Adobe - Spry and Nimble or Microsoft II?
Note: this post was
carried this morning on Wallstrip
Overview
Adobe is a cool company with some wicked cool products. And as
readers know, I am all about investing with the wind at my back, and
Adobe has a bunch of that with the need for a bridge between
programming and design, the explosion in online publishing and products
that have become the de-facto standard in a Flash-rich world. All that
said, they’ve got some serious issues to deal with. Serious issues -
the rise of open source, cheap, high quality alternatives, Microsoft
gearing up to compete, a high price point that is pissing off loyal
users, to name a few. So, my sense is that there is an epic struggle
unfolding between the hip, nimble, forward-looking company that they’ve
been in the past versus a Microsoft look-alike who milks their existing
turf, makes gobs of money today but has a hard fueling organic growth.
Adobe is a good story, a sound story, but a story with a very uncertain
ending. Whether or not this risk is priced into their P/E is for you
decide after reviewing the data.
Adobe vs. Microsoft - Stepping on Each Other’s Toes?
Some say no:
Robert Scoble talks today of a coming war between
Microsoft and Adobe. For what it’s worth, I don’t see things this way
at all… Microsoft and Adobe are in fundamentally different businesses,
and have fundamentally different roles to play. Microsoft makes an
operating system and expands outwards from there; Adobe provides the
background technology for people to connect with their audiences
regardless of media type. The new company will be much more clearly
visible after the MAX conference this month. In the meantime, after
checking with other folks here, I think the impression left by Robert’s
piece is rather strange. He’s a nice guy, but I’m not sure of his
speech.
We think yes. John Dowdell’s analysis would have resonated a few
years ago when Adobe was more of a pure play, focusing solely on
graphic/document management software, but the acquisition of Macromedia
has expanded its pool of technologies. Also, the explosive growth of
web application technologies such as AJAX demonstrates that the growing
market for tools that bridge the gap between programming and design.
It’s exactly this market that Microsoft and Adobe are vying for. It’s
difficult to dispute that both are moving into each other’s turf.
Microsoft may be focused on operating systems, but their monopoly
gives them huge leverage in changing standards. This is highlighted by
the recent controversy surrounding Microsoft’s XPS file system and its
attempt to completely blow Adobe’s PDF cash cow out of the market. The
EU eventually stepped in at the request of Adobe.
Does this mean Microsoft has the early edge? Scoble thinks not yet, but the pieces are in place for a major battle:
Microsoft fired its big gun with the Visual Studio 2005
vs. Dreamweaver page. But, don’t count Adobe out of this fight yet,
this is only the first battle in a multi-year, multi-billion-dollar
battle. I was over at Adobe yesterday and they have some major things
coming next year that’ll play off of Adobe’s strengths and take the
battle back to Redmond.Looking at Microsoft’s list it’s interesting to note what’s not there. Some things that come to mind?
- Video. Adobe’s Flash is what YouTube used. Microsoft doesn’t have
a good video story anymore because it pulled out of the Macintosh,
which is where a lot of video folks spend their time.- Web standards. Yeah Visual Studio supports most of them, but weird
that they didn’t call that out. For designers this is the #1 most
important thing whenever I hear them talking at conferences or on blogs.- Integration into print workflows. Adobe’s strength is its Acrobat
franchise. That came from print fidelity. Things look the same on
screen as they do in a magazine. Microsoft is just getting onto that
bandwagon with Windows Vista printing. Also, because Dreamweaver rarely
sits alone, but as part of InDesign and Acrobat, it has a strong
print-centric workflow (ask Printing for Less’ CEO what designers use
to create printed items and he’ll tell you largely Adobe software).So, you can see how Adobe and Microsoft are going to attack each
other over the next year. Adobe comes at it from
design/video/print/layout. Microsoft will come at it from the
programmer’s point of view. Tools. Protocols. Source code control.
Debugging.You’ll see both shoring up their offerings where they are weak.
Winners? Both designers and developers who’ll have a raft of new tools
and approaches to choose from.
Scoble is a rock star. Man, that guy is smart.
Another interesting perspective is from PolyGeek,
who has an excellent post responding to an Adobe employee’s take on why
Adobe (with its Flash technology) will set the standard with Flex:
Flash video is has become an overwhelming success. Using anything else these days is rapidly becoming a joke.
Vista has slipped and along with it Windows Presentation
Foundation/Atlas. Flex is out there and is picking up steam by the day.
Any hope they might have of stealing away support for Flex is waning.
There’s no doubt that WPF will have wide support because the most of
the current crop of .Net developers are likely to pick it up. But as
time goes by that number will wain. The Windows platform isn’t going to
get any bigger than it is today.
Bloggers Been Berry, Berry Good to Me
In addition to high-end web development, blogging as caused a
massive growth in online publishing. Adobe is very well-positioned in
this respect with their web publishing tool Contribute. This product as been
praised by the professional blogging community, even receiving special recognition from Six Apart – the maker of Movable Type:
We’ve been fans of Adobe for a long time — their
blogging community on Movable Type is a great look inside one of the
largest and most innovative software companies in the world, and of
course we’ve worked with their teams in the past to add Movable Type
and TypePad template support to tools like GoLive and Dreamweaver.That’s why it was especially exciting to see the announcement of
Adobe Contribute 4. (You might remember the tool back when it was still
called “Macromedia Contribute”.) Contribute’s a great web editor that
builds on Dreamweaver’s HTML publishing engine.But unlike Dreamweaver, Contribute is designed for regular people to
be able to update your website. Hey — that sounds like blogging!
