Adobe's Uphill Climb Off the Desktop

CEO Narayen is keen to put Flash and Adobe's other software on mobile devices, but an impasse with Apple and competition with Google mean it won't be easy

By Aaron Ricadela

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Adobe Systems Chief Technology Officer Kevin Lynch had good news on Oct. 5 for attendees of his company's annual conference in Los Angeles. The next version of Flash, the company's flagship Web video software, could be used in applications for Apple's iPhone—developers the world over could use Flash to create downloadable games and other tools for one of the most popular smartphones.

But in the back of the minds of many of the 4,000 designers, software developers, and computer-industry execs was the bad news—that because of an ongoing dispute between Adobe (ADBE) and Apple (AAPL), iPhone users still can't view Web pages built with Flash. The upshot: While Flash can be embedded in software downloaded and used on the device, it won't show up for people who use the iPhone to surf the Internet. "They see [Flash] as a mixed blessing," Adobe Chief Executive Shantanu Narayen said of Apple in an August interview. On one hand, iPhone users want access to videos and Web pages built in Flash. But Apple says the software slows the device down.

The conundrum illustrates the chief hurdle facing Adobe, the world's fourth-largest software maker by market value. Under CEO Narayen, Adobe wants to keep its products relevant in a world where computing is shifting away from traditional PCs and laptops toward handheld devices. The company wants to ensure that Flash and other marquee products are as useful on smartphones, netbooks—even car dashboards and TVs—as they are on desktops. By keeping Flash off the Web for iPhone users, the impasse with Apple doesn't help.

An Emphasis on Handhelds

Adobe has long been a key supplier of software for PCs and Macs and is expected to sell $2.91 billion worth of software, including Flash, Photoshop, and Acrobat, in its 2009 fiscal year, which ends on Nov. 27. The company controls key industry standards for document publishing and Web-site development, which creates markets for its publishing and software-development tools. Adobe's "growth has always been fueled by creating vibrant technology platforms," then selling products that take advantage of them, Narayen told analysts on Oct. 7 at Adobe's annual financial analyst meeting in Los Angeles.

In pursuit of new growth, the company is spending $1.8 billion for Omniture (OMTR), which makes Web-traffic measuring tools that might give customers such as Disney (DIS) and Nike (NKE) ways to monitor user activity on Web sites built with Flash.

Adobe is also putting new emphasis on software for smartphones and other portable devices—at its Max conference it announced that version 10.1 of Flash, due next year, will be able to deliver software applications and high-definition videos not just to traditional Windows and Mac computers but also to smartphones running operating systems from Google (GOOG), Palm (PALM), Symbian, and Microsoft (MSFT). "We'd love to attack this market," said CTO Lynch in an August interview.

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