Google, Microsoft, and Adobe's Acquisition Love Triangle

If someone's going on a shopping spree, who is it?

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On Thursday, shares for Adobe Systems soared 17 percent following a New York Times article suggesting that Microsoft would acquire the software company. Soon afterward, however, Kara Swisher at All Things Digital deemed the deal "nonsense" citing "numerous sources at both companies." After throwing a wet rag on the Times article (and consequently lowering Adobe's shares), Swisher advanced the idea that Google was actually much more likely to acquire Adobe. The reportage from both publications has spurred a great deal of strategic musing over which tech giant would benefit most from an Adobe acquisition:

  • A Microsoft Acquisition Makes Sense, writes Horace Dediu at Asymco: "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."
  • The Justice Department Would Probably Green Light It, writes Ed Hansberry at Information Week: "An acquisition by Microsoft would have been unthinkable a decade ago. Back then, the justice department was considering breaking up the software giant, something Judge Thomas Penfield Jackson ordered but was reversed on appeal, being found guilty of misconduct. Today though, Microsoft isn't the giant it was in 2000... It is doubtful the US government would put up too much of a fuss if the two companies got together. If Microsoft did acquire Adobe, would it matter? While Flash is important, I don't see it being a deciding factor for too many people on what phone they buy, and with HTML5 on the horizon, Flash will have less importance in the coming years."
  • A Microsoft Acquisition Is Not in the Works, writes Kara Swisher at All Things Digital:
It is kind of hard to do an acquisition when “Steven A. Ballmer, Microsoft’s chief executive, recently showed up with a small entourage of deputies at Adobe’s offices to hold a secret meeting with Adobe’s chief executive, Shantanu Narayen.”

Memo to the Times: When there is an acquisition afoot–in my experience–it’s all private airplanes and law offices and not a company HQ visit by the very loud and very noticeable Ballmer, the exact polar opposite of a shrinking violet.

  • Still, Microsoft Would Have a Lot to Gain, writes Darrell Etherington at Gigaom:

    A spurned Adobe is the perfect target for Microsoft’s overtures. First, Apple’s complete shutout of Flash from its wildly popular iOS mobile platform must mean that Adobe is missing out on an incredible amount of potential revenue...

    In a worst-case scenario for Apple, Microsoft would buy Adobe, and though it probably wouldn’t be able to make CS Windows platform-specific, it could hobble the software on OS X the same way it seems to have done with MS Office in the past. A slow erosion of Apple’s creative user base could also undermine the reasons it became a success to begin with: “Think Different” is a slogan born of the Mac’s appeal to the artistically minded, whether or not Apple is willing to admit it. Try to find a photography or design professional who doesn’t use Adobe’s Creative Suite in some capacity.

  • I Can't See How This Helps Microsoft, writes Preston Gralla at Computer World: "It won't help fight Apple... After all, Flash runs on Android 2.2 phones, and Google didn't have to buy Adobe in order to make that happen... It won't help fight Google... Adobe has no special expertise in search, Web applications, or online ad delivery. Microsoft needs to be worried [about] Google Docs... but Adobe is no help there, either... It will be a major distraction. ... Combining two large companies with different cultures takes a major effort... Right now, Microsoft executives need to focus on competing against Google and Apple."
  • Google Acquiring Adobe Is More Likely, writes Kara Swisher at All Things Digital: "In fact, it is Google that is more mentioned in Silicon Valley as the logical acquirer of Adobe, if there were to be a sale. Along with all its various assets, such as the Photoshop and Acrobat software that dominates online publishing, Adobe’s Omniture unit is one of the more powerful and popular analytics companies on the Web, which is right in Google’s wheelhouse. Personally, that’s the one I would bet on, although that’s entirely me speaking." Shira Ovide at The Wall Street Journal agrees.
  • Grain of Salt Time, writes Steven Hodson at Silicon Angle: "As interesting as this idea may be, I think for the time being this reports belongs strictly in the rumor column."
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