October 8, 2010 12:50 am

Microsoft acquisition of Adobe mooted

A possible Microsoft acquisition of Adobe Systems, long a rival in the desktop software business, was among ideas for closer co-operation raised informally at a recent meeting between the chief executives of the two companies, according to a person familiar with the talks.

The suggestion, arising from a broader discussion about whether the two companies should ally against Apple, highlights Microsoft’s willingness to consider more radical tactics as it tries to counter Apple’s success with the iPhone and iPad.

Two people familiar with the meeting – between Steve Ballmer of Microsoft and Shantanu Narayen of Adobe – played down the prospect that the informal takeover suggestion would lead to a deal between the two companies.

One said that it had not led to any active takeover discussions, while the other added that no deal was “imminent”. Both characterised the discussion as part of a regular series of meetings to consider a range of possible areas of co-operation.

However, news of the meeting, first reported in The New York Times, sent Adobe’s shares up by more than 11 per cent in the final hour of trading on Wall Street on Thursday, lifting its stock market value to $15bn.

While it had cash on hand of nearly $37bn at the end of June and a stock market value of more than $200bn, Microsoft has avoided such large acquisitions in the past and failed to push through an unsolicited bid for Yahoo two years ago.

Adobe was long seen as a more likely acquisition target for Apple itself, before a recent rift between the companies. The two companies have fallen out over Apple’s decision not to let users of its touchscreen devices view websites using Adobe’s Flash technology. The rift with Apple had helped push Adobe’s shares to their lowest point in more than a year before the meeting was reported.

Microsoft and Adobe, meanwhile, have often found themselves at loggerheads. Microsoft has created a rival to Flash, called Silverlight, and Adobe’s promotion of the PDF document format to support sales of its Acrobat software has made it a direct rival to Microsoft’s Office.

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