Back to GetFilings.com

Table of Contents

Index to Financial Statements

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the Fiscal Year Ended March 31, 2003

OR

Commission File No. 000-22688

MACROMEDIA, INC.

(Exact name of registrant as specified in its charter)

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.  ¨

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Act. Yes  x  No  ¨

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 30, 2002, the last business day of the Registrant’s most recently completed second fiscal quarter: $466.1 million. See definition of affiliate in Rule 12b-2 of the Exchange Act. As of May 27, 2003, there were 63.6 million shares of the Registrant’s common stock, $0.001 par value per share, outstanding, including 1.8 million shares held in treasury.

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.

Table of Contents

Index to Financial Statements

MACROMEDIA, INC.

FORM 10-K

ANNUAL REPORT

For the Fiscal Year Ended March 31, 2003

TABLE OF CONTENTS

2

Table of Contents

Index to Financial Statements

PART I

Except for historical financial information contained herein, the matters discussed in this Form 10-K 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;” and (iii) the other risks detailed from time-to-time in our reports and registration statements filed with the Securities and Exchange Commission (“SEC”). Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

ITEM 1.    BUSINESS

Business Overview

Experience matters. Macromedia, Inc. is motivated by the belief that great experiences build great businesses. Our software empowers millions of business users, developers and designers to create and deliver effective, compelling and memorable experiences—on the Internet, on fixed media, on wireless and on digital devices.

We were incorporated in Delaware in February 1992. Since that time, we have grown to become one of the leading independent software companies in the world, with net revenues of $336.9 million for fiscal year 2003. Our principal executive offices are located at 600 Townsend Street, San Francisco, California 94103. We make available free of charge copies of our SEC filings and submissions on our Website, www.macromedia.com, as soon as practicable after electronically filing or furnishing such documents to the SEC.

Market Opportunity

Several broad industry trends in the development of software systems for corporations, government and educational institutions shape the market opportunity for our products. First, the digital world has come to understand what the physical world has known for some time: great experiences build great business. Organizations are increasingly focused on providing great experiences for their customers, partners and employees both in the physical and digital worlds. Second, organizations are adopting Internet technologies as the primary mechanism for deploying content and applications to end-users. This trend began in the mid 1990s and is continuing today, as more and more organizations recognize the benefits of using Internet technologies to communicate and interact with employees, customers and partners. Third, large organizations are migrating existing business systems to a new generation of application-server technologies such as Java application servers and the Microsoft .NET framework. At the same time, organizations are building new business systems using application server technologies to automate business processes, including expense management, customer service, supply chain interactions, employee training and support for remote workers and human resources administration. Fourth, the market for Internet-connected devices including cellular phones, personal digital assistants, game consoles and home entertainment systems is rapidly expanding.

In the context of these broad industry trends, we believe there is a significant opportunity for software that makes it easier and more cost-effective to create content and applications that provide great end-user experiences. Creating high-quality, responsive and effective interfaces for end-users requires a combination of client software

3

Table of Contents

Index to Financial Statements

for enabling the display of information and user interactions, server software that can extend application server technologies to handle the unique needs of generating a high-quality end-user experience and development tools that can be used to design content, develop interactions and integrate content and application functionality. Moreover, as the market for Internet-connected devices grows, we believe there will be an increasing demand for products that enable the creation of content and application user interfaces which can be deployed to personal computers and other Internet-connected devices.

Given these market trends and the opportunities they create, we believe our MX family of products provides Information Technology (“IT”) organizations in business, education and government institutions the client, server and development tool technologies to create effective end-user interfaces for Internet technologies and Internet-connected devices. In addition, we believe creating great experiences should extend beyond technology professionals. Our Information Convenience products enable non-technical business users to create great experiences for their customers, employees and partners. Our Mobile and Device products enable telecommunications carriers and news and entertainment networks to deliver information to consumers using modern wireless and high-speed wire line networks.

