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The Devil's Advocate - If Apple Buys Adobe, Is the Operating System Market up for Grabs?
by
- December 16th, 2005
If Apple buys Adobe, is the operating system market up for grabs? It doesn't take a brain surgeon to see why. Borrowing heavily from Mr. Cringely's terminology, there are several industry realities and stories, each having its own vector/trajectory that might lead one to seeing the importance of Adobe to Apple's well being. Adobe owns key graphic sector applications. Meanwhile, Microsoft has a strangle-hold over Apple with Office for the Mac. Were Apple to buy Adobe, it would give Apple the leverage it needs to ensure Microsoft keeps making Office for the Mac.
Make no mistake, Apple is much like Blanche DuBois; it relies on the "kindness" of Microsoft. At any given time, all Microsoft has to do to put Apple down like a sick pony is stop making Microsoft Office for the Mac. Right now Microsoft will not do that for a slew of reasons, e.g., antitrust issues, Microsoft makes a boat load of money on sales of Office to Mac users, etc. Nevertheless, were it to become threatened as Apple transitions into more markets, Microsoft will not hesitate in pulling the plug on Office, and down the tubes Apple will go.
You say "What transitions? Why would Microsoft do that!?! How is Apple ever going to seriously challenge Microsoft?" (Or you may be saying "get to the f'n point" and if so, hop to the "Adobe is Key" section and skip a lot of suppositions and history). Well young grasshopper, through long and drawn-out series of bad analogies and metaphors, let me paint you a picture.
Transition One: Apple's is building its own office suite
Developing it at a glacial pace, Apple's office suite, iWork, consists of a sub-par Microsoft Word replacement called Pages and a great presentation program called Keynote. It's relatively likely (as gleaned from its trademark filings) that a spreadsheet will be added to iWork. Moreover, Apple does have enough other applications in place to supply an alternative to Outlook as well, namely in the form of Mail.app, iCal and AddressBook.app. With enough time, Apple may get iWork to feature parity with Microsoft Office. So that is one vector: Apple is building an Office suite just in case Microsoft tries to pull the plug on Office.
In another related vector, Microsoft may finally make its Office file formats open enough that third party developers could make programs 100% Microsoft Office file format compatible. I know what you're saying "you idiot, that would mean that iWork could be 100% compatible and Microsoft Office will become irrelevant." Relax, not so fast. The reality is it won't matter even if there is 100% file compatibility. It's not enough for businesses.
Opening the file formats does little to nothing to open up the rest of Office's APIs. There is a huge vertical market that depends on interfacing applications with Office APIs. Billing, accounting, document management systems, etc. all tie directly into Office and the rest of the corporate world depends on these vertical business applications; the corporate world cannot and will not simply abandon these very expensive and integrated systems. So compatibility with the Office file formats themselves won't be enough. Businesses rely on actually plugging into Office.
So at the intersection of those two vectors you can see Microsoft holding Apple up by the short hairs (it doesn't have to tug or squeeze very much to bring Apple to tears), and Apple's strategy to get loose is akin to trying to grow the short hairs long. It may work given enough time and slack, but it's not the best strategy.
Developing an Apple Office suite signifies that Apple realizes it must do something to decrease its reliance on Microsoft's "kindness," but it is not likely to succeed any time soon. Even if the corporate sector had the inclination to do so, it will take too long to transition vertical applications to any hypothetical Apple office suite APIs. So strike one.
Transition Two: Beyond Intel, the target is Windows
There is another transition that's going on. It's blatantly obvious too. Apple is putting its operating system on Intel machines. For now Apple is saying that its operating system will run only on Intel Macs and not on other Intel based machines (e.g., Dells). Apple wants everyone to believe this, Microsoft in particular. Apple does not want Microsoft to feel threatened by it in the Intel operating system market; at least not yet.
However, I'm willing to bet that Apple, eventually, will compete with Microsoft despite its protests to the contrary. For me the only real question is how will Apple allow its software to run on non-Mac Intel machines: On Windows itself, on a version of Mac OS that will run on any Intel machine, or both? I'm betting on both.
An old friend has popped up as of late in the rumor mills: Yellow box for Windows, apparently now code-named Dharma. Before Apple bought NeXT, NeXT used to have a technology called OPENSTEP (aka Yellow box) for Windows. With it, a NeXT or Windows developer could write one program, hit one build button and it would compile into a single fat binary that would run on OPENSTEP for Motorola and Intel processors, and it would also run on a Windows machine that had OPENSTEP for Windows libraries installed.
This was no beta app. It was a real and shipping development platform. And today, we have rumors abounding that it may be back; except now it is updated and working with Cocoa libraries.
