Will Microsoft Buy Adobe to rival Apple?
October 8th, 2010
Daniel Eran Dilger
Hello readers, sorry for the long hiatus. I hit pause to enjoy life a bit. But now I’m digesting a story that is causing me to gag: that Microsoft and Adobe are going to battle Apple together in 2010 by resurrecting the 1990s.
The idea is that Microsoft was discovered to be holding talks with Adobe, and therefore the worlds biggest software company was imminently prepared (obviously!) to swallow the wildly overvalued conjoined twins of Adobe and Macromedia.
Why? To battle Apple of course, because how else do you take on a successful smartphone platform other than combining the worst mobile operating system available with the least efficient mobile app platform in the world, one that only exists for Android and then only works halfway on a few models of Android-based devices.
The only good thing about a Microsoft acquisition of Adobe is that it would almost certainly trigger the dismissal of CEO Steve Ballmer. Why? I’m so glad you asked, because the premise of this piece is to explain why.
Mergers are not wonderful
For starters, I’d like to point out that while oxymoronic “conventional wisdom” holds that the solution to any corporate problem is to merge with another company, the opposite is often the case. Very rarely do you have a merger of two large companies that does anything but fail or marginally survive.
The best example of a good tech merger was Apple’s acquisition of NeXT, but that was more of a reverse takeover of a well positioned but ineptly run large company by a struggling but talented management pool of a relatively small company.
Microsoft may well play the role of a well positioned but ineptly run large company, but Adobe doesn’t offer any sort of talented management, nor even the futuristic technology along the lines that NeXT provided to Apple back in 1997. A merger of the two would be more like American Airlines buying Amtrak.
Flash is dying as quickly as Microsoft’s PCs
Billions could be invested in making Flash better, but the industry at large has already determined that it’s a better bet to throw capital at HTML5, a portfolio of open specifications that aren’t owned and managed by a single entity with specific goals that don’t align with most other entities in the tech world. Apple has accumulated the most flack for not being foolish in this regard, but most other companies are doing the same thing without the ignorant criticism (because they lack the ability to sell news as anti-Apple reports do).
A lot of people who are invested in Flash don’t like this reality, but failing to believe in obvious realities has never resulted in anything good. Flash is dead, and even those who seem to be advocating it (including Google and others who appear to be backing Flash as a frenemy in optimistic attempts to hold back Apple’s juggernaut iOS platform) have clear reasons not to be interested in pushing Flash long term, particularly once HTML5 begins to gain traction everywhere.
What about Microsoft? Is it the exception to this rule, given the dramatic failure of Windows Mobile, the embarrassing face-plant of KIN, and its struggling efforts to establish Windows Phone 7 in a world already oversaturated with better mobile products? Will Microsoft pick up Flash and fund it as an alternative to Apple’s Cocoa Touch?
Dinosaurs eating each other
Adobe’s Flash-motivated acquisition of Macromedia in 2006 for $3.4 billion was curious at best, but at the time Adobe was struggling to earn a web presence and tie its print apps (Photoshop, Illustrator and InDesign) into a stronger suite that could better target the web.
Being able to absorb the only other significant vendor of creative apps was not only a reasonably good addition for Adobe; it was also a major subtraction of competition. This was enabled by the right wing currents blowing in America at the time, which were openly fostering the consolidation of oligarchies at the expense of the competitive, entrepreneurial marketplace of small players that once made the country great.
We now have the product of a decade of pro-consolidation, anti-regulation public policy: banks and massive corporations control the government and entertain the middle class with the notion that they should give up any demand for “socialist” benefits in exchange for providing multinational monopolies with the freedom to pay low wages, syphon their profits into tax shelters, and pay no regard to any sort of environmental issues or invest anything into the proper education and critical infrastructure of the nation.
Rather than bringing significant visible change, President Obama has since focused on making lots of invisible progress that hasn’t suitably entertained the middle class, prompting them to threaten to bring back to power the party of John Boener, who shamelessly handed out campaign checks from the tobacco industry on the House floor.
