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Adobe and Microsoft sitting in a tree

Adobe is one of the last surviving desktop software companies. So is Microsoft. Consolidation happens when an industry matures and excess capacity and excess overhead can be squeezed out of the value chain, giving a temporary burst of earnings growth.

So, in this way of thinking, recognizing that the sun is setting on desktop software, a merger of old schools of thought may make sense. Rather like Sun and Oracle or HP and Compaq.

But then a lot of other things make more sense. Like both companies trying to expand into new growth areas. Like Microsoft talking to RIM or Adobe developing tools for HTML5. Adobe’s cash cow products are not going anywhere without a deep reset. Same is true for Microsoft. They will both face these challenges whether standing alone or together.

There would be nothing strange about a Microsoft Adobe merger, but there would be nothing great about it either.

  • http://twitter.com/GoodyBird @GoodyBird

    Makes no sense.
    Adobe have no stakes in the future.

  • Mark Newton

    I’ve been racking my brain all day, trying to imagine what Ballmer and Narayen could be scheming as a strategy for wresting mobile share away from Apple.

    I’m struggling to come up with anything threatening. Surely MS doesn’t need Adobe to provide a mobile SDK for WP7, nor an App Store. Does Abobe have patents MS could leverage against Apple?

    It’s got me beat. I just don’t see it.

  • MattF

    Microsoft and Adobe both have a vast amount of engineering talent locked up inside their company walls. The CEOs should be looking for ways to get that talent doing transformative– or at least, interesting– things. But I somehow doubt that's what they were discussing…

  • Gandhi

    If they were planning to merge, or Microsoft to acquire Adobe, they would not do it so publicly. They would do it through intermediaries behind closed doors

    Anyways, even if they do merge, it would be like two drunks trying to hold each other up – can’t win a marathon that way.

  • CndnRschr

    As was the case for TimeWarner and AOL, in this case 1 + 1 = 1. Different cultures, competing programming aims, neither has a substantial handheld device marketshare. Perhaps they were co-commiserating – after all grief likes company.

  • http://info-tran.com Info Dave

    Deep reset. When we were kids, we called it a do over. I still do, but I like deep reset better.

    Apple had a do over when they created OS X. It worked pretty good for them.

    • Gandhi

      Microsoft at least is congenitally incapable of a do-over. They are too addicted to Windows cash cow, and don't have an innovative bone in their body. While Apple purchased Next to beget OS-X, no one would argue that iOS was not homegrown.

      Look at WinPh7 that is about to be released. A carbon copy of the features of iOS, circa 2007, right down to the missing cut and paste feature! What possible benefit would Adobe bring – they have their own set of problems they are dealing with – namely a bloated design-suite that is increasingly becoming a niche product catering to a smaller and smaller market subset.

      • http://info-tran.com Info Dave

        I would tend to agree with you. I have little respect for either Adobe or Microsoft. In the bloatware department, nobody does it better.

        Apple was pretty desperate before its do over. Perhaps Adobe and Microsoft are just not hungry enough. There is still plenty of money to extract out of their perspective cash cows. The future is one of maintenance and preservation rather than innovation and new markets.

      • ericgen

        As mentioned here, and elsewhere, Apple has figured out that the safest way to avoid being disrupted by others is to disrupt yourself first. They cannibalize themselves before anyone else even figures out how to compete with where they were. Jobs loves the Gretzky quote about skating where the puck is going to be instead of where it currently is (Who knows? Maybe the new Apple TV's shape is a tribute to this? :)). Apple lives this in pretty much everything that they do.

        Companies like Adobe and Microsoft not only don't have this ethic ingrained, they don't have cultural structure to even do it on any product. Apple continuously experiments with things. They'll pick a product to try a new approach with. If it doesn't do as well as expected (the last generation shuffle comes to mind), they change and move forward. If it does well (unibody construction on the MacBook Air), they roll it out across the product line. They never just sit and feast on the cash cow.

        Adobe and Microsoft, like a lot of companies, are addicted to their cash cows. They can't imagine cannibalizing themselves much less how to go about actually doing it.

  • Mark Hernandez

    This little hour-long meeting has delivered a giant, complex tangled web of idle speculation that's nothing but fun. But here's one thing that I've noticed…

    Both CEOs are very much like the American politicians John Boehner and Mitch McConnell. When they get up to the microphone, they consistently say things that everyone in the room knows is untrue and/or deceptive, and they act like no one notices. They really don't care that the media and their peers know it's BS because they're talking to the public which has minimal critical thinking skills.

