Adobe Gets Ready To Rumble With Microsoft

Adobe Systems Inc. is making changes to Acrobat that could mean lower desktop licensing costs for many businesses but higher prices for design and engineering users. Upcoming workflow technology from Microsoft, however, could give some users an alternative to Adobe's document software.

Acrobat 6, the latest version of Adobe's software for creating and editing industry-standard PDF documents, will come in three editions when it ships in May. A light edition for volume licensing will likely cost less than $50 per user, a standard version is expected to run about $250 (the same as Acrobat 5), and a professional package aimed at graphic-arts and engineering users could exceed $450, according to sources. Adobe wouldn't confirm pricing.

Adobe wants its software on more business desktops to create demand for its server products, which can cost $20,000 per CPU. The vendor is on track to sell $60 million worth of server software this year, CEO Bruce Chizen says. But the real growth won't come until 2004, after "the foundation gets built," he says. "Most CIOs are interested in what we're doing."

Retirement-plan administrator Open Access Ltd. bought Adobe servers in 2001 to generate 27,000 PDF statements every quarter, up from 6,000 after an acquisition. In a few weeks, the company plans to let its clients' employees print customized PDF statements from the Web. Adobe "pretty much owns the market as far as the most generic document type you can send out to somebody," says Sean Dalley, IT manager at Open Access.

The light version of Acrobat will exclude many design and publishing features and cost "in the low tens of dollars" per seat, says Jay Vleeschhouwer, an analyst at Merrill Lynch. The standard edition includes functionality to round up changes from various editors of a document and export those into a Microsoft Word file. The professional package will include one-click PDF creation from AutoCAD and Visio drawings and will have prepress features for design users. That software could carry a price tag comparable to Adobe products such as Illustrator and Photoshop, which cost $400 to $600, Vleeschhouwer says.

Sales of Adobe's design products remain stuck in a publishing- and advertising-industry slump. First-quarter revenue was unexpectedly good, up 11% to $296.9 million. Earnings rose 9% to $54.2 million. But sales last year were down more than 5%, to $1.2 billion. "Workflow is a natural step for them," says Tim Stettheimer, VP and CIO at St. Vincent's Hospital, a member of Ascension Health Inc. "If you're willing to implement multiple Adobe servers, the price of Acrobat keeps dropping."

Meanwhile, Microsoft plans to ship its Office 2003 suite in a few months, along with an Office product called InfoPath for creating XML forms and importing the data into other Office apps. "It will be a great tool for streamlining the internal information-gathering process," product manager Bobby Moore says. Microsoft has also developed rights-management technology in Office 2003 that will give Office users unprecedented control over who can access and change E-mail messages and Office documents. The system requires Microsoft's upcoming Windows Server 2003 or its Passport identification service on the Web.

Chizen insists that Adobe is "focused on a much different place" than Microsoft. "Microsoft will continue to be successful for internal processes," he says. "The problem is when you reach outside the firewall, you can't ask your user to use a certain platform with Windows and the latest version of Office."

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