Analyst: Microsoft more likely to cooperate with Adobe rather than buy the company

Friday, October 8, 2010

Ahead of the Bell: Adobe and Microsoft

NEW YORK — Investors who drove up shares of software maker Adobe Systems Inc. following reports of a meeting with Microsoft may be too optimistic about a buyout, industry analysts said Friday.

The two companies are more likely to collaborate than do a deal, Oppenheimer & Co. analyst Brad Reback said.

After dipping to a 52-week low, Adobe shares rocketed nearly 12 percent Thursday after word of a secret meeting between the companies’ chief executives fired up rumors that buyout talks were underway.

Reback said the it may make more sense to establish a closer relationship so the companies can compete with Apple Inc. and provide software that powers more sophisticated cell phones and tablet computers. A full-on acquisition, however, would provide very few benefits, compared to a partnership, he said.

Janney Capital Markets analyst Sasa Zorovic agreed.

He said an Adobe takeover would not “address any of (Microsoft’s) key challenges at this point,” which include mobile software, “cloud computing,” in which software is delivered over the Web, and search advertising.

He added that an acquisition of that size would only distract management “at a critical time for the company.”

Speculation about a deal arose after The New York Times reported Thursday that Microsoft CEO Steven Ballmer met recently with Adobe Chief Shantanu Narayen.

At a conference in Madrid on Friday, Ballmer declined comment on the report.

“If you are going to do something, you say nothing,” Ballmer said. “So I’ll be entirely consistent with standard CEO operating procedure.”

Both companies are concerned about Apple’s domination of mobile computing market with its iPhone and iPad. Apple won’t allow any of its mobile gadgets to run Adobe’s Flash video software, and Microsoft provides a mobile operating system that runs on competing devices.

Adobe shares slipped 80 cents, or 2.8 percent, to $27.89 ahead of regular trading Friday.

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