The current trends in the business and government sectors are also shaping the long-term demands for specialized computing skills in the labor force. As a result, educational institutions in both the K-12 and higher education markets are seeking to incorporate technology into their curricula that enables students to learn professional skills and gain general computer competencies through the use of software to complete traditional educational exercises and analysis individually and in collaboration. The demand for technology in the education market represents another market opportunity for us to sell our products directly to educational institutions, instructional program designers and students.

Products

Macromedia provides three broad families of products to address this market opportunity. They include our Macromedia MX Products, our Information Convenience Products and our Mobile and Device Products.

MACROMEDIA MX PRODUCTS.

The Macromedia MX family of products provides client software, server and development tools for cost-effectively building websites and Internet applications that offer highly effective end-user experiences. A substantial portion of our revenues are derived from licensing our software products, which are now included in the Macromedia MX product family. The products in the Macromedia MX product family are specifically designed to work together through functional integration and a shared user interface standard. Macromedia MX provides a complete, integrated solution for building Internet applications that combine the interactivity of multimedia and desktop applications, the multi-way communication capabilities of collaborative computing systems and the flexible deployment characteristics of web applications.

Client Software.    Our Client Software is enabling technology distributed directly to end-users on the Internet.

We distribute our client software for the personal computing platform through downloads from our Websites at no charge. We also distribute our client software through original equipment manufacturer (“OEM”) agreements with a number of major operating system vendors and hardware manufacturers. Our two primary client software products are Macromedia Flash Player and Macromedia Shockwave Player.

Macromedia Flash Player—Macromedia Flash Player is the most widely distributed rich client software on the Internet. The player provides a runtime environment for text, graphics, animations, sound, video, application forms and two-way communications. According to a survey by The NPD Group, Inc. (“The NPD Group”), a provider of global information for measuring product movement and consumer behavior in a variety of

4

Table of Contents

Index to Financial Statements

industries, at March 31, 2003, 98 percent of Web users, which represent approximately 500 million people, could view content created for Macromedia Flash Player. Macromedia Flash Player is also available on a wide range of Internet-connected devices such as wireless and handheld devices, interactive TV and game consoles.

Macromedia Shockwave Player—Macromedia Shockwave Player is a rich media player used for deploying multimedia content for use in Internet solutions including education, training, games and commerce. According to The NPD Group, at March 31, 2003, Macromedia Shockwave Player was available to 60 percent of Web users.

Server Software.    Our Server Software is used by thousands of companies worldwide to develop and deploy Web applications. The Macromedia MX server product family primarily consists of Macromedia ColdFusion MX and Macromedia JRun Server.

Macromedia ColdFusion MX—Macromedia ColdFusion MX is the server technology in the Macromedia MX product family. Macromedia ColdFusion MX provides a server-scripting environment and a set of features for building database-driven applications that are accessible through both Web browsers and Macromedia Flash Player. ColdFusion is used by organizations that need a way to quickly build scalable business applications. Macromedia ColdFusion MX is built on an open Java technology architecture. As a result, it can be deployed on third-party Java application servers that support the Java 2, Enterprise Edition (“J2EE”) specification, including Macromedia JRun Server, International Business Machine Corporation’s (“IBM”) WebSphere and Sun Microsystems, Inc.’s (“Sun”) SunONE application servers.

Macromedia JRun Server—Macromedia JRun Server is a Java application server based on the J2EE specification. While not part of the Macromedia MX product family, Macromedia JRun Server integrates with our development tool offerings and is designed to compete at the mid-range of the Java application server market through ease-of-use and price. Macromedia JRun Server is used to deploy applications for functions such as on-line banking and customer service.

Development Tools.    Our Development Tools provide a broad range of capabilities for building the full scope of Internet solutions including Websites, Web applications and rich Internet applications. The tools in the Macromedia MX family include Macromedia Dreamweaver MX, Macromedia Flash MX and Macromedia Fireworks MX. These products are licensed individually and together in a suite, Macromedia Studio MX, which also includes Macromedia FreeHand MX and a license of ColdFusion MX Server Professional Edition, which is restricted to use on a single computer for development purposes. In addition to the Macromedia MX products, we license several tools that are market leaders in their respective categories including Macromedia Director MX Shockwave Studio for multimedia development and Macromedia Authorware for creating computer based training solutions.