Contribute is now the chocolate to your Movable Type peanut butter.
Talk about tail winds - this is great stuff!
But Not All is Rosy in Adobe-Land
As if pirating wasn’t enough of an issue, Adobe now has to contend
with several successful low-cost and open source tools. While
open-source GIMP still falls short
of user’s needs, many proponents are hopeful that future releases will
improve (as is often the case with open source applications):
NewsForge on GIMP:
These packages are not Photoshop, and while they are all
powerful in their own right, they do not match the powerhouse that is
Photoshop.
TheWheel on GIMP:
It seems that there’s place for both applications. I
won’t discuss Photoshop’s superiority — it’s factual. But still, there
are certain tasks that can easily be accomplished with Gimp without
having the need to pay for Photoshop.
LinuxAdvocate on GIMP:
We all know that the GIMP is more or less the de-facto
standard for image editing in Linux, where Adobe Photoshop is the
standard on the Mac and Windows (and some Linux boxes using Crossover
Office) The question is the following: Does GIMP have what it takes to
dethrone Adobe Photoshop as the standard? Right now, the answer is no.
But there is that distinct possibility in the future… the world will
finally have a free / open source replacement for Photoshop, which
knowing the development base of the GIMP, will probably surpass
Photoshop in a few years.
Now even as open source is posing a challenge, the biggest threat
may come from low-cost commercial software. Much chatter has surrounded
Pavel Kanzelsberger’s Pixel, retailing at $79 and
able to run on Linux – a platform on which Adobe has refused to develop.
Tectonic on Pixel:
According to the results of a survey conducted early
this year by Novell, Adobe Photoshop tops users’ lists as the most
critical application not available on Linux. While Adobe continues to
only support Windows and Mac OS X with most of its products for its
own, unknown reasons, alternatives are becoming increasingly popular
with the ever-growing Linux user base.While Gimp may be a popular free choice, an exciting project from
Slovakia called Pixel is a potential Photoshop-killer under
development. Pavel Kanzelsberger’s Pixel uses the best of Photoshop and
adds some really great ideas and features to take it one step further.I’m obviously hoping for “better”, and the potential is definitely
there. If Kanzelsberger gets it right, there could be serious trouble
for Adobe, and it could end up paying the price of ignoring the Linux
community. If it all comes together like it should, Pixel will be a
serious competitor on Adobe-native platforms too. I don’t think that
the first version will be quite up to Adobe’s standard, but future
versions could be frighteningly good.
It’s Brass Tacks Time - So How do You React?
It remains to be seen how Adobe will rise to the challenge. Will it
take the Microsoft route - only to see its market dominance slowly
eaten way by Firefox and Open Office? Or do they get pissed, listen to
their loyal users and innovate like hell? All we do know is that while
Adobe will always have its fan base, many users are dissenting and
dismayed at their lack of options:
Subtraction - Listen Up, Adobe:
It’s almost pointless to enumerate their many
shortcomings, but here are just a few: a massive and unrealistic
processing overhead required any time you launch one of the suite’s
programs; a general decline in reliability and a general increase in
crash frequency; a surfeit of seemingly arbitrary, low-level changes to
how basic commands are invoked and executed from version to version,
often invalidating years of customer habits. Everything bad that you
can do to these once effective, industry-leading software programs has
been committed by Adobe in the name of ‘improving’ them — not the least
of which is the basically ill-advised idea that they should be bundled
and sold together as a prohibitively expensive “suite.”
Gilbane Group - Acrobat Still Suffering from Schizophrenia:
On Monday, in the wee hours of the night (my email was
sent at 12:27 a.m.) Adobe emitted three short press releases announcing
Acrobat 8. I’m a fan of Acrobat and PDF, so I always look forward to
new versions of this ungainly but hugely-popular product. Sadly release
#8, at first look-see, leaves me thoroughly unmoved.
And let’s not forget the legions of Apple fans disappointed that the switch to Intel hampered performance.
Brad’s Blog - Apple Computer and Adobe Creative Suite - Same Page?
According to Adobe’s Press release on the subject, they
put out some marketing stuff about “being dedicated for 20 years to the
support of Apple Products” and that it’s normal life-cycle for
developing its software to work on something new is 18-24 months. It
also seems by the release that the whole Intel switch was a surprise to
them, and “now that it’s been released” they’ll begin designing for it.
Is this really Adobe saying this? Does a company as large as Adobe
really wait until something is released to start making a plan to
design for it?
Needless to say, in the immortal words of Jerry Seinfeld - “Not
good. Not good.” This is about as mixed a bag of data and commentary as
you could get. Net net, risk is high. The possibility of a moon shot is
certainly resident, but the probabilities of execution risk weigh
heavily on this scenario.
Thanks again to Rick Calmon for his stellar data gathering.
The author does not hold a position in the securities of Adobe.
