Microsoft Should Buy Adobe Instead Of Yahoo!

Posted Jul 23, 2008

I once read an article in Business 2.0.  The article asked the reader which software company do you think touches our everyday lives the most.  The answer was Adobe Systems (NASDAQ:ADBE).  Adobe software is used for the magazines we read, the videos we watch, and the advertisements we see on the subways. 

Carl Icahn was able to get several board positions on Yahoo!’s Board.  Yahoo! also has what they wanted, avoidance of a proxy fight against Carl Icahn on August 1st.  But Microsoft is left without a Yahoo! acquisition and now has an unsigned $44 billion acquisition check.  Who should Microsoft buy instead?  Adobe Systems makes the most sense. 

Microsoft can afford to buyout Adobe Systems because their market cap is roughly the same as Yahoo!’s.  Yahoo! is riding at about a $30 billion market cap and Adobe is about $22.23 billion.  Adobe is constantly ranked as an outstanding place to work by Fortune magazine too.  If you go to any user-generated video sharing website in the world today including YouTube, Adobe Flash software is most likely used.  Yahoo! makes about double of Adobe’s revenues, but Yahoo! is constantly losing marketshare to search engine leader Google.

Integrating Adobe and Microsoft software would be pretty seamless too.  Microsoft Word and Adobe Acrobat/Reader are interdependent.  MS Paint definetely could use help from Photoshop.  Adobe Dreamweaver is clearly better than Microsoft Frontpage.  Microsoft Silverlight and Adobe Flash are competing against each other but clearly Silverlight hasn’t made a dent on Flash’s marketshare.  Windows Movie Maker could use the features that After Effects and Premiere has.  The list goes on.

The only problem I see with a combined Adobe and Microsoft is that there would be a definete corporate culture clash.  Microsoft is seen as a process-driven software bully and Adobe is seen as a freeflow creative environment.  If I was Steve Ballmer and I had a big budget for a major acquisition, then I would definetely set my sights on the company that makes the best photo and video editing software.

In your opinion, who would you buy if you were Microsoft and had $44 billion to spend?  Leave it in the comments.