After all, Steve Jobs admitted that OS X had been living a "secret double life" where Apple was keeping the Intel version of OS X up to date with the PowerPC version. It's a relatively safe bet that Apple has also been updating the OPENSTEP for Windows libraries so they are current with today's Cocoa libraries. Look no further than WebObjects for Windows, which relies on similar library sets.
Now it may make a lot of sense for Apple to make it easier for developers to cross develop programs for Windows and the Mac (no doubt there are risks involved too, but that's a whole other article). The general idea would be to lure developers into using Apple's development tools because a) they're pretty good, and b) it's nice to develop once and release the app for multiple platforms.
So eventually, if enough developers use Apple's development tools, enough programs could work on both Windows and Mac OS (and potentially Linux as well), and then Apple may position itself well. If more and more programs work on both platforms, you may have more people that switch, i.e., "all my apps work on both OSes and Mac OS is prettier, less buggy and virused up, why not switch." But again, it would take quite a bit of time to get enough developers to use the Apple development environment for cross platform development. So really, that makes for strike two.
You poke my eye, I poke yours, we all go blind
However, the cross development tool vector does give you a taste of a strategy for Apple. What Apple really wants is some mutually assured destruction action. And what Apple needs are some apps that it can hold over Microsoft's head the way that Microsoft holds Office over Apple's.
Should Apple release Dharma it would signify that Apple understands that controlling the development tools for killer apps on both platforms would give it leverage over Microsoft. Although Dharma and its cross development tools might eventually provide such applications, it won't happen anytime soon.
Transition Three: Apple Media Dominance is No Charm
Right now the closest things Apple has to killer apps on Windows is iTunes and QuickTime, but in reality, MS would be only too happy to see iTunes and QuickTime go away. So there really is no leverage for Apple there. So this gets me to why would Microsoft try to kill Apple? Well, threatened market share is why Microsoft would do this. Microsoft is totally losing market share to Apple's third transition (from a computer company and into a Media/Consumer Electronics provider with the iPod, iTunes and QuickTime).
As soon as Microsoft loses enough market share to Linux and to Apple, and its revenues start declining, Microsoft may feel emboldened to dump Office for the Mac so that "it can focus its energies on more profitable platforms." True, Microsoft makes a boat load of money on Office for the Mac, but how much revenue does it account for relative to Windows and Office? Office for Mac is just a drop in the bucket.
If Microsoft goes down to "only" a 70% market share, there's no reason Microsoft couldn't get away with killing Office for Mac. Microsoft could argue that Apple has a majority share in the media market and use that dominance as an excuse to concentrate the extra resources to compete against Apple and Open Source. Think it unlikely? Well don't forget Microsoft basically won the antitrust war in the U.S. As for Open Source Office replacements, again, they won't work for the same reasons Apple's office suite won't replace Microsoft Office any time soon. API interoperability et al. will keep business users away.
The question is, what's next? Extending my cheesy baseball metaphor, will it be strike three, a foul ball, a base hit? What can Apple do to hit a home run? One of the options Apple has to better situate itself to compete head-on against Microsoft involves buying Adobe. Adobe basically owns the creative graphics market right now with its suites of Web, photo and illustration products. It also owns the professional imaging market with Postscript and Acrobat.
Were Apple to buy Adobe (and what the heck, maybe Quark), it would own enough key applications necessary to Windows users to thwart Microsoft. Should Microsoft threaten to pull Office from the Mac, Apple could then threaten to pull the Adobe products from Windows. This would be bad for both companies, and basically get them into a big ole game of mutually assured destruction (or at least mutually assured losses of revenue).
Could Apple do this? Sure it could. Adobe's market cap is around $17 Billion. Apple has well over $7 Billion in cash and its market cap is over $60 Billion. Apple has enough cash and stock for a buyout. And if Apple purchased a majority stake, the stock would soar for both companies; you might even see a dip in Microsoft stock. That would be a home run for Apple.
Apple could give itself the time it needs to transition developers to its development tools and get more and more people to use software that would run on Mac OS. Eventually, it could give Apple the opportunity to move out if it's niche and compete against Microsoft for dominance in the operating system market for the first time since the introduction of the Macintosh.
On the other hand, Microsoft could buy Adobe even more easily than Apple. If that happens, Apple will be so dependent on the kindness of Microsoft, that you can expect Apple's eyes to well up with every move Microsoft makes.
is an attorney. Please don't hold that against him. This work does not necessarily reflect the views and/or opinions of The Mac Observer, any third parties, or even John for that matter. No assertions of fact are being made, but rather the reader is simply asked to consider the possibilities.
