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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the Fiscal Year Ended March 31, 2000

OR

[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

COMMISSION FILE NO. 000-22688

MACROMEDIA, INC.
(A Delaware Corporation)

I.R.S. Identification No. 94-3155026

600 Townsend Street
San Francisco, California 94103
Telephone: (415)252-2000

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [   ]

Aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 9, 2000: $5,221 million. Common stock outstanding as of June 9, 2000: 51,696,228. See definition of affiliate in Rule 405, 17 (FR 230.405).

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the documents listed below have been incorporated by reference into the indicated parts of this report, as specified in the responses to the item numbers involved.

	(1)		Designated portions of the Proxy Statement relating to the 2000
			Annual Meeting of Shareholders:	Part III (Items 10, 11, 12 and 13)

MACROMEDIA, INC. AND SUBSIDIARIES

FORM 10-K
ANNUAL REPORT
For the Year Ended March 31, 2000

MACROMEDIA, INC. AND SUBSIDIARIES

FORM 10-K
ANNUAL REPORT
For the Year Ended March 31, 2000

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Table of Contents

PART I

      Except for historical financial information contained herein, the matters discussed in this annual report may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and subject to the safe harbor created by the Securities Litigation Reform Act of 1995. Such statements include declarations regarding our intent, belief or current expectations and those of our management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks, uncertainties and other factors, some of which are beyond our control; actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to: (i) that the information is of a preliminary nature and may be subject to further adjustment, (ii) those risks and uncertainties identified under “Risk Factors that May Affect Future Results of Operations” in Item 7 and the other risks detailed from time to time in our reports and registration statements filed with the Securities and Exchange Commission.

Table of Contents

ITEM 1. BUSINESS

Overview

      Macromedia, Inc. develops, markets and supports software products, technologies and services that enable people to define what the Web can be. Our customers, from developers to enterprises, use Macromedia solutions to help build compelling and effective Web sites and eBusiness applications. We were incorporated in Delaware on February 25, 1992, and have acquired several other businesses since our incorporation. Our principal executive office is located at 600 Townsend Street, San Francisco, California 94103 and our telephone number is 415/252-2000. Our common stock is listed on the Nasdaq National Market under the symbol MACR. Our World Wide Web site can be accessed at www.macromedia.com.

      We are a software company based in San Francisco, California with more than 1,000 employees worldwide working with industry partners to deliver compelling and effective Web experiences.

      We have two primary business segments in which we operate today, the Software business and shockwave.com. Our Software business’ products enable rich, engaging, and personalized Web experiences. From stand-alone products for Web authoring and graphics creation to integrated solutions for mission-critical eBusiness applications, we have the technology and services that enable developers and enterprises to create Web sites. Our consumer business, shockwave.com, Inc., provides a leading entertainment experience on the Web by means of content, products and technologies that give consumers a next-generation Web experience at www.shockwave.com. (For financial information regarding our business segments, please refer to Note 19 to our Notes to Consolidated Financial Statements on page F-35).

Market Opportunity

      The Internet has experienced dramatic growth since the advent of the World Wide Web, a graphically rich environment made accessible to millions of consumers by the combination of advanced networking technologies, inexpensive, multimedia-capable computers and Web browser technology. In just a few years, the Web has become a powerful business software platform allowing companies to communicate with their customers, vendors and employees using standard formats and protocols. For businesses, Web technology provides an alternative to existing mainstream computing platforms and creates new opportunities for commerce and information exchange. For consumers, the Web is quickly becoming a viable medium for communication, community and entertainment.

