Adobe Systems Gains from Microsoft Vista Delay? (ADBE, MSFT)

Includes: ADBE, MSFT
by: David Jackson

adobe systems logoYesterday I surveyed the stock impact of the Windows Vista delay on Microsoft's (MSFT) partners and competitors. The chip, PC hardware and PC retailing ecosystem is negatively impacted by the Vista delay, whereas competitors like Google and Apple Computer Inc. stand to gain.

Amit Agarwal adds an interesting perspective, arguing that the biggest beneficiary of the Vista delay could be Adobe Systems (ADBE).

His timing is unfortute, given the disappointing guidance Adobe released last night (see the full Adobe conference call transcript), but still worth considering for contrarian investors. He writes:

"This may not be good news for memory chip makers and computer makers but has provided Bruce Chizen of Adobe Systems enough reasons to smile again.

Microsoft has long been eyeing Adobe's marketshare with technologies like Microsoft Sparkle (Flash rival) and Microsoft Metro (PDF rival), both exected to relase with Vista. Now that Vista launch has been pushed back, it gives Adobe engineers enough time to add more features and finetune their products."

In a separate article, Amit explains Microsoft's threat to Adobe:

Microsoft's insatiable quest for software dominance continues. And this time, [its] target is Adobe Systems. Microsoft is not willing to concede the design market to Adobe/Macromedia. As a first step, [it] acquired Creature House to solidify its presence in the design market. And if Microsoft is successful, it will represent the most significant competitive threat Adobe/Macromedia has seen in many years.

Adobe PDF, Photoshop and Flash find themselves in Microsoft crosshairs.

Target I : Adobe PDF - Microsoft is working on a new XML based document format "Metro" that will challenge Adobe's PostScript and PDF technologies. Microsoft Metro will be licensed royalty free and users will be able to open Metro files without a special client. It will be available around the time Visa is released. [read details]

Target II : Adobe Photoshop - Microsoft's own illustration and graphic design tool Acrylic is actually an updated version of Creature House Expression bought by MS in 2003. Microsoft intends to offer Acrylic as an alternative to Adobe Photoshop, likely at a lower cost. Acrylic supports XAML format that will enable developers to take advantage of Windows Vista's new graphics engine known as Avalon. [read details]

Target III : Adobe-Macromedia Flash - The Adobe-Macromedia merger will close this fall and Macromedia Flash is set to become Adobe's baby. Infact, Flash received the maximum boost in recent announcement of Macromedia Studio 8. And Microsoft Sparkle is all set to challenge Flash dominance.

Like other Microsoft competitors, ADBE rose yesterday, though by only $0.27 to $36.62.