You can send your comments directly to me, or you can also post your comments below.
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The Devil's Advocate Archives
Observer Comments
Fri Dec 16, 2005 3:35 pm Subject: Apple has history of passing up good opportunities
Fri Dec 16, 2005 4:32 pm Subject: Hey John, do me a favor...
Hey John,
Do me a favor will you? Open up Pages (which comes bundled with Keynote in Apple's "iWork" bundle - for a measly $79.00 vs. $499.00 for Office on the Mac), and create a page using one of Apple's freakin cool templates. Then, instead of saving it as a Pages document, export it as a Word document. Then, open up your new "Word" document in Microsoft Word and VOILA! Same margins, same type, same pictures, same formating.
I'm afraid you're playing the Devil's advocate simply for the sake of playing Devil's advocate. It's simply not true that Apple relies so heavily on Microsoft for software on it's platform.
I do believe however, that a buy-out of Adobe would be in Apple's best interest. "Assured success" so to speak. You're right that it could be held over Microsoft's head. And Adobe/Macromedia produce killer apps. There's plenty of cash in the bank and it'd just be fun to see more amazing applications come join the Apple fold.
All in all though, I believe Apple relies little on what Microsoft is doing. And I'd be willing to bet that Microsoft's executives are likely frowning in bitterness at Apple's recent success.
S.
Fri Dec 16, 2005 4:56 pm Subject: strategic takeover
It would be very simple, partners willing, for Apple to put Microsoft down.
The world of Unix is quickly taking over as consumers get fed up with the Microsoft banana systems. If Apple buys Adobe, partners with Sun and the makers of Linux, and licenses their own proprietary software (which they have X86 ports for already), Redmond will go down. Heck, Apple has the kahones to do it. They just opened an Apple Retail Store 3 miles away from the Microsoft home campus in Redmond.
Ballmer should see the fins circling. The waters are dark. He's chum!
I'm sure Apple would love to buy Adobe. Only Premier needs a serious makeover as it isn't optimized for Apple's hardware. Microsoft's killing Office for the Mac is not as big a deal as it might have once been. Alternatives such as Open Office, Neo Office, Abiword, Think Free Office, Filemaker (owned by an Apple subsidiary and is crossplatform which Access is not), Pages which was already mentioned, Keynote, all exist to Office for the Mac and would easily fill in the gap if Microsoft were to drop Office for the Mac. Adobe's relationship with Apple is turning sour because of the entry of Apeture and Final Cut Express, but if Apple decided it best to take over Adobe, and maintain their product lineup, it would be win-win for Apple. The migration to Intel will make it an interesting couple years ahead for Apple as we see which software becomes Universal Binary, and which sits back and lets Rosetta do its job for it.
QuoteBiff wrote:QuoteOn Windows?fartheststar wrote:Quotegopher wrote:
I'm sure Apple would love to buy Adobe. Only Premier needs a serious makeover as it isn't optimized for Apple's hardware.
Meh. They could do away with that - they have FCP, FCE and iMovie.
I know what you're saying - they don't - but if Apple were to buy Adobe that would be one more "inticement"... MS dangles "office" in front of Apple, we dangle "FCP" in front of MS - yes on windows - much better then dangling Premiere, I've seen that, not as nice as what Apple has.
I guess what I'm saying is for that particular product, FCP/FCE/iMovie are better then Premiere, imho, and I'd either rebrand Premiere to be one of those, or get rid of it. All of the other Adobe products are good, and Apple's not competing against them right now (even Aperture isn't a Photoshop replacement).
Quotefartheststar wrote:
I guess what I'm saying is for that particular product, FCP/FCE/iMovie are better then Premiere, imho, and I'd either rebrand Premiere to be one of those, or get rid of it.
In order for this to make sense we'd have to assume that Apple would like to sell iMovie and FCP for Windows even if they DON'T buy Adobe.
But of course, they won't do that because it will only serve to hurt Mac sales AND they open up Final Cut Pro to a whole slew of unfamiliar hardware thus making it run worse for more people and costing them more time and money to troubleshoot and design. (More time and money devoted to hurting Mac sales, remember.)
So they'll never do it.
So my question is, why would that magically change if they buy Adobe? Would these issues go away?
No, they won't, which is one major reason Apple won't buy Adobe. They'd be forced into weird, stupid ideas like making FCP and Premiere at the same time. I don't think that's something they want to be doing.
Interesting article, BTW. The points make sense but I think details like this are what derail this as being an actual plan in the future.
Fri Dec 16, 2005 5:53 pm Subject: Which market is Apple in???
Apple has no interest in Office Automation market. I mean "If" one could build a mess like office, with backward compatibility to 8 bit DOS, bloated & slow... they would keep it, but they aren't that kind of company.
