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A Microsoft Buy of Adobe: Good, Bad or Ugly?

So, Microsoft did not buy Adobe. A rumor that such a deal was in the works popped up last week, but all has since gone dark. A report by the New York Times claimed that Microsoft CEO Steve Ballmer had met with Adobe's CEO Shantanu Narayen and talked about a possible acquisition bid, along with Apple competition.

The Times cited unnamed consultants and employees as the source, a now common practice that tends to degrade journalism. It can have the effect of helping to start wars. On Wall Street, news can still move stocks, even news that's mostly rumor. Adobe's stock went up 17 percent after the Times published its report. Someone made money.

Even if the report that Microsoft was considering buying Adobe turns out to be bogus, it excited imaginations. Adobe has seemingly cornered the market on graphics production tools. The two companies have been chatting about coordinating software security efforts. But that's really the point -- why wouldn't the heads of Microsoft and Adobe talk?

Adobe products run on Windows operating systems, both desktop and mobile. Adobe Flash and Microsoft Silverlight compete, but both may gradually fade if HTML 5 and hardware-accelerated graphics take off. It's also true that Adobe and Microsoft have shared Apple problems. Microsoft is trying to compete against the Apple iPhone and iPad, while Adobe's Flash is banned from the Apple OS platform altogether.

Adobe's market capitalization is estimated at $14.2 billion, and Microsoft's acquisitions have tended to be more modest than such a sum. For instance, last week, Microsoft bought AVIcode Inc., which might have cost Redmond something less than $50 million. However, Microsoft's buying behavior this year is said to have gone underground. Microsoft bought 15 companies without announcing them, according to reports. That "secrecy" may have added fuel to the speculative fire.

Barring any potential antitrust issues, would Microsoft's acquisition of Adobe be a good thing for software users? Would the Adobe Creative Suite suffer on the Mac platform as a result? Would Adobe products become more secure with Microsoft at the helm? Tell Doug what's the score at dbarney@redmondmag.com.
--By Kurt Mackie

Posted by Kurt Mackie on 10/13/2010 at 1:18 PM


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