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Apple + Adobe? Umm. No.

Posted by: Arik Hesseldahl on November 02, 2007

Brandon Watts over at OSWeekly has a suggestion: Apple should acquire Adobe. It’s a fair idea that even made the front page of Slashdot, fair that is, until you start running the numbers. Apple has $15.4 billion in cash, and as of today’s closing price Adobe is worth nearly twice that at $27.5 billion. An Apple takeover would have to include a fair premium on top of that, which would make such a deal worth more than $30 billion easy.

The only way Apple could do it would be to issue stock, which would dilute its value, or take on debt. (Imagine a really big credit card.) And? Apple’s stock on such a huge deal would be, um, Applesauce. Investors would flee. They usually do when big acquisitions are announced because they inject uncertainty, and investor hate uncertainty, and let’s face it, Apple’s on a very solid growth footing right now.

Here’s the other problem: Platform Mix. As recently as 2005, the most recent year that Adobe broke the figure out, 75% of its revenue came from the Windows platform, and I’d venture that that figure is about the same, if slightly lower now. Watts is suggesting that an Apple-controlled Adobe would be able to encourage Windows users to switch favoring the Mac version of Adobe products, “while letting Windows versions trail behind.”

Imagine buying a very expensive car, say a Jaguar, and then taking out its engine and replacing it with an inferior one. Not only have you made your car crappy to drive for yourself, but you’ve reduced its value substantially. Buying Adobe (which now owns Macromedia remember) and then hobbling the part of the business that brings in two-thirds to three-quarters of its revenue is a very bad business idea, and terrible way to squander Apple’s hard-earned cash stockpile.

Sorry Brandon. Good idea? No.

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Reader Comments

Perry Clease

November 2, 2007 07:06 PM

Apple already has several windows programs:

Safari
iTunes
FileMaker (yeah, I know that they are some sort of subsidiary)

Apple would almost certainly continue developing Adobe apps for Windows. Sure they may tightly integrate the Mac with Creative Suite for pros much in the way of iLife for the home/small business user and in the process encourage Windows user to switch to the Mac.

That being said I do not see this marriage in the offing.

PXLated

November 2, 2007 07:33 PM

I agree, a bad idea but for slightly different reasons. Everything I've read/heard is that when Adobe went cross-platform, they created their own development environment that now doesn't allow them to easily take advantage of new technologies within the underlying OS. So, they can't take full advantage (if any advantage) of OSX core video, animation, or other Apple technologies. Also understand that a good portion of the Adobe Mac code is Carbon -based rather than Cocoa, in other words old.
Apple would probably be better off recruiting the top ten programmers for each Adobe graphics product (Photoshop, Illustrator, and InDesign), offering them a $5-10M signing bonuses and starting from scratch. Total cost would be far less than buying old tech and major overhead.
From the grumbling I hear, designers aren't that enamored with Adobe anymore anyway. Their products have become bloated and upgrade pricing way to high.

John

November 2, 2007 09:27 PM

an Apple-controlled Adobe would be able to encourage Windows users to switch favoring the Mac version of Adobe products, "while letting Windows versions trail behind?

Why does this sound so familiar? Oh right, MS Office. Well, one favor deserves another.

Mark Wilson

November 3, 2007 05:41 AM

There's no way they should buy them. What they should do is write some seriously competitive products of their own. Apple has shown it can acquire small / write new great apps and turn them into leaders. Adobe could do with the heat...

Mark Wilson

November 3, 2007 05:41 AM

There's no way they should buy them. What they should do is write some seriously competitive products of their own. Apple has shown it can acquire small / write new great apps and turn them into leaders. Adobe could do with the heat...

mark G

November 3, 2007 06:48 AM

great article Arik, I agree w/ you that it would also be a bad move.

taojones

November 5, 2007 12:43 AM

apple is into making great stuff and so is adobe if your dumb enough to want to run on a beige box wintel apple could care less, one thing for sure the software will work and work for you. example : my Motorola razor when i open my main menu the center button is the shop for ringtones, my address book requires me to click down and click to open it. apple or adobe would never put their sales pitch above my needs for functionality. that address book would open for me and id be ready to go. apple and adobe have a great relationship and work so well together now they might as well be one company. perhaps Microsoft's office for apple division could buy them both. as you may remember mr gates bought a sizable chunk of apple in 1995 i don't think he is sorry i own both companies stock and regularly trade them to accumulate shares (i have done quite well) i expect Bills investment in apple alone could finance the deal by now if he was so inclined. (ps i would not run from that merger as an investor I would be CERTAIN that the new company would continue to do amazing things)

Peter

November 5, 2007 05:43 AM

I agree that Apple's acquisition of Adobe would not make sense, but for a different reason. It's the Adobe code base. It would require a great deal of effort to carbonize the code.

It will be far less expensive for Apple to develop competing products in-house and sell them at 1/10th of what Adobe charges.

Chris

November 8, 2007 01:57 PM

"Imagine buying a very expensive car, say a Jaguar, and then taking out its engine and replacing it with an inferior one. Not only have you made your car crappy to drive for yourself, but you've reduced its value substantially."

Didn't Ford already do that?

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A blog on the daily doings of Apple and the many companies in its orbit, with insight and analysis by two longtime Apple-watchers BusinessWeek Senior Writer Peter Burrows and BusinessWeek.com Senior Technology Writer Arik Hesseldahl.

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