      We see five central market trends that will continue to drive large and growing market opportunities for our software and services:

(a)

As the Web matures, eBusinesses increasingly are focused on providing higher quality customer experiences, differentiating and expressing their brand identity, and attracting and engaging new and existing customers. Multimedia technologies that enable a richer and more compelling experience through

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			audio, animation, graphics, and interactivity are critical to this effort. While these higher quality Web experiences are already possible in today’s Internet environment, the growth of high bandwidth Internet access will only help accelerate this trend.
	(b)		Since the advent of the World Wide Web, there has been a dramatic increase in the number of people around the globe with Web-connected, multimedia-capable PCs. The Web is now just at the beginning of an expansion in the number and variety of Web-connected, multimedia capable devices, from set-top boxes, to handheld devices, to wireless phones. This proliferation will serve to increase the opportunities for businesses to leverage the Web for new applications and increase the importance of technologies for developing, managing, personalizing and analyzing Web applications across platforms.
	(c)		As the importance of the Web to a wide range of business practices has increased, the number of people involved in creating Web sites and Web-based applications at a given enterprise, and the complexity of building effective and engaging Web experiences has also increased.
	(d)		With the increase in both the importance and complexity of building eBusiness applications, the importance of integrated solutions that tie together tools, application servers and databases to create dynamic applications is increasing.
	(e)		The market for digital media entertainment has grown dramatically with the increasing proliferation and sophistication of personal computers, and with the expanding varieties of content and services available on the Internet.

      With these five trends, we see large and growing market opportunities for software solutions and services that enable developers and enterprises to create effective and engaging Web experiences and eBusiness applications.

SOFTWARE BUSINESS

      Our vision is a family of software products that will work together as a solution to streamline Web workflow from concept to design, development to production. Our products enable businesses to dramatically reduce the time it takes to develop their Web sites and provide mission critical solutions including Web measurement, analysis, and personalization solutions. Our line of software products allows us to deliver integrated solutions for our Web Content Lifecycle product solutions.

      We describe the Web Content Lifecycle as the five key areas of focus for the creation and management of Web sites: Build, Manage, Engage, Personalize and Analyze. These words represent the key steps in the Web Content Lifecycle necessary for the creation of effective and engaging eBusiness applications. Our software, together with future initiatives such as Project Whirlwind and in conjunction with companies with which we do business, enables customers to:

	•		Build sites efficiently
	•		Manage the production process
	•		Engage their customers
	•		Personalize their experience
	•		Analyze the results

      The graphic below illustrates how our software products are used to enable our customers to efficiently deliver compelling and effective Web experiences on multiple platforms through integration.

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	•		Macromedia Dreamweaver® - The solution for professional Web site design and production.
	•		Macromedia Fireworks® - The solution for professional Web graphics design and production.
	•		Macromedia Dreamweaver® UltraDev™ - The solution that allows developers, programmers, and designers to visually create and edit data-driven Web applications on multiple server platforms.
	•		Macromedia Flash® - The solution for producing high impact, vector based Web sites.
	•		Macromedia FreeHand® - The most powerful design tool for print and Internet graphics.
	•		Macromedia Director® - The standard for creating and delivering powerful multimedia.
	•		Macromedia Authorware® 5.1 - The solution for producing rich-media training and learning applications.
	•		Macromedia CourseBuilder for Dreamweaver® - An extension application which enables professional Web developers and subject matter experts to quickly and cost-effectively author engaging training content in a visual environment, without requiring programming knowledge.
	•		Macromedia Generator™ and Macromedia Generator EE™ - The solution for automated and personalized Web site graphics.
	•		Macromedia ARIA® - The solution enabling e-marketers to analyze users’ online behavior and gain a clearer understanding of their most valuable customers. ARIA automatically captures registration form data for demographic and geographic reports.
	•		Macromedia LikeMinds™ - The solution for real-time personalization of Web sites. LikeMinds automatically updates as new customers visit, existing customers’ tastes evolve, new products are introduced, and existing products are discontinued, without requiring constant updates from the

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Web staff. With each interaction, LikeMinds learns more about customers and products, continually becoming more accurate with its recommendations.

      Our unique Web Content Lifecycle approach to the creation of Web sites and applications is essential now that eBusiness is a critical component of any successful enterprise. Integrating Web content authoring with real-time analysis and personalization is critical to maintaining a competitive market edge and accurately measuring return on investment.