Macromedia Dreamweaver MX—Macromedia Dreamweaver MX is a leading professional development environment for creating Websites and applications. It includes capabilities for visually designing Hyper Text Markup Language (“HTML”) pages, coding HTML and application logic and working with application server technologies. Macromedia Dreamweaver MX is used by designers and developers to create a broad range of Web solutions for publishing on-line commerce, customer service and on-line education. Macromedia Dreamweaver MX, which is included in the Macromedia Studio MX product suite, is licensed per development seat and is available for both the Microsoft Windows and Apple OS X operating systems.

Macromedia Flash MX—Macromedia Flash MX provides a development environment for creating Internet user experiences that integrate animations, motion graphics, sound, text, video and application functionality. Solutions built with Macromedia Flash MX are deployed via the Web to browsers and Internet-connected devices that run Macromedia Flash Player. Macromedia Flash MX is part of the Macromedia MX product family, so it is designed to work with and complement the other Macromedia MX products, including integration on the server with Macromedia ColdFusion MX. Macromedia Flash MX, which is included in the Macromedia Studio MX

5

Table of Contents

Index to Financial Statements

product suite, is licensed per development seat and is available for both the Microsoft Windows and Apple OS X operating systems.

Macromedia Fireworks MX—Macromedia Fireworks MX is a professional graphics design tool for building interactive Web graphics. Macromedia Fireworks MX gives professional designers, as well as developers who need to create graphics for Websites and applications, tools for creating images that can be deployed to Web browsers and Macromedia Flash Player. Macromedia Fireworks MX integrates with Macromedia Flash MX and Macromedia Dreamweaver MX. Macromedia Fireworks MX, which is included in the Macromedia Studio MX product suite, is available for both the Microsoft Windows and Apple OS X operating systems.

Macromedia FreeHand MX—Macromedia FreeHand MX is a professional vector graphics tool that designers and illustrators use to create images that can be scaled. Macromedia FreeHand MX, which is included in the Macromedia Studio MX product suite, supports developing images for print, the Web and the Macromedia Flash Player and is available for both the Microsoft Windows and Apple OS X operating systems.

Macromedia Director MX Shockwave Studio—Macromedia Director MX Shockwave Studio is a tool for creating multimedia content that combines images, text, audio and video into presentations and interactive experiences. For Websites, Macromedia Director MX Shockwave Studio provides a powerful solution for delivering multimedia content that supports three dimensional, or 3-D, images and animations for use in various markets, including education, games and commerce. In addition, Macromedia Director MX Shockwave Studio enables the creation of fixed-media content for CD titles and DVD titles in the entertainment, education and corporate training markets. Macromedia Director MX Shockwave Studio is available for both the Microsoft Windows and Apple OS X operating systems.

Macromedia Authorware—Macromedia Authorware is a rich media authoring tool used for e-learning. Uses of Macromedia Authorware range from creating Web-based tutorials to simulations incorporating audio and video. Applications developed with Macromedia Authorware can be delivered on the Web, over corporate networks or on CD-ROM.

INFORMATION CONVENIENCE PRODUCTS.

This software product family enables non-technical business users to create and deliver information without intricate technical training. The products in the Information Convenience family include Macromedia Contribute and Macromedia Breeze.

Macromedia Contribute—Macromedia Contribute is an easy way to update, add and publish Web content. With Macromedia Contribute, non-technical users can make changes to an HTML Website while automatically maintaining site standards for style, layout and code. Macromedia Contribute, which is included in the Macromedia Studio MX product suite, enables content providers and Web professionals to save time and streamline the Web-content maintenance process.

Macromedia Breeze—Macromedia Breeze solutions enable organizations to quickly provide customers, partners and employees with consistent, just-in-time education and training on-line using Macromedia Flash content and Microsoft PowerPoint to author their content.

