Microsoft and Adobe Huddle Hints at Partnership

Tomado de: http://www.newsfactor.com/story.xhtml?story_id=023001SOY3N7

Autor: Jennifer LeClaire

A clandestine meeting between Microsoft CEO Steve Ballmer and Adobe Systems CEO Shantanu Narayen spurred rumors of an acquisition. The speculation drove up Adobe's stock, only to decline as skepticism set in. Analysts see little reason for Microsoft to buy Adobe, but a partnership could unite Microsoft and Adobe against Google.

It's not causing quite the stir in the markets as when Microsoft bid on Yahoo, but speculation that the software giant might snap up Adobe Systems is turning heads. Even though equities analysts suggest little possibility of an acquisition, investors drove Adobe's stock up in after-market trading Thursday.

After hitting a 52-week low, Adobe shares soared 12 percent Thursday after rumors of a clandestine meeting Relevant Products/Services between the two tech companies hit Wall Street. The stock declined five percent Friday morning as skepticism set in. News reports told the story of behind-closed-door meetings between Microsoft CEO Steve Ballmer and Adobe CEO Shantanu Narayen.

Ballmer fueled the speculation when he declined to comment on the rumors at a conference Relevant Products/Services in Madrid, Spain, according to the Associated Press. "If you are going to do something, you say nothing," Ballmer said. "So I'll be entirely consistent with standard CEO operating procedure." Adobe also declined to comment.

The Microsoft-Flash Connection

Microsoft and Adobe have a common enemy in Apple. As reported in The Wall Street Journal earlier this year, Apple CEO Steve Jobs personally decided not to include Flash support in the iPad, insulting Adobe and opening the door for the software maker to find partners to rival Apple in tablet computers. Microsoft is launching its Windows Phone 7 Series operating system to compete with Apple's iOS.

Rob Enderle, principal analyst at the Enderle Group, said both Microsoft and Adobe would need to be feeling desperate to agree to a merger, because Microsoft would have to shell out significant cash and Adobe would likely lose its identity. When Microsoft made its bid for Yahoo, the search Relevant Products/Services company was in a desperate position -- and it still refused the offer.

"Flash, this incredibly popular and powerful aspect of Adobe, is actually an ancestor to Microsoft Chrome, which was a product that got killed for political reasons," Enderle said. "The connection between the two companies would give Microsoft control over a technology that they were actually partially responsible for creating. Granted, there is a lot more to Flash now than Chrome."

Apple or Google

Although there's bad blood between Apple and Adobe, Microsoft picking up the company to battle against a common enemy is a stretch. That's because Microsoft is more concerned with Google than Apple, and Adobe doesn't help Microsoft battle Apple. But Enderle said a merger might make sense for the companies from a different view.

"Adobe may feel it needs Microsoft's scale to weather what is clearly a major storm in its space, where increasingly people are creating content on cameras and on the web rather than using Adobe's tools," Enderle said. "That could be a serious problem. Adobe needs web tools and capabilities. That's Microsoft's strength. Adobe just doesn't seem to get the cloud."

Microsoft could add compelling tools on its web platforms to drive dominance. But the key target would be Google. Although many comparisons are made between Microsoft and Apple, at the end of the day Apple is a hardware company and Microsoft is a software company.

"Apple does not rise to the level of concern that Google does," Enderle said. "If Google is successful, Microsoft is obsolete. If Apple is successful, Microsoft can be successful as well. A strategic alliance between Microsoft and Adobe is much more likely."

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