Jun 16, 2006

What’s the next move for Adobe?

With Newly Acquired Macromedia, it Plans to Render Windows `Irrelevant,’ its CEO Says

Written by John Boudreau, Mercury News

When Adobe Systems acquired Macromedia for $3.4 billion in stock in December, it was more than a merger of tech companies. It brought together two cultures — the hip, body-pierced world of San Francisco and the land of khakis in San Jose.

The old Adobe, maker of photo management software and the Adobe PDF, which lets people share digital documents, boasts a growing three-story downtown San Jose headquarters, where each employee has an office and easy access to the company gym and “chill zones” on every floor.

The new Adobe includes San Francisco-based Macromedia, where employees work in cubicles in a remodeled furniture warehouse — a building exuding industrial chic with exposed bricks and thick wood beams. Macromedia’s franchise Flash animation technology is embedded on most computers, in many cell phones and other non-PC devices and allows for ubiquitous video streaming and sophisticated ways to spruce up Web sites.

Together, the two former competitors hope to create new ways to share content — video, documents, Web applications — across multiple devices, from the PC to the cell phone, and on any operating system, from Microsoft’s Windows to Linux. Adobe, whose mission is to facilitate “the way to communicate in the new world,” said Chief Executive Bruce Chizen, is expected to garner between $2.54 billion and $2.6 billion in revenue this year.

The company’s moves, though, also place it on a collision path with its sometimes-partner Microsoft.

“After the merger, Microsoft announced it was going to compete with Adobe for most of the key markets Adobe competes in,” said Chris Swenson, director of software industry analysis for market researcher the NPD Group. Microsoft is developing its own suite of creative design software, a direct challenge to some of Adobe’s core products. Microsoft also plans to offer software allowing people to create their own PDF-like documents — without using Adobe’s Acrobat software, which has been a lucrative business for the company, and one the Redmond, Wash., company has long cast a covetous eye on.

“It’s pretty aggressive on Microsoft’s part,” Swenson added. “But Microsoft has growth targets approximately the size of two Adobes every year.”

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