Hmm… funny, some companies would give up their first born child to have Microsoft bundle something in their Office suite. Of course, when you boast a market cap of over $17 billion and have set the standard for portable document formats (or PDF), you might not be happy about the fact that MSFT does not plan to charge for it. Read more and then let’s look at some other problems potentially facing Adobe (I own shares of Adobe):
The prospective legal dispute concerns the software behemoth’s move to incorporate Adobe’s portable document format (PDF) technology into the next iteration of Microsoft’s Office suite. Negotiations between the two companies concerning the Microsoft’s use of PDF broke down earlier this week, Brad Smith, Microsoft’s general counsel told the Journal.
The core item of contention between the two companies is whether Microsoft will charge Office customers an extra fee for the PDF feature, the Journal reported. Adobe, which wants Microsoft to charge for the feature, has insisted that Microsoft separate the feature from Office. Microsoft has agreed to remove the feature but does not want to charge for it, Smith told the Journal.
Adobe has raised concerns about Microsoft’s use of the PDF format, an Adobe representative told the Journal. But the representative declined to say whether the company is planning an antitrust suit against its bigger rival.
Representatives from Adobe didn’t immediately return calls seeking comment.
Adobe invented PDF, which companies typically use to create secure versions of documents. The format has become one of the de facto standards on the Web.
Adobe’s Acrobat family of products are used to read or write PDF documents. In a move to make the standard more ubiquitous, Adobe has given other companies the technical specifications of the format for free and allowed them to build their own applications using PDF.
Read more on that.
Back to Adobe: I like the company and own a few shares in them. Adobe is one of the few firms that is really well positioned to benefit from the overall digitization of content. Not only is PDF the standard for its market, but I loved their acquisition of Macromedia: combining the overall Adobe suite of products with Macromedia’s Dreamweaver product line is genius.
That acquisition was worth it for flash alone, especially as flash video takes off online. While Adobe would be nuts to bundle Macromedia’s Dreamweaver with its own Adobe Suite, having both under one roof can only mean one thing: Adobe will be better positioned, not worst, over the next 10 years as content becomes increasingly digital.
However, there are two potential negatives about Adobe that worry me as a shareholder.
Culture: This one has been written about ad nauseum, but there is a major difference in company culture between Adobe and Macromedia. One thing that Adobe’s CEO has done is elevate a lot of Macromedia people given their more entrepreneurial and creative disposition, that is great for the company but it might hurt morale at Adobe.
Blogs: Believe it or not, I expect the rise in blogs to both help and hurt Adobe. It will help Adobe because more people having websites will invariably help a publishing leader like Adobe, but the mere fact is that many people who would have otherwise used Macromedia Dreamweaver to build websites can now simply use Blogging software like Blogger, Wordpress etc. (Disclaimer: the Mojo Supreme blogs are powered by Wordpress)
Personally, I used Macromedia when I began building websites and loved it, but now I see a lot of benefits in blogging software to build and manage content-heavy sites. I am not alone. As more and more people embrace blogging and blogging software, it will adversely affect Adobe’s sales of Macromedia’s Dreamweaver. That’s just simple logic.
And do not think that only amateur and semi-professional website builders will favor blogging software, more and more professional websites see that blogging software like Wordpress is both powerful and seamless.
Despite this, I still like Adobe as a company and a stock. I bought shares in the mid 20s and held on until it rose to 40. I was close to selling but with the rise in flash video, I liked Macromedia’s outlook too much to dump the shares. Today the stock is at $29, which more importantly, means that Adobe carries a market cap of $17 billion.
That’s rich, but it speaks volumes about the company’s prospects. Considering that the stock is trading $4 above its 52-week low and $10 below its 52-week high, you just might want to stock up before analysts and the “average investor” begin to like the flash video storyline with Adobe.
Again, do your homework, make sure you know what you are doing; I work online, use their products and own stock, so I am biased.
p.s. To Adobe execs, if you are reading, avoid the courts, especially with Microsoft. You might be better served to work out a reasonable settlement.
Ask yourself what is more important to you:
1 - to get MSFT to charge for PDF in the new Office Suite
OR
2 - to further establish Flash Video as the best format for video on the Web.
Why look at the past when you should look ahead? Focus on #2 and work out some kind of arrangement whereby MSFT used flash video in their Windows Media Player. Sounds crazy? Well, most settlements are.
What’s crazier is that when you start thinking about it, Adobe and Microsoft would actually make GREAT fits in a potential M&A. Think about it, Adobe has a few tools in the web publishing space that, under MSFT’s roof, set Google back a bit. Read that over twice if you do not see what I am referring to…
Now that’s crazy.
All right, I’m emailing Bill and Steve. Maybe I’m crazy.
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June 4th, 2006 at 2:55 pm
[…] Now, he probably assumed I emailed him cause he is suing me, since he does not know that I make it a habit of emailing everyone from Mark Cuban to Bill Gates when I get these crazy ideas. I am not sure if he reads his email, let alone get my suggestion. I told him that by doing so, he could be both MySpace and YouTube. […]
June 22nd, 2006 at 1:02 pm
[…] We’ve also talked about how Adobe is miffed at MSFT for wanting to bundle its PDF reader for free, click here for that. […]