Adobe and Microsoft vs. Google and Apple?

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Generally speaking, meetings are the least interesting part of IT work. But when the CEOs of two of the world's largest software companies -- Microsoft and Adobe -- meet in secret to discuss how they can collaborate to better compete with Microsoft top rivals Google and Apple, the whole industry sits up and takes notice.

No less an authority than the New York Times speculated that the talks might have gone beyond a mere team-up, and that a full-on acquisition of Adobe by Microsoft might be on the table. The two companies have discussed the possibility before, sources told the paper.

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But don't take the idea of Microsoft Photoshop too seriously just yet. Kara Swisher of All Things Digital described the possibility of a Microsoft/Adobe merger as "nonsense" and suggested that if any company was likely to buy up Adobe, Google would be a better fit.

Microsoft CEO Steve Ballmer has been mum on the subject since the meeting, saying only, "If you're going to do something, you say nothing." Adobe has also declined to comment.

Even if a merger is not in the offing, it seems clear that we can expect a renewed partnership between Microsoft and Adobe in the coming months. What can the two companies have up their sleeves, and more important, what could it mean for developers?

A new desktop software powerhouse?
Certainly an Adobe buyout would not be out of the question for Microsoft. The Redmond-based giant has a market capitalization of $219 billion versus Adobe's $14 billion, and it holds some $36.6 billion in cash and short-term investments.

And contrary to Swisher's position, Microsoft seems like a much better match for Adobe's business model than Google does. Microsoft at least sells commercial desktop software, while Google has built its business around the idea that such traditional software offerings are obsolete. Google Docs is an online alternative to Microsoft Office, for example, and Google's forthcoming Chrome OS will be almost entirely browser-based.

Adobe's niches are authoring software for creative professionals (Creative Suite) and software for creating univerally distributable documents (PDF), and it dominates these markets in much the same way that Microsoft dominates the market for office productivity software. Photoshop, Adobe's flagship desktop product, is so entrenched among graphics pros that its name has become a de facto verb. Likewise, PDF has become a de facto verb for document sharers.

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