MOBILE AND DEVICES PRODUCTS.

This software product family is targeted at device manufacturers, carriers and media networks. The products in the Mobile and Devices products group today are Embedded Flash and Flash Lite. These products leverage off

6

Table of Contents

Index to Financial Statements

of Macromedia Flash MX, which combines sophisticated multimedia and powerful application development features, making it easy for Macromedia Flash designers and developers to deliver both engaging consumer content and rich mobile business applications to a wide range of Internet-enabled devices and platforms, from cellular phones to personal digital assistants, organizers, set-top boxes and game machines. Our Mobile and Devices products provide devices manufacturers and carriers with the ability to design for next-generation Internet-enabled devices while effectively targeting the Macromedia Flash Player version supported on the device.

Product Development

The majority of our research and product development has been performed in the United States. Development teams or contractors in various local markets perform translation and localization of foreign-language versions of certain products.

The following table summarizes our consolidated research and development expenses for fiscal years 2003, 2002 and 2001. In addition, we amortized $4.6 million, $4.0 million and $3.1 million of capitalized software costs during fiscal years 2003, 2002 and 2001, respectively.

As the software industry is characterized by rapid technological change, a continuously high level of expenditure is required to enhance existing products and develop new products. We believe that our future success depends on our ability to enhance existing products as well as develop and introduce new products on a timely basis. It is critical that new products and enhancements keep pace with constantly evolving network infrastructure, Internet technology and competitive offerings. We continue to adapt our products to new hardware and software platforms in order to embrace industry standards and, therefore, we will continue to incur significant operating expenses in the future for product research and development. As part of this effort, we may, as appropriate, acquire additional software and system technologies that we consider critical to meet the needs of Internet developers and consumers.

Independent firms and contractors perform some of our product development activities, while other technologies used in our products are licensed from third-parties. We either own or license the software developed by third-parties. Because qualified development personnel are in high demand, independent developers, including those who currently develop products for us, may not be able to provide development support to us in the future. Similarly, we may not be able to obtain and renew existing license agreements on favorable terms, if at all and any failure to do so could harm our business.

Marketing and Sales

Our customer-related operations are divided into three primary geographic regions, North America, Europe and Asia Pacific and Other, and are supported by global marketing and sales organizations. Through these organizations, we extend our brand worldwide through various marketing techniques, including direct mailing and advertising both on the Web and in print, customer seminars and trade shows. We also work directly with our distributors, resellers and OEMs on cooperative advertising, promotions and trade show presentations.

A substantial portion of our revenues is derived from the sale of our software products through a variety of distribution channels, including traditional software distributors, value-added resellers (“VARs”), electronic commerce through our Websites, OEMs, hardware and software superstores and retail dealers.

7

Table of Contents

Index to Financial Statements

Our ability to effectively distribute our products, particularly in the international markets we serve, depends in part upon the financial and business condition of our distributor network. From time-to-time, computer software distributors experience financial and operating difficulties, particularly during times of economic contraction and may do so in the future. Moreover, the changing distribution models resulting from the Internet and in particular the increased focus on direct sales to major accounts, may impact our distributor network in the future. One distributor, Ingram Micro, Inc., accounted for 28% of our consolidated net revenues in each of fiscal years 2003, 2002 and 2001. The loss of this distributor or a significant reduction in business with this or any major distributor could harm our business.

We also sell our products directly to large corporate and educational institutions, typically under volume licensing agreements where customers have the right to reproduce and use our software products.

Internationally, our products are sold through our distributor network and directly to end-users. International sales accounted for approximately 40% of our consolidated net revenues in fiscal years 2003, 2002 and 2001. In certain cases, distributors have exclusive distribution rights to certain products in their respective countries.

We typically ship products shortly after receipt of order, which is common in the computer software industry. Accordingly, backlog as of any particular date is not indicative of actual sales of any succeeding period.

