on M-Audio or Digi products?

 

Mark my words.

 

They'll probably also put in roadblocks for M-Audio users exchanging data and projects with other non M-audio users if at all possible. Or maybe even try to block the hardware from working with other software.

 

OTOH, maybe they'll make a version of PT for M-Audio gear. Ha ha.

 

Or even fix the pitiful M-Audio driver situation. Nah... that's too absurd to even joke about.

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I am NOT authorized to give more information than the content of the Q&A already posted.

 

However, as soon as they allow me to talk I will keep you guys updated.

 

:)

Músico, Productor, Ingeniero, Tecnólogo

Senior Product Manager, América Latina y Caribe - PreSonus

at Fender Musical Instruments Company

 

Instagram: guslozada

Facebook: Lozada - Música y Tecnología

 

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Originally posted by Gus Lozada:

I am NOT authorized to give more information than the content of the Q&A already posted.

 

However, as soon as they allow me to talk I will keep you guys updated.

 

:)

GOLLY! What powerfull guys these are to keep you from talking! We've been trying to do this for YEARS!!! :D

 

Is There Gas In The Car? :cool:

"Music expresses that which cannot be put into words and that which cannot remain silent." - Victor Hugo
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Originally posted by theblue1:

Donchya think it means Ableton will eventually only work on M-Audio or Digi products?

 

Mark my words.

Naah. Ableton is its own entity and has very little to do with M-Audio except as a distribution channel. They also distribute Reason...do you think think that will happen to them?

 

Not a chance. Europeans love their autonomy. :thu::thu:

"For instance" is not proof.

 

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I don't expect any jarring changes at M-Audio over this. When Avid acquired Digidesign, the changes seemed slow and subtle.

 

9. Are there plans to brand M-Audio gear as Digidesign and eliminate the M-Audio name from the MI landscape altogether, as Apple did with E-Magic?
Someone should tell whoever originally posted this that, unlike "M-Audio," it's not written as "E-Magic" and that Emagic still exists as a brand name.

 

As evidence, here's a photo of the new Emagic Logic Pro:

 

http://www.emagic.de/media/products/content/products_PRO.jpg

 

Gustavo, I'm happy that it seems you still have a job at M-Audio (not that I expected otherwise...)! :thu:

 

Best,

 

Geoff

My Blue Someday appears on Apple Music | Spotify | YouTube | Amazon

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I don't like Digi's (Avid's) attitude. At all.

I have never liked Didi's attitude, from their first promised 'upgrade' to their $800 SoundDesigner editor for the Akai S900 (the 'upgrade', after two years or promise, cost $2500, and you had to buy a $1500 card to work with it, and ooh, it won't work on your Mac SE30 at all, you'll ned a new $2500 computer...) :evil:

 

I have never purchased a Digi system since then, never will. But I hope they don't mess with M-Audio's new lines, hey're finally starting to produce keyboards that have the features I need (Gus, what's this about the organ controller keyboard with space for a laptop?) :thu:

 

Dasher

Dasher - don't ask me about those other reindeer, all I can tell you is Comet's in the sink!
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Originally posted by Gus Lozada:

I am NOT authorized to give more information than the content of the Q&A already posted.

 

However, as soon as they allow me to talk I will keep you guys updated.

 

:)

Thanks Gus. Best of luck with the transition. :)
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Originally posted by DJDM:

Thanks Gus. Best of luck with the transition. :)

Ditto.

 

And on a personal note, I LOVE MY 1010's! They are among the best in the biz. I hope to god I can expect the same quality from M-Audio when it comes time to replace these fellas.

Whenever you find that you are on the side of the majority, it is time to reform.

Mark Twain (1835-1910)

--------------------

Reporter: "Ah, do you think you could destroy the world?" The Tick: "Ehgad I hope not. That's where I keep all my stuff!"

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The most interesting theory I've heard (this is from a very knowledgeable but non-attributable source)is that the rumored Apple "Pro Tools" killer really does exist, and will hit the world soon. By acquiring M-Audio, Digi now has "insurance" in the form of owning a different corner of the market.

 

What floors me in all this is that I remember the early days of MIDIman, which was...well...not that different from Peter Gotcher and Evan Brooks selling Drumulator replacement chips out of their garage and becoming Digidesign. Tim Ryan et al have been around for a long time and worked hard to get where they are. I'm glad they got a reward for that work. I've had M-Audio products save my butt a couple of times on the road, so I'm favorably disposed toward the company :)

 

Finally, as to Ableton, it's correct they're a separate company altogether. M-Audio distributes the product but has no ownership of the company. However, I do think that with Live 4 being so cool, they'll try to maintain the distribution situation. Don't forget that mini versions of Live and Reason come with several Digi packages.

