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Microsoft And Adobe: A Fight To The Last Brick?

The news late last week that Adobe threatened to take legal action against Microsoft unless it stripped PDF support from Office 2007 was the second time in as many weeks that a prominent Microsoft partner rose up against Redmond. (The previous week it was Symantec, which, unlike Adobe, filed an actual lawsuit.)

The blogosphere went wild analyzing what exactly the Adobe actions (or threatened actions) meant. Was Adobe shooting itself in the foot? many asked. After all, by refusing to allow Microsoft to support PDF, Adobe could simply be driving users to Microsoft's competing XPS format. Several people commented they had little sympathy for Adobe, which (they say) overcharges for Acrobat even though most customers only use a fraction of its functionality. Indeed, third parties offer basic and even advanced PDF features for a lot less money, and many helpful souls over the weekend posted links to sites offering free ways to create PDFs from Microsoft Office documents. The most popular of these tools: PDF995, PDF Creator, and CutePDF.

The deal isn't good news for users, who have been clamoring for a "Save as PDF" option in Office for years, and who finally got their wish when Microsoft announced it would include native support for the PDF format in Office 12 back in October. As it now stands, Microsoft intends to offer a free download of an Office add-on that would provide the promised PDF support; however, since Adobe is demanding that users pay for such a download, the two companies are at an impasse.

One obvious motivation for Adobe's actions could be fear of losing Acrobat revenues. Gene Munster, an analyst with Piper Jaffrey, estimates in a research note that Acrobat accounts for about 20% of revenues. But although that's a significant chunk of change--some $393 million in fiscal 2005--the low end of the Acrobat line represents just a fraction (1%) of total income, or about $20 million. (The Acrobat Reader has always been free; the Standard edition of Acrobat--the one most people use to create PDFs from Office documents--retails for $299. But the bulk of Adobe's Acrobat revenues come from the more feature-rich versions of the product, including the $449 Professional and the $995 3D.) Still, $20 million is enough to raise Adobe's hackles.

It's also plausible that Adobe could lose revenues indirectly, as its ability to successfully up- and cross-sell customers who are coming to its Web site to download the low-end Acrobat applications could be seriously eroded.

Microsoft's side of the story is being put forth most persuasively by Brian Jones, a Microsoft program manager for Office. His main point: PDF is supposed to be an open standard, and there are other office suites out there that already support PDF output--OpenOffice and Corel's Word Perfect Office being the main ones, as well as the Apple Mac OS X--so why does Adobe appear to be implementing a double standard where Microsoft Windows is concerned?

Andy Updegrove, a contributor to the Consortium Standards Bulletin, agrees with Jones and points out that this is the problem with relying on what he calls "de facto" standards: Everyone isn't guaranteed equal access. With a real standard--one blessed by a bona fide standards committee--all are assured they can get what others are getting, and for the same general terms, he wrote in his blog over the weekend. But as the events of last week made clear, a de facto standard like Adobe's PDF format offers no such assurances.

But not everyone was buying the Microsoft-as-a-victim line. At least one blogger pointed out that this was a prime example of Microsoft once again attempting to win using its time-honored "Embrace, Extend, and Extinguish" strategy: First, include a PDF export function in the software, then make it kludgy and difficult to use, and finally offer customers an easy-to-use alternative (XPS) that they'll get hooked on. That's the argument, anyway.

Much of the most thoughtful analyses of not just the Adobe matter but of the larger picture of how Microsoft's relationships with its partners appear to be deteriorating has been provided by Jupiter Research's Joe Wilcox, who has been blogging on this topic in the Microsoft Monitor Weblog.

He argues that this isn't just about Adobe--although he's been saying for months that Microsoft was gunning particularly for it--but part of a larger picture in which Microsoft has substantially ramped up competition against long-standing partners.

Microsoft long ago stopped being a pure platform vendor, Wilcox says. What we're seeing now, in effect, is those companies whose businesses are being encroached upon starting to fight back. Expect to see more, not less, of this as other companies with established agreements with Microsoft get fed up.

Wilcox is especially careful to point out that we haven't yet gotten Adobe's side of the story. So despite most of the bad press that Adobe is reaping as a result of what is perhaps poor (very poor) management of breaking news, the truth is probably much more complex than what has been reported. Let's stay tuned.

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