With the abject failure of the American government all but certain, one can only hope that something other than the failed “government of the people” can survive the collapse of the massive dinosaurs created under President Bush, something both Microsoft and Adobe represent: companies that are too large, poorly focused, complacent, and simply unable to compete outside of areas where they hold a monopoly lock on competition.
That something is entrepreneurial, smaller companies that make decisions with capital that benefit their customers and suppliers as well as themselves. Apple is a big company in terms of net worth, but it’s somewhere around a third the size of Microsoft in terms of employees, and many of Apple’s workers are retail staff. Apple acts and thinks like a thin, lean, small company despite its billions in the bank and its massive growth. Adobe and Microsoft act like elderly, obese queens resting on the laurels of their past glories.
No, Microsoft is not going to buy Flash
Today, one could be forgiven for thinking that Microsoft might swallow up Adobe, given all the effusively megamerger-positive drivel that the nation has wallowed in for so long. Merging major companies is like peanut butter and chocolate, right? Well not exactly.
For starters, Microsoft already has a Flash of its own: Mobile .Net / Silverlight, which is based on the same stuff Microsoft has been pushing to modernize Windows on the PC beyond Win32. Buying Flash would be more ridiculous than buying Danger and then converting its Java-based OS to WinCE. Or buying HotMail and WebTV and replacing their Solaris underpinnings with WinNT. And those things were all very ridiculous.
Mobile .Net is already the foundation of Microsoft’s any-day-now WP7. Microsoft not only has no need for Flash, but it actively dislikes Flash and has positioned Silverlight to replace it both on the desktop PC and in its mobile devices (at some point, and very optimistically).
People who think Apple really “hates” Flash should clue into the reality that Apple doesn’t have an alternative Flash clone that it’s pushing, like Microsoft. Instead, Apple is just betting on HTML5, something Google and Microsoft and everyone else is also doing. Microsoft really hates Flash, it just isn’t upfront about it.
The only reason for Microsoft to buy Flash would be to waste vast billions of dollars for nothing. The rest of Adobe’s apps would compete against the ineffectual creative suite that Microsoft put together, then gave up on.
If Microsoft really wanted to be in the creative apps businesses, buying Adobe would be a very cost-ineffective way to not make money. However, there is no sensical reason for Microsoft to spend its money buying Adobe, as opposed to say, buying back more shares in admission that the best thing the company can do with its money is give it back to its shareholders.
What does Microsoft really want?
Instead, Microsoft is desperate for frenemies in its effort to rival Apple. It would like to have Adobe prepare Flash for WP7 at Adobe’s own expense just to give Microsoft’s new phone platform both a bullet point and a competitive distinction with Apple’s iOS, even though having a shoddy beta-quality Flash runtime isn’t exactly making the Google Nexus One stand out as a must have, discontinued Android phone.
Microsoft would also love to have Adobe drop Flash and push Silverlight, although the best it could ask for would perhaps be for Adobe to add Silverlight export to its Flash tools, similar to the iPhone Cocoa Touch export Adobe delivered, only to be rebuffed by Apple initially. This would enable Flash developers to poop out WP7 “apps” from Adobe’s tools, giving WP7 at least the illusion that it has some software available.
In exchange, Microsoft could offer to promote Flash in the lying sort of way that it once suggested that Windows would run OS/2 apps, or that Office on the Mac would ever be decently good again. That is, a visible show of support for Adobe’s Flash platform, even if it’s really just a hollow pretense that covers up Microsoft’s real intention to push Silverlight instead. That sort of thing is Microsoft’s core competency.
As for Adobe, investors are signaling that the best hope for the company is to have any another company of any kind take the time to talk with it, recalling the Rodney Dangerfield line about a kid being so ugly they had to hang a bone around his neck just to get the dog to play with him. Imagine how Adobe’s stock would jump if Apple ever bothered to discuss the future with it.