      Product Development

      Our business strategy emphasizes developing products and services that help customers take advantage of opportunities on the Internet. We aim to solve the problems customers face as they create and deliver content on a new medium with multiple standards, multiple browsers, and different bandwidth rates.

      As the software industry is characterized by rapid technological change, a continuous high level of expenditure is required to enhance existing products and develop new products. We plan to continue internal product development efforts and, as appropriate, acquire additional software and system technologies that we consider critical to meeting the needs of Internet developers, consumers, and the enterprise.

      We believe that our future success depends on our ability to enhance existing products, and develop and introduce new products on a timely basis. It is critical that new products and enhancements keep pace with the constantly evolving network infrastructure, Internet technology, and competitive offerings. We continue to adapt our products to new hardware and software platforms and to embrace emerging industry standards.

      For fiscal year 1998, 1999, and 2000, research and development expenses were $36.8 million, $41.6 million, and $53.5 million, respectively.

      Acquisitions

      In December 1999, we acquired Andromedia, Inc. (“Andromedia”) by exchanging all of the outstanding capital stock, options, and warrants of Andromedia for approximately 5.2 million shares of common stock, options, and warrants of Macromedia. The transaction was valued at approximately $210.0 million based on our stock price over a period of time at the initiation of the agreement. The transaction was accounted for as a pooling-of-interests, and all historical financial information presented has been restated to include the accounts and results of operations of Andromedia. The ARIA and LikeMinds product lines from Andromedia are now a critical part of our eBusiness infrastructure, and integrated with our products, allow developers to create content that has built-in tracking, profiling, modeling, analysis, personalization, and reporting capabilities.

      In September 1999, we acquired ESI Software, Inc., (“ESI”) by exchanging all of the outstanding capital stock, options, and warrants of ESI for approximately 635,000 shares of common stock, options, and warrants of Macromedia. The transaction was valued at approximately $24.1 million and was accounted for as a pooling-of-interests.

      Competition

      Our Software business competes in a highly competitive market characterized by pressure to incorporate new features and accelerate the release of new product versions and enhanced services. These market factors represent both opportunities and competitive threats to us. Some of our competitors do not offer as wide a breadth of solutions as we do. A number of our competitors, including Adobe Systems Inc., Corel Corporation, Accrue Software, Inc. and Net Perceptions, Inc., currently offer products and services that compete directly or indirectly with one or more of our software products. In addition, several of our current and potential competitors have greater financial, marketing and technical resources than we do. As we compete with larger competitors such as Adobe across a broader range of product lines and different platforms, we may face increasing competition from such companies.

      We believe that the principal competitive factors in the markets in which our Software business presently competes and may compete in the future are:

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	•		functionality;
	•		ability to provide efficient solutions;
	•		ability to timely introduce new product versions;
	•		ability to evolve with changing technology and customer requirements;
	•		performance of products;
	•		ability to provide enhanced solutions and support;
	•		ability to provide added value features;
	•		price; and
	•		market presence.

      Operations and Manufacturing

      We are dependent on a sole source, Modus Media, to manufacture and ship our finished products. The manufacturing of our products typically consists of pressing CD-ROMs, printing manuals, and packaging and assembling finished products, all according to our specifications and forecasts. Manufacturing is currently done at three Modus facilities worldwide: in Preston, Washington for the Americas, in Apeldorn, Netherlands for Europe, and in Singapore for the Asia Pacific market. We perform quality assurance testing at Modus facilities. Modus operates multiple facilities around the world that are capable of serving our needs, and we believe alternative sources could be implemented without significant interruption to our business. To date, we have not experienced any significant difficulties or delays in the manufacturing or assembly of our products or any significant returns due to product defects.

      In addition, we license and distribute our software products directly to end-users over the Internet through our Web site. We continue to invest in technologies and infrastructure to support electronic software distribution and online documentation, which are becoming an increasingly important and cost-effective way to deliver our products.