Customer Support and Training

We believe that providing a high level of customer service and technical support is necessary to achieve rapid product implementation that, in turn, is essential to customer satisfaction and continued license sales and revenue growth. Our customers have a broad choice of support options depending on the level of service desired. We provide access to a wide range of technical information on our Websites, as well as on-line forums for each of our products. For our development tool software products, we offer complimentary 90-day technical support for end-users who have registered their products with us via email or over the phone.

In addition, we offer a number of paid support options for end-users, including incident-based support, annual support contracts and access to “24 by 7” support. These programs include Macromedia DevNet Subscriptions (“DevNet”) which we introduced in March 2003. Our DevNet program offers a comprehensive set of tools, servers, extensions, components and other resources over a one-year subscription period.

We have also developed relationships with third-party support providers to complement the support services that we provide.

Our customers also depend on support from our worldwide network of VARs, OEMs, training centers and third-party developers. We offer several programs that provide marketing, sales and technical support to augment services provided by our global partner network.

We offer both on-line and classroom-based training as well as formal certification for our development tool and server products through a worldwide network of authorized third-party training centers and certified Macromedia instructors. In addition, training and instruction on the use of Macromedia products is provided by thousands of high schools, colleges and technical schools throughout the world. We support the expanded use of Macromedia products for classroom training by providing approved curricula and through reduced pricing on products licensed to schools and students.

Production and Suppliers

Production of our finished products involves replication of the software, the printing of user manuals and product assembly. The production and distribution of finished goods is performed by a third-party manufacturer. Manufacturing is currently performed by one vendor at facilities located in the United States, the Netherlands

8

Table of Contents

Index to Financial Statements

and Singapore. Our current vendor operates multiple facilities around the world that are capable of serving any additional needs we may have and such sites could serve as viable back-ups in the event manufacturing difficulties arise at the existing sites used to support our business. In addition, we believe there are other third-party vendors capable of fulfilling our production and distribution requirements. To date, we have not experienced any material difficulties or delays in the production of our software and documentation or in the distribution of finished products.

We also license and distribute our software products directly to end-users through a volume licensing program. The management, tracking and fulfillment of the volume license orders are performed by a third party at its facilities located in the United States and France.

In addition, we license and distribute our software products directly to end-users over the Internet through our Websites. With an increasing proportion of revenues being derived from on-line sales, customer access to our Websites affects the volume of software products we sell and thus affects our consolidated net revenues. A third-party hosts the primary computer equipment and communications systems used to run our Websites. We experience occasional system interruptions that make our Websites unavailable or prevent us from efficiently fulfilling orders, which may reduce our revenues. To prevent system interruptions and to ensure integration with our other business systems, we, as well as our third-party service provider, upgrade software, hardware and network infrastructures used in the operation of our Websites to accommodate increased traffic and sales volume on our Websites.

Our computer and communications systems as well as those of our third-party service provider could be damaged or interrupted by fire, flood, earthquake, power loss, telecommunications failure, vandalism or similar events. Computer viruses, physical or electronic vandalism or similar disruptions could also cause system interruptions, delays and loss of critical data and could prevent us from fulfilling customer orders. We have disaster recovery plans and backup systems to reduce the potentially adverse effect of such events, as they could impact our sales and damage our reputation and the reputation of our products. We may, however, have inadequate insurance coverage or insurance limits to compensate us for losses from a major interruption.

Competition

We operate in a highly competitive market characterized by market and customer expectations to incorporate new features and to accelerate the release of new products. These market factors represent both opportunities and competitive threats to us.

Our development tools compete directly and indirectly with products from major vendors including Microsoft, IBM, Corel Corporation and Adobe Systems, Inc. (“Adobe”). The Web application development tools market is a very competitive market. While we believe that we are a leader in the market for professional Web development tools with Macromedia Dreamweaver MX, we face competition from Adobe GoLive as well as competition from the mid-range product provided by Microsoft FrontPage. We believe our ability to compete favorably in this market in the future will require continued product development and innovation resulting in new functionality that can integrate with our existing products so that we can offer our customers a greater suite of products and solutions.

