Looking to expand its Web graphics empire, Macromedia Wednesday said it has inked a deal to acquire eHelp for about $65 million in cash and stocks.

San Diego-based eHelp's is a privately-owned firm best known for its RoboHelp Web authoring tool and RoboDemo, a Flash-based software demonstration product. San Francisco-based Macromedia says it will combine the eHelp offerings with its own authoring family such as Macromedia Breeze and market the combined platform to developers who are building e-learning applications, online help desks, software simulations and/or tutorial sessions.

Best known for its Flash, Shockwave and Dreamweaver products, Macromedia's recently released Breeze product is an online meeting platform designed to go head-to-head with LiveMeeting from Microsoft and various services from online meeting pioneer WebEx.

Although Macromedia says it is still evolving aspects of its Macromedia Breeze Live product, the company said it is available either as a hosted ASP for annual packages starting at a monthly rate of $83 per user, or as an enterprise licensed solution.

"eHelp defined the help authoring space with RoboHelp and is now ushering in a new generation of demonstration software with RoboDemo. We look forward to nurturing eHelp's thriving business and continuing this tradition of innovation," Burgess said in a statement.

The Macromedia/eHelp proposal will still have to be scrutinized by shareholders and the U.S. government but Macromedia chairman and CEO Rob Burgess says he expects the deal to resolve by the end of December.

The purchase would certainly be a boon to Macromedia's client coffers as eHelp serves marquee players like Cisco Systems, government agencies such as the United States Coast Guard, and the University of California in San Diego.

The company is also looking to cash in on the burgeoning corporate e-learning market, which generated nearly $2.3 billion in 2000. The sector is currently experiencing a growth rate of more than 50 percent, which will allow it to exceed $18 billion in 2005, according to analyst firm IDC. The North American market alone is expected to grow to $11.7 billion by 2005, according to research by Kinetic Information and Collaborative Strategies. The sector has seen a fresh opportunity with the marriage of enterprise content management and hosted Web-based learning services. The analyst firm says the combination of content management and e-learning has been appealing to customers' eagerness to gain access to all relevant learning materials while also addressing the all-important bottom line and recent concerns over travel.

Macromedia says it is well aware of the high-stakes and says it will retain eHelp CFO Anthony Olivier and the eHelp management team to help lead the eHelp business. eHelp founder and chairman Jorgen Lien will retire, as previously planned.

As part of the agreement, Macromedia will exchange cash and stock, in amounts to be determined after the deal is closed, for all of the outstanding capital stock and $10 million of cash of eHelp. Macromedia is also assuming outstanding eHelp options. The transaction is expected to be slightly accretive to earnings for fiscal year 2004. Macromedia number crunchers aren't worried, however, as it says eHelp has a solid 12-year track record with good consistency in revenue growth and profit.