News

Rumor: Microsoft To Buy Adobe

• By Kurt Mackie
• October 8, 2010

The New York Times reported today that the heads of Microsoft and Adobe held a secret meeting to discuss the acquisition of Adobe, among other matters.

The account was sourced to "employees and consultants who were involved in the discussions" or familiar with them, according to the Times' story. Microsoft's CEO Steve Ballmer and Adobe's CEO Shantanu Narayen both reportedly met for an hour to discuss Microsoft buying Adobe and a partnership alliance against Apple, the story explained.

They also reportedly discussed Apple's "control" of the mobile phone market. However, Nokia's Symbian mobile OS actually holds that distinction, at least in terms of numbers of handsets sold.

It's not clear from the account when this meeting might have taken place, if it did take place. Ballmer is currently in Europe this week talking about Microsoft's cloud efforts. A Microsoft spokesperson stated today by e-mail that "Microsoft is not commenting on this issue."

The relationship between the two companies has seemed generally positive of late. They recently collaborated on security patch efforts. And while Apple banned Adobe Flash from the Apple's OS platform, with Apple CEO Steve Jobs calling Adobe products "insecure," Microsoft officials have sounded more positive tones about Adobe's products.

Even with Microsoft's rollout of the Silverlight multimedia platform, which competes with Adobe's Flash browser plug-in, and even with Microsoft's announcement of native browser HTML 5-based video and graphics support in its Internet Explorer 9 beta (which might one day eliminate the need for both Flash and Silverlight), Microsoft officials have assumed that Adobe's Flash technology will play an important role for years to come.

Cold water was immediately splashed on the possibility of Microsoft acquiring Adobe. Veteran Microsoft observer Mary-Jo Foley noted that Microsoft historically seldom makes large acquisitions. Microsoft just announced its acquisition of AVIcode, but the price was estimated at less than $50 million, according to some accounts. In a Bloomberg video, Brad Reback, an analyst with Oppenheimer & Co., called the acquisition possibility "low," noting that it would take Microsoft something like $20 billion to acquire Adobe.

Microsoft's biggest purchase to date was its $6 billion acquisition of aQuantive, a maker of ad platform technology for the Web, in 2007, according to notes by Reuters.

Reback did speculate that Microsoft and Adobe might have discussed establishing a partnership on Windows Phone 7 and enabling a good Flash experience on smartphones. However, Microsoft expects Windows Phone 7 devices to start appearing by this holiday season. It would seem that such talks would have already taken place by this time.

Adobe's stock rose today by nearly 17 percent in late-day trading, according to Investors.com.