Long ago, the guy who invented "Lifestyle Marketing" ( sell a CPU as how it can improve a life -not MIPS/ISA ) The guy who talked Intel into keeping a cancelled 8086 CPU line, and Apple, largest IPO ever at the time...
Every day, I guess in the 70's, he would write on the chalkboard ( archaic communications tool before whiteboards ) you can be an IBM OR A SONY - NOT BOTH!!!
They are both successful, but have different operations. IBM has to market, and court customers for YEARS before selling 1 product. They need to agree with customers on features, compatibility, and support large organizational structures ( anyone still awake?)
Sony, made consumer electronics. They made a cool gadget, and as soon as they did, people could buy it, while often a fickle public... does not require a board approval of every purchase!
( He wrote EVERY day, on one side IBM, other side SONY, over & over.... Back then Apple was always targeting business - Lisa for example, yet their only market was consumer - no company ever standardized on Apple. People would choose them, IBM felt threatened, and funded MS to compete!)
I want this to be really clear. Every day, for years, Jobs heard this... and last few he's been saying "We want to be the next Sony, not SONY, but like Sony" @ Pixar "The next Disney, not Disney, but like Disney".
( This foundation is where PC Industry began, and survives )
Apple would need to hire 45,000 sales people, like IBM & MS, and make products by committee! Is THAT where YOU see Apple??? (!)
MS has pitched WM as the 1st Music stores, and tried to beat iTunes, and make the WinCE OS available cheap - losing $$ & paying people to use it - Office & OS are the ONLY part of MS NOT LOSING $$$ - everything else is a drain, loss leader...
Media Center PC's, Apple told shareholders it's a flop, even at our size, but a Video iPod just did an end run around MS, PC's, Intel, everyone!
Apple has never competed in a market. It creates a market, not invents, but an actual market... like you could "build" PC's, but Apple ][ was one you could USE.
Apple can compete, but once you start this line, it's not Apple. The M.O. is create a market where none exists, write the rules, make the market, make distribution, 3rd party offerings....
Ehem, Adobe (!) Why buy them? They did Video once, now FCP kills them... Quartz has 44 Photoshop filters built into the OS! Steve wasn't licensing Post Script - that HE invented at NeXT - PDF engine built into OS X.
FCP has a few people developing it, makes $$ on sales of FCP/express - iMovie/ iLife - it was 7 Million 4 the code, license, developers, rights, name... all in... Logic ( eMagic) was 14 Million for company maybe 25 developers - again earns profit, Garage Band is free with a UI for grandma...
Since Apple has had cash for a while, and always asked what for, has stressed fiscal discipline, small strategic but no mortgage on our future. Increased earnings, independent profitable divisions ALL make $$$ even iTunes Music Store ( and no music store earns $ ) break even as service to iPod, but even after expenses, servers, payroll, etc.
Retail stores, as Gateway shut ALL of theirs, Apple began opening -a lot questioned it, it was proven failure... Still expanding @ a fast clip - retail must compete as reseller by law - buy at MSRP - and profit like that - they do... even though common business is "Invest" lose $ now, make it back later.... .com bubble showed most never would...
Apple manages to get a profit, even on OS dev - recoup on retail sales! Mac sales, it's free on, hardware must compete feature 4 feature, price, & sales, vs. PC box makers - or answer for it.... Structured so, "If Steve is hit by a truck, Apple will function ".
So, since they are printing cash, iPod/iTunes/ITMS-VS <-- 2nd largest e commerce store, Amazon is #1 <just to make buying songs easy - at non-profit 4 iPod owners >
Yeah, Apple has 8.3 B in cash - but they will not buy a large mess! Do you know how much 47 layers of management can suck from a company? FCP was "saved" from Macromedia - poorly run, unfocused, unprofitable, no strategy... web portal strategic investments (?) The developers are paid more, the product ships, Apple earns more, and each division supports itself...
Apple with Steve & his friends will never allow mergers! Small companies, small groups, free to invent & ship, all earn profits... against all business sense ( except that someday profits are typical, but only today @ Apple. )
Like MS and their monolithic strategy for WinCE, WMP, MS Media stores, Players, plays for sure, 77 stores losing $$, 180 MP3 player companies, losing $$ - and Apple just made iPod a real Media Center PC - TV/ Airtunes/stereo/ CARS!! MS has lost billions since before Apple ever had iPod....or iTunes... and still everyone losing cash, slowing Apple?