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Originally posted by Anderton:

By acquiring M-Audio, Digi now has "insurance" in the form of owning a different corner of the market.

It's not a corner they have much experience in (reasonably priced hardware, that is). From that Q&A thing, it seems like M-Audio is basically remaining autonomous, only now (1) their profits will head up to Digi/Avid and (2) they should have easier access to capital through Avid then on their own. So, from Avid's perspective it does seem like an "insurance" move, which is a troubling development for Avid shareholders -- it has long been proven that conglomeration leaves shareholders worse off over time than if the funds would have been paid out as dividends (in this case $80 million in cash, plus potential additional earnout payments of $45 million to M-Audio shareholders) and reinvested by the shareholders themselves.

 

[EDIT] P.S. $80m is twice the net income Avid showed for all of 2003, to give you an idea of how much cash this is to Avid. It's 80% of the total amount of cash they had on hand at the end of 2003, and 133% of the amount of cash they had on hand at the end of 2002. In other words, it's a lot of cash to them.

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Originally posted by Phil B:

[in other words, it's a lot of cash to them.

... and it's worth every penny ;)

 

Regarding Ableton you have to understand that M-Audio ONLY DISTRIBUTES IT. According to what has been said, everything will remain untouched, including our own distribution lines, including Ableton, Propellerhead and FocusRite from Digi.

 

BTW Ableton is not a competitor to Pro Tools. They can co-exist in a very pretty manner so any of our lines do really have a conflict. Let's see what happens.

 

There are A LOT of theories talking about M-Audio stuff running PT LE, but at this very point, there's anything confirmed, it's really too early to know for sure. Of course, we all expect to be a better option to our customers.

 

We were fighting Evolution Keyboards for a while, then we bought them. Digi and us were competing in the home recording market, now we are just brothers... what an interesting day...

 

Stay tuned :cool:

Músico, Productor, Ingeniero, Tecnólogo

Senior Product Manager, América Latina y Caribe - PreSonus

at Fender Musical Instruments Company

 

Instagram: guslozada

Facebook: Lozada - Música y Tecnología

 

www.guslozada.com

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Originally posted by Anderton:

The most interesting theory I've heard (this is from a very knowledgeable but non-attributable source)is that the rumored Apple "Pro Tools" killer really does exist, and will hit the world soon. By acquiring M-Audio, Digi now has "insurance" in the form of owning a different corner of the market.

 

M-Audio is to ProTools what ProTools was to Synclavier. And if / when Apple releases their PT-Killer (and I hope it is soon -- c'mon Apple!) the days of host-based DAW-dom may finally be over.

 

I'm already treating my "new and improved" console-less studio as Post-Pro-Tools. I ordered a new dual 2.5 G5 Mac, with plans for a UAD card and/or TC Powercore for additional DSP rather than use TDM.

Dooby Dooby Doo
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Originally posted by Doug Osborne:

OMG!

 

I usually hear about these things before they happen...I'm slipping...Jeff, did you know?

I hear pretty much everything before it happens... and I had NO idea about this. Of course, knowing Digi as I do, it's entirely unsurprising that I didn't know. It would be more likely that I had secrets from the Pentagon than those from Daly City.

 

Well, best of luck with the transition of ownership. I'm happy for M-Audio's fonder and president, Tim Ryan. He's a great guy who worked hard to develop Midiman (and subsequently M-Audio) and deserves the big payday.

 

- Jeff

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I was leaning toward the ProTools killer rumor/myth as my explanation of this - and it does make strategic sense - tightening Digi's grip on the dealer landscape. But then I began to wonder if the real reason might be that it has become absurdly inexpensive to manufacture in China and the only thing that was slowing Avid/Digi down was the inability to come up with products fast enough. M-Audio has been pretty fast on their feet in bringing new items to market. Avid/Digi would be confident that they could save by consolidating back-office, credit/collections, planning and finance functions.

 

Strategically. I wouldn't be surprised if Digi is a little anxious about CREAF. The new series of EMU cards are a good indication of how serious CREAF can be if they try. Certainly their promotional campaign takes aim at Digi. M-Audio has a brand in consumer and entry level multi-channel soundcards. That market is dominated by Creative. This might be an opportunity for brand positioning in case things get ugly.

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