      Marketing and Distribution

      We extend our brand worldwide through creative marketing communications, our Web sites, www.macromedia.com and www.shockwave.com, public relations activities, customer seminars, advertising both on the Web and in print, and national and regional trade shows. We also use direct mail, both e-mail and print, to introduce new products and upgrades, to cross-sell products to current customers, and to educate and inform. In addition, we distribute a variety of interactive multimedia demonstration materials directly to prospective customers and follow up through outbound telemarketing during business hours.

      A substantial portion of our revenue is derived from the sale of our products worldwide through a variety of distribution channels, including traditional software distributors, electronic commerce on the Web, direct sales, mail order, educational distributors, value-added resellers (“VAR”s), original equipment manufacturers (“OEM”s), hardware and software superstores, and retail dealers. We also sell directly to large corporate and educational institutions, with volume licensing programs under which the customer receives a volume discount and has the right to reproduce and use our software.

      Internationally, our products are sold both directly to end users and through distributors. With distributors in more than 50 countries around the world, international sales accounted for 42% of total revenues during fiscal year 2000. In certain cases, distributors have exclusive distribution rights to certain products in their respective countries. In spite of economic difficulties in some regions, we believe that international markets for our products present a strategic opportunity, and expect international sales to continue to generate a significant percentage of our total revenues. (For financial information regarding our business segments, please refer to Note 19 to our Notes to Consolidated Financial Statements on page F-35).

      Customer Support

      We provide complimentary technical support to customers by phone and fax for a period of 90 days after the first technical support contact by a customer. After the 90-day period, we offer a paid technical support plan, Priority

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Access™, that provides the customer with access to a toll-free support line; priority in the call queue; priority response to e-mail, mail, and fax inquiries; and 24-hour voicemail messaging. We also offer high-end developer support.

      Millions of customers depend on our worldwide network of value-added resellers, training centers, and developers. In addition, our User Groups located in dozens of cities throughout the world, provide customers with ways to share information, network with developers, and keep in touch with us. We provide support through marketing collateral, guest speakers, product giveaways, and more.

      Our beta program enlists customers to conduct real-world tests on pre-release software, as well as provide feedback on features and software stability. The most informative beta sites receive free software.

      Macromedia’s Authorized Training Program is a worldwide network of professional trainers and educators who provide Macromedia customers with the highest-quality training on our products.

      Proprietary Rights and Licenses

      We rely on a combination of patents, copyrights, trade secrets, and trademark laws, as well as employee and third-party nondisclosure agreements, to protect our intellectual property rights and products. We distribute software under signed license agreements and a shrink-wrapped license agreement that customers accept when they open physical or electronic copies of our products. Policing unauthorized use of products is difficult, and while we cannot determine the extent to which software piracy of our products exists, it can be expected to be a persistent problem. We have established dedicated resources to focus on piracy and belong to key industry groups to further these efforts. In addition, the laws of certain countries in which products are or may be distributed do not protect our products and intellectual rights to the same extent as the laws of the United States.

      Venture Investments

      Macromedia Ventures focuses on finding, funding, and helping to develop companies that we believe will define the next generation of Internet and are complementary to our core product strategy. Macromedia Ventures targets companies growing Web software infrastructure and the rich-media, broadband, multi-device Internet. Macromedia Ventures will invest primarily in early stage companies that require not only capital, but also the unique technical and market development capabilities that we can provide.

SHOCKWAVE.COM BUSINESS

      shockwave.com is pioneering the next wave of consumer entertainment on the Internet. We are leveraging leading content brands and innovative content development and distribution models to create some of the best entertainment experiences on the Web. We offer these experiences through a variety of forms, including brand name and original cartoons; a variety of engaging and highly entertaining new and classic games; animated greeting cards which feature well known properties; and innovative music content, including an MP3 music directory. The content included in our offerings presently consists of a mix of licensed products, including such popular franchises as Comedy Central’s South Park and United Media’s Peanuts and Dilbert; popular games such as Frogger and Centipede; and newly created games, applications and properties.

      shockwave.com consists of a cutting-edge entertainment center, www.shockwave.com, and the Shockmachine, a versatile digital “media jukebox” that consumers can use to play, save, organize and access a wide range of content. As of March 31, 2000, we had registered over 15.3 million members and are growing rapidly with as many as 70,000 new members registering each day.