Our server products compete in a highly competitive and rapidly changing market for application server technologies. We face competition from major vendors including Microsoft, IBM, BEA Systems, Inc. (“BEA”) and Sun. In addition, Macromedia ColdFusion MX competes indirectly with several technologies available today at no cost including the PHP and PERL programming environments that are available for the Apache Web server. Macromedia JRun Server competes with large Java application server vendors as well as products available at no cost including the Tomcat Java Servlet Engine provided by the Apache Foundation. We believe our future results largely depend on our ability to innovate by developing new products and providing enhancements and upgrades of current product offerings that compete favorably with respect to reliability,

9

Table of Contents

Index to Financial Statements

performance, ease of use and pricing. However, we believe that we will be able to continue to successfully compete with our server products through a combination of functionality, ease of use and price performance.

Today our client technologies, Macromedia Flash Player and Shockwave Player, command leadership positions in their respective categories. For animation and application user interfaces, Macromedia Flash Player is the most widely distributed Web browser plug-in. We distribute our client technologies through OEM agreements with a number of major operating system vendors and hardware manufacturers. For application development, Macromedia Flash Player faces competition from time to time from new vendors and technology providers. The on-going success of Macromedia Flash Player could be threatened by new capabilities added to Web browsers or by alternatives provided by major operating system vendors including Microsoft and Apple. We believe that our existing market penetration and user acceptance provides our client technologies with a competitive advantage over other competing technologies.

Our newly announced Information Convenience products appeal to a much broader set of customers. Competition for the non-technical business user comes from a much broader range of companies. Generally these products target a specific business work flow such as updating content on a Website or using the Internet to communicate with a company’s customers, partners and employees. Companies in this space include Microsoft and WebEx Communications, Inc.

Proprietary Rights and Licenses

We rely on a combination of copyright, patent, trade secret and trademark laws, as well as employee and third-party nondisclosure agreements, to protect our intellectual property rights and products. We license our software to end-users under “shrink-wrap” license agreements that the end-users accept when they install our products or activate electronic versions of our products. Despite our efforts to protect our intellectual property rights and products, certain of our intellectual property rights may not be successfully asserted in the future or may be invalidated or challenged. In addition, the laws of certain countries in which our products are or may be distributed do not protect our products and intellectual property rights to the same extent as the laws of the United States. Furthermore, the enforceability of “shrink-wrap” licenses has not been conclusively determined. Our inability to adequately protect and enforce our proprietary rights could harm our business.

Policing unauthorized use of our software products is difficult. We have dedicated resources to focus on software piracy and participate in industry groups to further police unauthorized use of our software. In addition, we are developing technology for our products designed to reduce unauthorized use and activation of our products. While we have recovered some revenue resulting from the unauthorized use of our software products, we cannot determine the extent to which software piracy of our products exists. We anticipate that software piracy will continue to be a persistent issue in the software industry.

Employees

At March 31, 2003, we had 1,085 full-time employees worldwide. None of our employees is subject to a collective bargaining agreement and we have not experienced any work stoppages. We believe that our relations with our employees and contingent workers are good. Our future success is highly dependent on our ability to attract, retain and motivate highly skilled employees.

10

Table of Contents

Index to Financial Statements

ITEM 2.    PROPERTIES

As of March 31, 2003, we leased the major facilities described below:

We have additional field sales offices in various locations within the United States, Canada, Latin America, Europe and Asia Pacific. We believe our facilities are adequate for our current and near term needs.

ITEM 3.    LEGAL PROCEEDINGS

From time to time, Macromedia is involved in various disputes and litigation matters that arise in the ordinary course of business. These include disputes and lawsuits related to intellectual property, mergers and acquisitions, licensing, contract law, distribution arrangements and employee relations matters.

