Adobe and Macromedia: Bellwethers

Adobe and Macromedia are two vendors whose products have great impact well beyond their revenue streams – the combined total of which is less than $3B per year as compared to Microsoft which is easily ten times their combined total. Yet both have key enabling technologies that are of increasing importance as the IT world moves haltingly towards open, interoperable, cross platform and most importantly rich-media oriented on the client. But as we all know from what is coming from the CES-Consumer Electronics Show, this client base is leaping towards mobile, easily carried, rich media and not based on your pops desktop PC.

Adobes two major strengths are its CS-Creative Series of products headed by Photoshop-bitmap 2D graphics, Illustrator-vector 2D graphics, and Premiere/After Effects – video plus a host of other image design products. Next are its Acrobat line of cross platform high quality output ( and now form processing capabilities). Meanwhile Macromedia dominates two markets as well: Dreamweaver is the pre-eminent web development tool especially among professional developers while Flash dominates not just the animation scene but the whole other media delivery market – compact packaging and distributions of rich media such as combined audio, images, video, and animations. Flash has lead Macromedia into leading positions in emerging markets such as Web presentations with conferencing, rich client application delivery, eTraining and classic plus novel documentation and help systems.

Windows Co-dependents

The problem is that both Adobe and Macromedias strengths are still anchored primarily on the PC and specifically to Microsoft Windows. Yes, both vendors have cross platform Mac implementations of most of their products. And given the Apple OS/X and its Unix base it should be fairly straight forward for both to move to Unix, Linux or the hot new Solaris 10. The move to Linux in particular would make sense because Linux is winning more embedded devices and is the lowest cost OS desktop which will have a huge impact in the markets with the largest future growth – China, India, the rest of Asia, Africa and Eastern Europe.

But strangely, both vendors stick to close to Windows despite the trend to open and interoperable plus the potential. For example, in its new Acrobat 7 line many of the new and advanced features of the product are only Windows enabled including the new intelligent forms features and object/data layers. Like wise Acrobat, GoLive, and the CS family of products have tight integration only with Microsoft Office, Visio, Project and other Redmond-only products. Now remember, Microsoft is the company that did the TrueType and a continuing stream of Picture-It, Publisher and other nasties to Adobe – so its not been exactly a balanced, quid pro quo relationship betweeen Adobe and Microsoft. So one would think that Adobe would at least contribute equally to the Linux, Unix , Symbian and other OS camps simply for the reason that it needs to be there as Moores law works it magic and makes phone/PDAs, iPod/portable media centres, and other smart embedded devices the increasing focus of attention simply because 4,000,000 iPods not tablet PCs were sold in 4Q2004.

Likewise Macromedia has not brought Dreamweaver to an obvious client, Linux. Ditto for Flex Builder, the Flash rich client side development tool. Unlike Adobe, Macromedia is beholden to Redmond. Its Flash player is distributed with every copy of IE which is distributed with every copy of the Windows OS in its sundry versions. This has allowed Flash to reach 90%++ penetration of browsers and desktops.But when Longhorn comes out – this most favored status will likely go by the wayside as Redmond has its own designs on the rich media market. So Macromedia has some tough strategic choices looming on the horizon.

Bellwether ISVs

So if you are an investor and wanting to know when to short Microsoft Windows or put money into Linux or Symbian market players – watch these two vendors closely. Both have some very complex decisions to make not just about the Windows/Linux/Consumer Electronics marketplaces; but also like all ISVs what to do about Open Source as well. Open Source Gimp is a serious competitor to Photoshop while HTMLKit and Laszlo are just a few of the Open Source competitors to Macromedia products. A lot of people are arguing that the protected and proprietary Gates of Longhorn are looked on sympathetically by PC software vendors who dread Open Source possibly even more than the Redmond Zerosum Pitbull.