( Apple doesn't care about ITMS - it's a service, break even, for iPod customers - no one CAN make $$ here, so if Real, Napster, love losing $$ OK, but it will run out... MS/MTV - License a store to them -smart!! Monopoly? At no profit? No one else has OS X support - WMP is Windows Media Player - so Apple had to "Make" a store, player, mini OS, - MS survives as IT Managers enablers - never consumer electronics! X Box loses tons of cash, last X Box never broke even either... )
This is all verifiable, public, info...
The interesting parts of possible future possibilities include - RED BOX revival ( Windows runs virtually in OS X - copy+paste Office into OS X ) Wine - Win32 API's without Windows (!) Just to get office - on Mach, BSD, more secure, safe....etc.
Mac Mini, was made as a test box. Intel will run Windows, you can buy a sub $500 PC for Windows, Apple cool, 2.9 pounds, quiet... and have some exposure to OS X - compare well...
Rosetta- includes PPC on X86 emulation, Transitive Technologies is there, but not a Licensing....??? Anyway, runs x86/PPC/68K/Itanic/MIPS/Power/Alpha/Sparc - on ANY CPU - ALL CPU's with zero change to code. ( at about 75% ) Includes Quartz hardware accelerated graphics - so only CPU bound tasks are an issue - look in your system folder for ACCELERATE LIBRARY = x86 SSE3 - AltiVec - over 70% compatible )
The options for Apple even optimizing open source emulation/ virtualization/ adding a slick UI, are obscene, immense, vast... If iPod plays Audio/Video on any TV/Stereo/Car - already... Maybe it will run OS X one day - as virtual HD with Apps/emails/all with you - on any TV, Stereo, PC...
I think you will be blown away by what approaches they actually take... Mind Blowing to begin at MWSF soon.... Brace yourself!
"He who heeds my council shall be victorious, he who does not, shall fail" -Sun Tzu
Fri Dec 16, 2005 5:57 pm Subject: TeXT Edit.app is office compatible now...
Amen to that, brother. Macs are already making inroads to the CAD professional offices and owning AutoDesk could finish them off. AutoCAD stinks (try VectorWorks), but I would love to see what Apple could do in terms of a makeover.
I think they should have a go at Avid and corner the film post-production market. At the moment, Avid and Final Cut Pro are just about neck-and-neck, with Premier, Vegas and the others a distant 3rd.
Sat Dec 17, 2005 7:24 am Subject: Apple has MS by the short hairs
Apple already owns the most important hardware/software platform on the market: iPod/iTunes. There are more iPods in use than Macs at this point, and probably 90% of those iPods are used with Windows.
Apple and Microsoft are competing for different markets. Microsoft's strategy is to own business and have home computer users buy the same platform for personal use. Apple's strategy is to sell personal (vs. impersonal) solutions - OS X, iMacs, iPods, Keynote.
Think Different. Just look at how each goes after the consumer electronics market. Apple's iPod is the standard for MP3 players. X-box and X-box 360? Also-rans in the video game world. And all of the Microsoft DRM based MP3 players and music services combined don't approach half of Apple's share.
Microsoft's empire isn't crumbling yet, but it's future depends on the good will of the tech savvy - most of whom own iPods. That's far more important than Apple controlling Photoshop and other Adobe technologies. Were Microsoft to "break" iTunes in Windows Vista (a strategy it has used in the past to kill off competitors), it would definitely bite them as millions of iPod owners in influential positions made their displeasure known.
If Microsoft thinks Office is important to Apple, they really need to think of how important iTunes is to Windows users.
I hardly think Microsoft, important though they are to Apple, have the power of life and death over them that they once had, simply because of Office.
I've been a Mac user, on and off, all of my adult life and I've never so much as installed office - but I'd be ruined without Photoshop.
There's a lot more awareness amongst the general population that Mac OS is more reliable and easier to use than Windows than there was only 5 or 6 years ago - when at the time you'd be hard pushed to find any "normal" people who even knew those cute brightly coloured iMac things didn't run Windows.
Sat Dec 17, 2005 9:03 am Subject: Re: Cheesy baseball metaphors...
QuoteAnonymous wrote:
The author could do us a favor as well and drop the "cheesy baseball metaphors" in a text that is accessible to people all over the world...why?
1 - Nobody outside the US knows what a strike three is;
2 - Nobody outside the US knows what a foul ball is;
3 - Nobody outside the US knows what a base hit is...
If you wanna do sports metaphors, talk about soccer...at least everyone will have a clue.
People outside the US have probably seen an American-produced baseball movie OR an American-produced movie contining baseball references, so they (likely) have some clue about bases, balls, and strikes. Soccer , while popular outside the US, is the red-headed stepchild of sports in the US and the vast majority of Americans have no clue (or care) about it.