      In connection with the incorporation of shockwave.com, shockwave.com issued its Series A Preferred Stock to Macromedia. On January 14, 2000, shockwave.com issued and sold to various investors in a private placement, its Series B Preferred Stock which, together with the Series A Preferred Stock issued to Macromedia, represented all of the shares of its capital stock then issued and outstanding.

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      The shockwave.com Opportunity

      We provide compelling content and personalized experiences to consumers and opportunities to advertisers, merchandisers and content creators.

      Furthermore, shockwave.com enables content providers to create and distribute online entertainment brands and experiences over the Internet. Because of our significant audience reach and technological advantages, shockwave.com is an innovative way for content owners to introduce new properties, enhance exposure to existing properties and rejuvenate classic brands. We allow content creators to launch new properties, get instant feedback and make revisions so that these properties can grow and develop. We also allow creators the opportunity to participate in e-commerce and advertising opportunities. We believe that this cost-effective and practical approach to content distribution is unique in the industry.

      Strategy for shockwave.com

      Our objective is to be a leading interactive entertainment center for consumers worldwide. We plan to attract the highest quality entertainment properties by enabling content creators and owners to reach a large, loyal audience and to have access to our tracking and e-commerce infrastructure.

      In fiscal year 2000, there were 15.3 million members registered. This volume of traffic and the size of registered user base of shockwave.com, combined with rich media capabilities, provide advertisers and merchandisers with a highly desirable platform for promotion. Unlike most Web sites that must create partnerships or spend millions of dollars to drive traffic to their sites, we have a built-in mechanism to drive millions of potential users to our site. That mechanism is the registration process required as part of the download process of obtaining the Shockwave Player. When users download, activate or upgrade the Shockwave Player, they are directed to the shockwave.com site. Further, due to the interactive nature of the site, we expect to create a one-to-one relationship with millions of users, which will provide a greater value proposition for advertisers and merchandisers. Finally, since all of our users have Shockwave and Flash, they are able to experience rich media messages, rich media banners, sponsored content and integrated branding. Therefore, we believe that we can accomplish compelling advertising beyond simple banner ads more effectively than elsewhere on the Web.

      We also plan to promote membership growth by leveraging built-in traffic mechanisms and increasing traffic with marketing, distribution partnerships and international expansion. We expect to increase membership usage by offering and adding new, high-quality and engaging content to the site. In addition, we intend to build a community of users who will return to the site on a regular basis and who will advance our brand name through grass roots promotion. We expect to accomplish this by providing community features, including an editorialized directory of thousands of Shockwave content titles located throughout the Web, a featured “shocked” site of the day that highlights high quality content on the Web and e-mail capabilities that allow users to send content URLs with one click.

      Furthermore, we intend to capitalize on our large and rapidly growing user base by offering high-value advertising and to generate additional revenue through a mix of e-commerce activities, including premium content, an upgraded version of the Shockmachine and related products and merchandise. In addition, we enhance traditional banner advertising through rich media content, product tie-ins, co-branded games and applications and other forms of unique sponsorships. We believe shockwave.com offers far more effective rich media banner, sponsored content and integrated branding opportunities for advertisers and merchandisers, due to the fact that all visitors are rich media enabled with Shockwave and Flash technology. We also expect to take advantage of the digital entertainment medium to produce additional e-commerce revenue streams. For example, fans of the properties and characters featured on shockwave.com will be able to purchase a range of related merchandise, videos, books and other branded products.

