Jobs Steps Up Attack on Adobe's Flash

Apple's CEO says the software has "major technical drawbacks," widening a rift between the companies

By Arik Hesseldahl and Rochelle Garner

Apple CEO Steve Jobs wrote a rare, 29-paragraph open letter on Apr. 29, panning Adobe Systems' Flash video software as having "major technical drawbacks"—and deepening a rift between the companies.

Jobs used the posting on Apple's (AAPL) Web site to outline six reasons Flash shouldn't be used for mobile devices and to say his company has "few joint interests" with Adobe (ADBE). He said the decision to bar Flash from Apple's devices stems from concern over the technology, not to keep from losing business.

Apple's exclusion of Flash from the iPad and iPhone reflects the company's aim to control the way games and other applications are created for its devices, says Charlie Wolf, an analyst at Needham & Co. who has a buy rating on Apple shares. Wolf says Apple's decision "makes sense." The company wants developers "on the same page and using Apple's development tools."

By urging programmers to adopt other tools, Apple threatens the dominance of Flash, used in 75% of online video. "The conflict between Apple and Adobe has been a very big deal," says Chad Bartley, an analyst at Pacific Crest Securities who has an outperform rating on Adobe. "The Flash platform and ecosystem is obviously critical to Adobe and to the success of its creative tools business."

Adobe shares closed down 51¢, or 1.4%, to $34.96 on Apr. 29. Apple rose $7.04, or 2.7%, to $268.64.

Developer Rules

This month, Apple released new rules that force application developers to write programs directly for the iPhone operating system, rather than use intermediary software such as Adobe's products. That may have made Adobe less appealing to developers, many of whom view Apple's products as platforms they can't ignore.

HTML5, a standard Apple uses instead of Flash, is a "completely open" technology, Jobs said. HTML5 lets Web developers create graphics and animations without relying on third-party browser plug-ins, such as Flash, he said. "Perhaps Adobe should focus more on creating great HTML5 tools for the future, and less on criticizing Apple for leaving the past behind," he said.

Adobe responded to Jobs' letter with a statement that said Flash "is one of the most pervasive technologies on the planet. …Apple's moves to block Flash and other technologies are designed to protect a business model that locks developers and consumers into a single, proprietary stack." The e-mailed statement from Adobe spokeswoman Holly Campbell also said, "Any attempt to position this solely as a technology issue is a smokescreen."

Michael Gartenberg, a partner at technology consulting firm Altimeter Group, says the onus is on Adobe to respond to criticisms of its product. "The best thing that Adobe can do at this point is not respond with words," he says. "They need to show Flash as a great mobile experience, and show Apple customers what they are missing."

Adobe at Risk

Dean Crutchfield, a senior partner at branding agency Method, which has done work for Microsoft (MSFT) and Autodesk (ADSK), says Apple's attack presents Adobe with "an opportunity to explain itself in a way that would have otherwise cost them millions and millions of dollars." Adobe is on perilous ground, though. "If Adobe has wedded itself to Flash, they better call a divorce lawyer right now," he says.

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