Assuming Adobe completes its acquisition of Macromedia, the combined company competes with Microsoft in three product areas.
In image editing, Adobe leads the market with its tightly integrated Photoshop and Illustrator applications. Microsoft recently released a test version of Acrylic, a vector- and pixel-based image creation and editing software title, though Montgomery downplays the direct competition.
In digital documents, Adobe rules the roost with PDF (Portable Document Format). The core of what the company calls its Intelligent Document Platform, PDF is widely considered the industry standard, in widespread use in government and the enterprise. (Adobe makes a point of noting, in its PDF fact sheet, that Microsoft applications Word, Excel, and PowerPoint all produce PDF files with the click of a button.)
Microsoft showed off its answer to PDF, called Metro, last month, as part of a demonstration of the capabilities of its upcoming, and late, Longhorn operating system.
In Web-based application platform technology, Flash and the recently introduced Flex server software have begun making inroads in the enterprise. Meanwhile, the world awaits even a test version of Longhorn amid continued evidence that Microsoft is having significant difficulty driving upgrades to newer operating systems.
With Longhorn late, Acrylic still in a test version and earning mixed reviews on developer forums, and Metro tied to Longhorn's fate, many see plenty of breathing room for Adobe and its intended acquisition target. Illustrator and Photoshop, part of Adobe's recently updated Creative Suite 2 package, are seen as all but invulnerable for the foreseeable future.
"It seems to us that the likelihood of prying creative pro customers away from either Adobe product, especially with the advances delivered in the new Creative Suite 2 releases, is not high at all," wrote Merill Lynch equity analyst Jay Vleeschhouwer in a report circulated last week.
But concern about Adobe's prospects -- as reflected in a dip in the company's share price following the Acrylic release -- has less to do with the quality of Microsoft's offering than with the fact that Adobe has provoked Microsoft's competitive ire.
Rather than competing with products or technologies, Hein said, Microsoft identifies competitive threats on a company-by-company basis.
"And they go after the company," Hein said. "Adobe and Macromedia are more of a competitor than either standalone, and Microsoft will compete by offering a free version that's better integrated with the OS. None of Microsoft's announcements or trial versions will displace Adobe, but it's a clear signal that Adobe just popped much higher on Microsoft's competitive radar."
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