      Competition

      We compete with a number of companies engaged in entertainment businesses of various kinds:

•

Major media and entertainment companies: Two major entertainment companies, Disney and AOL/Time Warner, currently operate entertainment sites, which exploit their library of characters. In

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			addition, as the Internet and other interactive systems, such as cable and satellite systems, converge with traditional television broadcasting and traditional cable networks, significant competition may come from other traditional media companies.
	•		Casual gaming communities: A wide variety of casual gaming businesses target a similar demographic to our own, such as HearMe.com, Pogo and Uproar.
	•		Internet search engines and portals: The major online aggregators of content and communities, including AOL, Excite@Home, Lycos and Yahoo! and Microsoft, are attempting to develop compelling overall interactive entertainment offerings which will compete for audience.
	•		New entertainment dotcom startups: Companies such as z.com, pop.com, Egreetings.com and many others are creating original entertainment specifically for the Internet. These companies’ products will compete with us for audience and advertising dollars.

      We also compete for visitors, advertisers and advertising revenues with thousands of other content providers as well as traditional forms of media and entertainment such as television, radio and magazines. We compete for gaming software revenues with PC-based and non-PC based entertainment software companies, including Electronic Arts, Midway Games, Nintendo, Sega and Sony.

      Content

      We offer a complete range of entertainment and interactive experiences through our site by developing the content and applications internally, licensing third party brands and programs and developing strategic relationships to create co-branded sections of the site. Currently, our site features well known cartoons and animated comic books featuring such well-known properties as South Park, Peanuts, Dilbert and Spiderman, as well as a range of new properties, several of which have developed loyal audiences. We also have contracted with several well-known artists such as David Lynch, Tim Burton, James Brooks, Stan Lee, Matt Stone and Trey Parker to create new, original programming exclusive to shockwave.com. The site’s game offerings include a wide range of arcade, action, adventure, card, puzzle and sports games, including online versions of well-known classics such as Frogger, Centipede and Missile Command and original games based on the cartoon properties licensed by us and a host of newly developed games. We plan to maintain a steady flow of new properties to encourage repeat visits by our users. In addition, we have launched animated greeting cards as our first interactive creative application. Animated greeting cards feature the characters from many of the properties licensed for either cartoons or games.

      Strategic Alliances

      We have entered into strategic alliances with leading media and technology companies to increase membership and usage, build brand recognition, accelerate product development and acquire content. For example, we have entered into numerous content license arrangements with content providers such as Comedy Central, Fox Interactive, Hasbro Interactive and Marvel Enterprises, whereby we are typically granted an exclusive period followed by a non-exclusive period to deliver the content in return for up-front development or licensing fees and ongoing revenue sharing arrangements. We have also entered into a number of distribution agreements with content distributors such as Excite@Home, Looksmart and Intel, whereby we manage, host and serve a co-branded area in cooperation with the distributor and, in return, establish prominent links throughout the distributor’s site to the co-branded area.

      Back-End Infrastructure

      We have made a significant investment in creating a scalable, robust back-end infrastructure to enable it to serve millions of users, to track personal preferences, to store individual usage behavior and to conduct e-commerce activities. When a consumer downloads Shockwave, a registration mechanism will ensure that their name, e-mail and some preferences are captured. Every user automatically becomes a member of our site and will be greeted by name when they visit the front page. A “welcome” e-mail provides additional information about our services and the technology they have downloaded.

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      Sales and Marketing

      We intend to be a leading destination site on the Web, with substantial reach into the consumer market. With this traffic potential come opportunities to monetize that traffic through advertising, sponsorships, integrated branding and transactional partnership. Our revenues have been generated to date primarily from the sale of advertisements. Our advertising products currently consist of banner advertisements and higher profile promotional sponsorships that appear on pages within our Web site. Hypertext links are embedded in each advertisement to provide the user with instant access to the advertiser’s Web site, to obtain additional information, or to purchase products and services. We have deployed a direct sales force dedicated to partner with consumer advertisers and agencies to deliver on the potential of Web advertising and to offer advertisers a wide range of targeted placement options. We believe that we offer components important to advertisers looking to reach the mass consumer audience: critical mass, a loyal user base, rich media opportunities, creative sponsorships, integrated branding capabilities and offline awareness. In addition, we expect to leverage our growing and loyal user base to generate additional revenues through e-commerce activities directly on our Web site, including offering of premium content, an upgraded version of Shockmachine and related products and merchandise and long-term participation in multiple revenue sources from the content and characters.

