Since its launch in 1982, when Microsoft was seven years old, Adobe has built up a commanding lead in the markets for digital document and image editing software, among the few areas in PC software Microsoft has failed to dominate.
Microsoft's recent test release of the Acrylic graphic design tool and the demonstration of its Metro digital document format indicate that the company may be growing less tolerant of Adobe as it encroaches on Microsoft's turf with the proposed acquisition of Macromedia and its Flash and Flex framework for building Web-based applications.
The combined forces of Adobe's PDF and Macromedia's Flash particularly, say analysts, have brightened the bull's-eye on the San Jose, Calif., graphics software company.
"Microsoft is already showing signs that Flash is more than just an annoyance," said Burton Group analyst Gary Hein. "Announcements like Metro, Avalon and Acrylic show that Microsoft is taking Adobe plus Macromedia much more seriously. (Adobe Chief Executive Bruce) Chizen should be worried."
In the race to sell technology for building Web-based applications, the competitive landscape is far from stable. Microsoft has described its vision of Windows applications integrated tightly into the Internet through the company's Longhorn operating system, but numerous delays have allowed alternatives such as Flash and "AJAX" to gain traction.
Adobe declined to comment on the strategic implications of its proposed acquisition. But Macromedia called "ridiculous" the idea that it is competing with Microsoft's operating system at all.
"I don't think Flash is any threat to Windows," said Kevin Lynch, chief software architect for Macromedia. "We're a really small company compared to Microsoft. Flash is specifically designed for Internet use, for Internet applications, and that's very different from an operating system."
Analysts take a different view of the strategic importance of Flash, and compare it to the threat the Web posed to Windows before Microsoft launched its defensive, ultimately successful campaign with the Internet Explorer browser 10 years ago.
"I'd agree that Flash is not a direct threat to the OS, but it's a threat to portions of the OS" such as developers' tools, said Hein. "It's kind of like the old Netscape push in that if you can develop all of your apps in a browser, it makes the OS less relevant."
Unlike Netscape, which came to Microsoft's attention as a head-on threat, Adobe has made its living over the years by dominating areas Microsoft tended to neglect. Until now.
"For Adobe, competition with Microsoft is its manifest destiny," said Jesse Garrett, a consultant with the San Francisco consulting company Adaptive Path, which works with Macromedia. "The Macromedia acquisition makes Adobe a threat that Microsoft can no longer afford to ignore."
For their part, Microsoft executives play down the competition, or as they like to call it, the "coopetition."
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