Adobe + Macromedia and Microsoft

At the JP Morgan 33rd Annual Technology Conference, Adobe CEO Bruce Chizen was asked repeatedly whether he thought the new Adobe would now appear on the Redmond RadarScope and become a major target for Microsoft. For the record, here is what Bruce had to say:

” …this gentleman thinks the [Macromedia merger] is a threat to Microsoft. You know, its interesting. As a $40 billion company Microsoft has lots of stress and lots of threats. It is a company that has to grow 1 or 2 times the size of Adobe in revenues every single year. It is a company that has just about every regulator anywhere in the world out to get them, or at least investigating them. They have partners and competitors alike that either really dont want to do business with them or compete ferociously against them. And they have a set of employees who have not seen their compensation structure or their stock price rise in 5 or 6 years. At the end of the day I dont think Adobe is what keeps Steve Ballmer up at nights. I think there are a lot of other companies and issues that keep Steve Ballmer up at night.”

Having said the above, Bruce went on to argue that Adobe+Macromedia with its multi-operating system and multi-device approach for its two key object containers plus many application(but not all – look at the Adobe Video Collection and some key components of its Acrobat/Form software which are Windows only) – all of these helped to insulate Adobe from Microsofts competition. Bruce went on to cite the failure of PhotoDraw, InfoPath, MDI and other Redmond image and media products from making a dent in either the creative processing or form/print container marketplaces.

However what was not discussed were the following issues:
1)one of the key reasons Flash has 98%++ coverage of browsers is because it is by default installed with every copy of IE. With a new version of IE coming out this summer would Flash still be on board? What about when IE becomes a part of the operating system in Longhorn due out in 2006 ?
2)Given that both Windows Media Player 10 and the upcoming Metro document container for Longhorn and Office 12 compete head on with Flash and PDF respectively, would the large Windows market (Adobe did not disclose the breakout of Mac versus Windows sales for any of its software products although Bruce did say that the historical ratios were roughly holding on the Creative side but less so on the forms side) – be adversely effected by a more aggressive Microsoft looking to gain advantage either through compelling free giveaways (see BI Stack giveaways to shore up SQL Server database sales) or proprietary Avalon, Windows Longhorn and/or XBox features and APIs that give Redmonds Metro, Windows Media Player, Sparkle and other “skunk works” or acquisitions distinct competitive advantage;
3)In the guise of meeting the EOLAS patent suit, or new security requirements, or XML and Web Services delivery requirements – could Redmond do an Albert the Alligator from Pogo comic fame. Alberts stunt was that whenever he found himself losing in a game of chess – he just yelled “earthquake, earthquake” and not just tilted but absolutely shook the game board to insure he never lost. See the next point below for a quick assessment;
4)None of the Adobe file formats: Acrobat-PDF, Flash-SWF, Photoshop-PSD, nor Illustrator AI are supported directly by Redmond in its Office or Windows system with exception of IE/Outlook for mime types of SWF and PDF. This is usually a bad sign – it means that Microsoft is still reserving the right to drop support for them and emphasize their own formats whenever it sees fit to do so. As we have seen in the case of the Java JVM and HTML/CSS/DOM – Microsoft can turn on a dime and freeze out technologies as “persona non grata” at 1 Microsoft Way. Bruce really did not address this risk and contingency;
5)The Linux desktop lure. Writing for the Mac as Adobe+Macromedia largely does without using Java extensively gives the company a relatively shorter stepping off into Linux. With Linux now sprouting up all over in the rapidly changing world of mobiles, embedded devices in cars and homes, and in all things manufacturing and distribution and collaboration related (PDFs natural constituency) – there is going to come up tipping point (probably sooner rather than later)when Adobe+Macromedia creative and/or developer tools need to port to Linux. And gven that I am not likely the only one who would foresake Windows in an eyeblink (especially with OS virtulization and Dual core becoming desktop hardware endowments in the very near future) if Dreamweaver/GoLive and Photoshop apps became available on Linux – Bruce did not address either when that tipping point comes and how it will be accomplished without stirring up the wrath of its admittedly largest desktop OS “partner”.

So there you have it – is Adobe low on Microsofts radar. I dont think so. Microsoft is currently having to endure the spectacle of Yahoo and Google, but especially Google, growing in revenues and profitability like Redmond used to and being the geek “place to be”, again like Redmond used to be. And Adobe is not far behind in geek affection as it gets consistently rated as one of the top 50/100 employers in all industries in the nation. Now the market for being the real time, secure, cross platform containers of choice also unlocks huge revenue opportunities for Adobe+Macromedia. Can Redmond afford another Google-like flowering among its ISV “partners” (Adobe+Macromedia becomes Redmonds largest on the desktop) in which Redmond gets embarrassed because it missed yet again another major IT take-off market? Uhhh …. not exactly.

(c) JBSurveyer 2005