Risk Factors

	See Risk Factors that May Affect Future Results of Operations in Management’s Discussion and Analysis of Financial Condition and Results of Operations on Page F-6.

Year 2000 Compliance

	See Year 2000 Compliance in Management’s Discussion and Analysis of Financial Condition and Results of Operations on Page F-10.

Employees

      As of March 31, 2000, we had 1,003 full-time employees and 229 contractors worldwide, with the majority working in California, followed by Texas, the United Kingdom, Japan, and Australia, among other international offices. None of our employees are subject to a collective bargaining agreement, and we believe that our relations with our employees are good.

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ITEM 2. PROPERTIES

      A significant portion of our United States operations is located in various buildings in San Francisco, California. We lease approximately 248,500 square feet of space in San Francisco, 25,000 of which is not currently occupied by us and is sub-leased. Our leases expire between July 2004 and May 2010, and we have options to renew for successive five-year terms at 95 percent of the then current fair market value of the space. We also own a four-story 100,000 square foot facility, located on land purchased in Redwood City, California. We occupy 50,000 square feet of this space and lease the remaining 50,000 square feet, with the intention to occupy additional space over time. We also lease 25,000 square feet at a facility in Richardson, Texas. In addition, we lease space in North America for field sales offices, in Berkshire, England, for our European operations, Victoria, Australia, for our Asia Pacific operations and in Tokyo, Japan, for our Japanese operations. We believe our facilities are adequate for current and near-term needs and that additional space is available to provide for anticipated growth during the life of the leases.

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ITEM 3. LEGAL PROCEEDINGS

      On July 31, 1997, a complaint entitled Rosen et al. v. Macromedia, Inc. et al., (Case No. 988526) was filed in the Superior Court for San Francisco, California. The complaint alleges that Macromedia and five of its former or current officers and directors engaged in securities fraud in violation of California Corporations Code Sections 25400 and 25500 by seeking to inflate the value of Macromedia stock by issuing statements that were allegedly false or misleading (or omitted material facts necessary to make any statements made not false or misleading) regarding our financial results and prospects. Four similar complaints by persons seeking to represent the same class of purchasers subsequently have been filed in San Francisco Superior Court, and consolidated for pre-trial purposes

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with Rosen. Defendants filed demurrers to the complaint and other motions, which were argued on December 9, 1997 and January 5, 1998. Before the demurrers could be heard, one defendant, Richard Wood, died in an automobile accident. In March 1998, the Courts sustained in part and overruled in part the demurrers. Claims against Susan Bird were dismissed and the Court overruled the demurrers as to Macromedia, John Colligan, James Von Her, II, and Kevin Crowder. In May 1999, the Court granted plaintiffs’ motion for certification of a class of all persons who purchased Macromedia common stock from April 18, 1996 through January 9, 1997. Trial has been set for March 12, 2001. On April 20, 2000, the parties proposed that the Court continue the trial date to September 10, 2001.

      On September 25, 1997, a complaint entitled City Nominees v. Macromedia, Inc et al., (Case No. C-97-3521-SC) was filed in the United States District Court for the Northern District of California. The complaint alleges that Macromedia and five of its former or current officers and directors engaged in securities fraud in violation of Sections 10 and 20(a) of the Securities and Exchange Act of 1934 by seeking to inflate the value of Macromedia stock by issuing statements that were allegedly false or misleading (or omitted material facts necessary to make any statements made not false or misleading) regarding our financial results and prospects. Plaintiffs seek to represent a class of all persons who purchased Macromedia common stock from April 18, 1996 through January 9, 1997. Three similar complaints by persons seeking to represent the same class of purchasers subsequently have been filed in United States District Court for the Northern District of California. All of these cases have been consolidated. Lead plaintiffs and lead counsel have been appointed under the provisions of the Private Securities Law Reform Act by the District Court. A consolidated complaint was filed in February 1998. Defendants moved to dismiss that complaint on the grounds that plaintiffs’ claims were barred by the applicable statute of limitations. In May 1998, the United States District Court for the Northern District of California granted defendants’ motion to dismiss with prejudice, and entered judgment in favor of defendants. Plaintiffs have appealed to the United States Court of Appeals for the Ninth Circuit, which reversed on April 21, 2000 and remanded the action to the District Court for further proceedings.