    Ballmer's recent statements about the iPhone and iPad, and Narayen's statements about Flash and Apple have been just like that, right?

    Reset. Is there a bottom line as to how to compete effectively? Responsible CEOs must stay in touch with it.

    Apple's oft stated raison d'etre has consistently been "to come in every day and build the best products available." It's such an unbelievably simple foundation for success. Operate like a startup in which the people at the top are in close contact with the creative team. Keep your mouth shut, let the products speak for themselves, and when you DO announce a product, it's available now and it works well and completely from DAY ONE, and often over-delivers. A little reality distortion mixed in is part of the marketing schtick.

    With MS and Adobe it seems more like we have CEO "politicians" who wear suits, with layers of suits between them and the creative team, and an advertising arm that's equally detached by layers, they announce their products way in advance, and under deliver.

    What are the chances these and other sharply competitive rules-to-live-by were discussed at their meeting?

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  • rd

    All of Adobe product are developed using
    their in-house technology combined with AIR.
    Microsoft could spend 5 years trying re-write them
    for .NET.

    If mobile is market then RIM is the only vendor
    using AIR therefore ADBE should merge with RIM
    and move to Canada.

    If by change Microsoft buy Adobe. Apple should lobby
    the government to force spin-off of Mac product line.
    end of story.

  • famousringo

    All I can say is that if Microsoft and Adobe merge, I hope the mobile revolution kills them sooner rather than later. It sickens me to see monopolies buy up other monopolies.

  • Alexkhan2000

    To me, it just sounds like two dinosaurs getting together to talk about how they'll survive the comet (the mobile revolution) that recently crashed half-a-world away. But as someone commented about the prospects of Microsoft buying Nokia, combining two dinosaurs doesn't produce a mammal, just another dinosaur.

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  • Christopher Brown

    Apple could have punished MicroSoft 5 years ago by buying Adobe and only supporting the mac versions of the software, but that wouldn't have been a very popular move, and as things turned out, Apple has been able to beat MS at other games during that same time (music, mobile, even the OS game) without buying Adobe.

    I really believe that if Apple wanted to, they could make iWork applications that truly rival MS Office, and could make a creative suite that knocks CS5 out of the water. They just haven't wanted to. Yet.

  • Alexkhan2000

    Microsoft (and Ballmer) has become a victim of its own success (or monopoly). The company and its leadership became numb due to the extravagant margins and profits provided by the Windows and Office cash cow. To this day, who can match Microsoft's operating margins? Even Apple and Google aren't quite in Microsoft's league when it comes to the money rolling in. There must be a "political" faction within Microsoft that controls Windows/Office and, thus, wield enormous influence over the strategic direction of the company. This faction probably consists more of bean counters and lawyers than the technologists and visionaries.

    I am sure Microsoft has (and has had) top flight engineering talent in their mobile division. But like their own employees say, they are weighed down by bureaucracy and political infighting. Problems like this start at the top. Ballmer and his top lieutenants are being dragged along by the political inertia of its corporate culture instead of directing it. There isn't that razor sharp focus and nimbleness that Microsoft used to have under Gates in the 80's and 90's and what Apple under Jobs is displaying now. It'll be very interesting to see how Windows Phone 7 pans out over the next 6 months to a year. Time has run out and either they produce with this thing or Microsoft will slowly fade into irrelevance. Or they may have to completely reinvent themselves and just focus on the backend against the likes of IBM, HP and Oracle.

    The odds seem heavily stacked against Microsoft. The lead that Apple and Google have built seem insurmountable and their momentum just seems to be getting stronger and stronger. I, for one, would like to see Microsoft do well and provide vigorous competition against Apple and Google. I think there's room in the mobile space for all three (or even more – like HP's webOS) to co-exist. I just don't see one player dominating the mobile market in the way Microsoft dominated the PC industry. The market forces just don't seem to want it and it's better for innovation and consumers that there are several strong companies competing vigorously in this critical global market.

  • http://twitter.com/TektonikShift @TektonikShift

    Amazing how times have changed.
    10 years ago, Microsoft was under constant antitrust scrutiny.
    Now, such a meeting happens and no one cares if these two hook up or not.

    So low the mighty have fallen.

    btw – I am not dismissing Microsoft's opportunities in mobile. Microsoft has many assets it can leverage with or w/o Adobe's help. If Microsoft can modernize its view of the mobile consumer and marketplace, they have chance to be relevant and thrive in mobiles.
    http://twitter.com/#!/TektonikShift
    Tek