Is an Adobe Acquisition in the Cards for Microsoft?

A blog post by the New York Time's Nick Bilton yesterday stirred up trouble in the tech industry and caused Adobe stock to soar amid speculation that Microsoft could acquire Adobe. Bilton reports that Ballmer and Narayen recently held a lengthy closed-door meeting about teaming up against Apple:

"The meeting, which lasted more than an hour, covered a number of topics, but one of the main thrusts of the discussion was Apple and its control of the mobile phone market and how the two companies could team up in the battle against Apple. A possible acquisition of Adobe by Microsoft were among the options."

Loose-lipped employees and consultants who were involved in the discussions or familiar with the organization spilled the beans on the meeting. They all requested that they not be named because not only were they not authorized to talk about the meeting, they were specifically told not to.

"Those involved in the meeting, from its logistical set up to the discussion that took place, were instructed to stay quiet about the two companies holding council," writes Bilton.

However, that didn't stop anyone, it seems. Among the topics of conversation were Apple and Steve Jobs dislike for Flash, and the possibility of Microsoft acquiring Adobe. One of the NYT sources revealed that Redmond had talked about an Adobe acquisition years ago but the discussion never got past friendly talks as Microsoft was afraid the Department of Justice would block the deal citing antitrust laws. However, NYT reports that the source also noted that, back then, Google and Apple were not the dominating forces they are now.

Though Ballmer and Narayen may have talked about an acquisition, some say such a deal is 'unlikely.' The Financial Post writes that, despite Adobe stock soaring in the wake of the news (it went as high as 17 percent in intraday trading and closed at an 11.5 percent gain), analysts are unconvinced.

"A Microsoft acquisition of Adobe makes little sense and is unlikely in our view," FP cites Walter Pritchard, a financial analyst with Citigroup Global Markets, as saying.

"Adobe’s Acrobat and Creative Suite are top 5 Windows desktop applications (along with Office), making it easy to make the case such an acquisition would be anti-competitive,” he later added.

Further Reading

• New York Times: What Did Microsoft and Adobe Chiefs Talk About?
• Financial Post: Microsoft acquisition of Adobe ‘unlikely’