On and after September 25, 2000, Allaire Corporation (“Allaire”), prior to its acquisition by Macromedia, and certain of Allaire’s officers and directors were named as defendants in several putative class action lawsuits filed in the United States District Court for the District of Massachusetts, each alleging violations of the federal securities laws. On December 5, 2000, the Court consolidated the lawsuits under the caption In re: Allaire Corporation Securities Litig., No. 00-CV-11972 (WGY) (“Class Action”), and appointed lead plaintiffs and counsel for the putative class. On February 23, 2001, the lead plaintiffs, on behalf of a putative class defined as those who purchased Allaire stock between January 26, 2000, and September 18, 2000, filed a Corrected Consolidated Class Action Complaint alleging that Allaire, Joseph J. Allaire, Jeremy Allaire, David A. Gerth, and David J. Orfao, violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and are seeking damages, interest, and attorneys’ fees and costs. The defendants filed a motion to dismiss the Class Action. On September 25, 2001, the Court ruled that the complaint in the Class Action did not comply with the pleading standards imposed by the Private Securities Litigation Reform Act of 1995, and permitted plaintiffs to file an amended complaint in accordance with specific requirements imposed by the Court. Plaintiffs filed an amended complaint on November 30, 2001, which asserted similar claims on behalf of a putative class of stockholders who purchased Allaire stock between December 7, 1999 and September 18, 2000. On June 19, 2002 the Court denied defendants’ motion to dismiss the amended complaint, and thereafter set a trial date for the Class Action for November 2003. The parties commenced discovery and thereafter mediated their dispute before a United States Magistrate Judge. On May 21, 2003, the parties executed a Memorandum of Understanding (“MOU”) that sets forth the basic terms of a settlement whereby the plaintiffs agree to dismiss the Class Action and provide a broad release of all claims arising out of their purchase, sale or holding of Allaire stock in exchange for a payment of $12.0 million, $10.5 million of which would be paid by insurers and $1.5 million of which would be paid by Macromedia. The MOU calls for the parties to negotiate additional terms to be set forth in a Stipulation of Settlement. The parties’ settlement is expressly contingent on Court approval, which may be withheld or, if provided, may be subject to an appeal to, or reversal by, an appellate court.

On April 11, 2001, Allaire, after it was acquired by Macromedia, Joseph J. Allaire, Jeremy Allaire, David A. Gerth, and David J. Orfao were named as defendants in an additional lawsuit alleging violations of the federal securities laws that also was filed in the United States District Court for the District of Massachusetts, Kassin v. Allaire Corporation, et al., No. 01-10600-WGY (“Kassin”). The complaint in Kassin, filed on behalf of an individual, alleges substantially the same violations of the Securities Exchange Act of 1934 as have been asserted in the Class Action, and additional claims for common law fraud and negligent misrepresentation. On May 11, 2001, the Court consolidated the Class Action and Kassin for purposes of briefing and oral argument on the

11

Table of Contents

Index to Financial Statements

defendants’ motions to dismiss. The defendants filed a motion to dismiss Kassin. On September 25, 2001, the Court consolidated Kassin with the Class Action, and the plaintiff’s claims in Kassin have been included in the amended complaint for the Class Action. Kassin is not subject to the MOU concerning a potential settlement of the Class Action and, as discovery is ongoing, we are not able to predict the outcome of the litigation at this time. We intend to defend this claim vigorously.

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

No matters were submitted to a vote of our security holders during the fourth quarter of fiscal year 2003.

PART II

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

STOCKHOLDER MATTERS

Macromedia’s common stock is traded on the NASDAQ National Market under the symbol “MACR.” The Company’s closing stock price was $18.26 on May 27, 2003 and there were 493 stockholders of record as of that date, excluding stockholders whose shares were held in nominee or street name by brokers. The Company has not paid any cash dividends and does not currently have plans to do so in the foreseeable future.

The following table sets forth the high and low sales price per share for Macromedia’s common stock for the periods indicated:

12

Table of Contents

Index to Financial Statements

ITEM 6.    SELECTED FINANCIAL DATA

The selected consolidated financial data presented below for the five years ended March 31, 2003, is derived from our Consolidated Financial Statements and related notes thereto. This selected consolidated financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Consolidated Financial Statements and related Notes thereto included in Item 15 of this Form 10-K. Historical results are not necessarily indicative of future results.