      All complaints seek damages in unspecified amounts, as well as other forms of relief. We believe the complaints are without merit and intend to vigorously defend the actions.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted during the fourth quarter of fiscal year 2000 to a vote of security holders through solicitation of proxies or otherwise.

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PART II

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ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The information required is set forth under “Quarterly Results and Stock Market Data” tabulations, on page F-38 of this report.

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ITEM 6. SELECTED FINANCIAL DATA

      The information required is set forth under “Selected Consolidated Financial Data”, on page F-2 of this report.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The information required is set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, on page F-3 of this report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The information required is set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, on page F-3 of this report.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The information required by this item are set forth under “Independent Auditors’ Report,” Consolidated Balance Sheets,” “Consolidated Statements of Operations,” “Consolidated Statements of Stockholders’ Equity,” “Consolidated Statements of Cash Flows,” and “Notes to Consolidated Financial Statements,” on pages F-12 to F-38 of this report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

      Not applicable.

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PART III

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ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

      The information concerning our directors required by this Item is incorporated by reference to the section in our Proxy Statement entitled “Proposal No. 1 — Election of Directors.”

      The information concerning our executive officers required by this Item is incorporated by reference to the section in our Proxy Statement entitled “Executive Officers.”

      The information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to section in our Proxy Statement entitled “Section 16(a) Beneficial Ownership Reporting Compliance.”

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ITEM 11. EXECUTIVE COMPENSATION

      The information concerning executive compensation required by this Item is incorporated by reference to the sections in our Proxy Statement entitled “Executive Compensation”, “Compensation of Directors”, “Employment Agreements”, and “Compensation Committee Interlocks and Insider Participation.”

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information concerning executive compensation required by this Item is incorporated by reference to the section in our Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management.”

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information concerning certain relationships and related transactions required by the Item is incorporated by reference to Sections in our Proxy Statement entitled “Employment Agreement” and “Certain Transactions.”

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PART IV

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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)

The following documents are filed as part of this Report:

1.

Financial Statements. The following Consolidated Financial Statements of Macromedia, Inc. and Subsidiaries are incorporated by reference from Part II, Item 8 of this Form 10-K:

	Independent Auditors’ Report
	Consolidated Balance Sheets — March 31, 2000 and 1999
	Consolidated Statements of Operations —Years Ended March 31, 2000, 1999, and 1998
	Consolidated Statements of Cash Flows —Years Ended March 31, 2000, 1999, and 1998
	Consolidated Statements of Stockholders’ Equity —Years Ended March 31, 2000, 1999 and 1998
	Notes to Consolidated Financial Statements

2.

Financial Statement Schedule. The following financial statement schedule of Macromedia, Inc. and Subsidiaries for the fiscal years ended March 31, 2000, 1999 and 1998 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of Macromedia, Inc. and Subsidiaries.

      Schedule II: Valuation and Qualifying Accounts

      Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto.

3.

Exhibits

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(B)

Reports on Form 8-K:

1.

An amended Current Report on Form 8-K/A, dated December 1, 1999 was filed by the Company on February 14, 2000. In this amended report, the Company filed the information pursuant to Item 7 of Form 8-K. Under Item 7, the Company filed the 1998 financial statements of Andromedia, Inc., an acquired business, and the pro forma financial information resulting from the acquisition.

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: June 21, 2000

POWER OF ATTORNEY

      KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert K. Burgess and Elizabeth A. Nelson, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitutes, may do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and dates indicated.

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MACROMEDIA, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER INFORMATION
March 31, 2000

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F-1

MACROMEDIA, INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except earnings per share data)

      All income per share amounts reflect a two-for-one stock split which became effective October 16, 1995 and have been restated to reflect the adoption of SFAS 128 in December 1997.