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Adobe Systems Inc. Message Board

  • spg13columbia spg13columbia Aug 24, 1998 11:35 AM Flag

    ADBE Problems

    The reason why Adobe is having problems is not
    because of the Japanese economy, but rather because of a
    lack of new products, late entry into the internet
    market, increasing expenses, and management that lacks
    focus.

    For more information,
    contact:
    http://www.wallstreetlinks.com
    Daily Info
    Equity Preview
    ZD Net

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    • Akibono,

      I told you twice now that I don't
      think Quark will acquire Adobe or that Adobe will
      acquire Quark. It told you my reasons are fully described
      in earlier posts (now probably a couple pages back),
      and i asked you to go back and read those
      first.

      You are making comments as if you think I am
      asserting that such a merger will take place and make sense
      - i keep telling you the opposite.

      Do you
      have a listening problem? Please go back and read the
      full thread.

    • Mark my words. MACR has a fresher product line is
      geared to the net where all future growth is coming
      from. With MACR drifting down below $14 due to general
      weak market conditions, you will see them get
      swallowed in Internet speed.

    • Just think about your logic. Adobe would have to
      spend about 900 million to acquire Quark and then kill
      off Pagemaker. What a dumb investment. At the very
      least, they would sell Pagemaker to another buyer. First
      I don't think this would pass the Justice
      department because the result is a significant reduction in
      competition. Second, since the advantage in Pagemaker is its
      tight integration with Illustrator and Photoshop, you
      would lose this advantage and cause a lot of resentment
      with your customers. Why would your customers want to
      buy another program at great cost and incur training
      costs? It just doesn't make sense. However, Quark does
      make a strong case for taking over Adobe. It allows
      them a greater presence and Adobe has some very good
      assets. In today's market, bundled applications is the
      key. Just look at Microsoft Office. Quark is in a
      mature market and there is no room for growth. In the
      end there will be no merger between these companies.
      The irony of the situation is that Adobe is actually
      worth more when it is chopped into pieces and sold
      separately. Hp would be interested in the Postscript busiess.
      Xerox in the desktop publishing. KodaK in the Photoshop
      software and digital imaging.

    • It doesn't matter if a Quark/MSFT acquisition
      would enhance competition in the DTP makretplace. The
      issue for the Justice dept. is that they don't want to
      see MSFT gain any additional strength in any software
      markets - they need to be broken up if anything.


      You gotta put yourself in their shoes and think they
      way they are thinking right now - they aren't going
      to give MSFT any room to play, on any playing field,
      no matter what, if they can possibly stop
      them.

      Also remembewr that any negotiation with MSFT is a
      one-way street - they tell you what price you will
      accept, and you don't get to negotiate. And the price is
      never a good price.

      WRT what MSFT plan's are in
      the DTP market for 1999, I can't tell you what they
      plan in specific detail, but they are planning a big
      move here.

    • Anti-trust is always a concern now for Microsoft,
      but given that Adobe is arguably #1 in the desktop
      publishing / graphics market, an acquisition of Quark or
      others by MS could actually ENHANCE
      competition.

      I don't think that Quark is worth more to Adobe
      than anyone else. As you have pointed out, Adobe
      already has this market pretty well covered with
      Pagemaker, Framemaker, Illustrator, etc. So they'd just be
      buying an installed base. Other than MS and Macromedia,
      I'd say Quark could fit at IBM (Lotus), Xerox, maybe
      Visio. Adobe would be way down the list.

      Re:
      competition - I see the competition being between Quark and
      Adobe, not MS. While you can never completely disregard
      MS, I don't see them being able to develop a
      competitive product (to Quark, PhotoShop, Illustrator, etc)
      from ground zero AND gain significant market share
      with it. MS took out Lotus and Wordperfect by changing
      the rules (DOS->Windows). I don't see a similar
      change underway now. So unless MS buys their way into
      this market, I think the threat is limited.

    • Akibono,

      I think you have interpreted my
      thinking wrong. If Adobe were to buy Quark, it would be to
      keep the Quark product, which is more successful than
      PageMaker, and sell off the PageMaker product, not the other
      way around. PageMaker would die a fairly quick death
      without either Aldus or Adobe sponsoring it, and much of
      the PageMaker user base would indeed migrate to the
      Quark application. Adobe could make this really easy by
      revising it to make PageMaker migration more seamless,
      with automatic file import etc. And killing off the K2
      development wouldn't cost Adobe anything by comaprison to the
      acquisition.

      I agree that Quark would be an expensive
      acquisition, especially now with Adobe stock down and Quark
      riding high on their latest earnings. That's why, in
      earlier posts, I discounted this and said I didn't thik
      this deal would materialize. Check back a page or so
      to see the full details of those posts.

      What
      I think we have here is some wishful thinking on
      Quark's part, to try to get Adobe to buy them, and let
      them keep control or at least share control. Maybe
      it's all a publicity ploy, but that would be a
      dangerous thing for a large company to do.

    • At one time, there was indeed a strong posibility
      that Quark would sell to Microsoft. I even heard that
      discussions were underway. This was a couple of years ago
      however.

      However, in light of the Justic department's scrutiny on
      anti-trust issues, Microsoft is no longer, at least for the
      forseeable future, in a position to acquire a very large,
      significant software company in a major market. If you doubt
      this, talk to an M&A attorney for their view on the
      situation. I'll bet they tell you the same thing, in no
      uncertain terms.

      If you accept that Microsft is no
      longer a candidate for acquiring you, then Adobe is the
      next best thing. Quark is worth more to Adobe than to
      anyone else.

      Acquisition of Macromedia and/or
      Metacreations doesn't give Quark enough critical mass to really
      change their prospects against Microsoft going forward.
      It might help a little if they picked up Macromedia,
      but thats about it.

    • Where do you get these crazy ideas. If Adobe buys
      out Quark, they would have to divest their main
      product QuarkXpress based on antitrust grounds. So what
      do they get in the deal? Second, since Quark is
      privately held it would be very unlikely. Management would
      cash out for much more by taking the co. public. The
      offer is merely an insult and slap in the fact of
      Adobe's managemnt. The bottom line is Quark does not have
      the cash to pull off such a takeover, especially if
      the price exceeds 40. This would be an entirely
      different scenario if Quark was public with a high share
      price. Then they could use their stock to force a
      merger. Perhaps this would put Adobe into play so that a
      better merger candidate such as Xerox or Eastman Kodak
      would buy them. In some ways they are a good fit, but
      in other ways they present problems. Because Adobe
      sell critical software such as postscript to their
      competitors, they would lose a lot of the business and gain
      little in synergy.

    • Your scenario is certainly possible. However,
      given the egos involved, I'm not sure I see Quark mgmt
      ready to play second fiddle - certainly not to Adobe
      mgmt. So I'm still a bit baffled. Maybe this whole
      thing is just a publicity play of some type.

      If
      I were Quark mgmt, I'd see other better
      choices
      1) If I wanted to step down and live off my winnings
      (or start a new venture), I'd rather sell to
      MicroSoft. The stock I get will more likely be a better
      performer.

      2) If I wanted to kill Adobe, I'd sell to
      MicroSoft.
      (Imagine Adobe's future if Microsoft were to acquire Quark
      and Macromedia)

      3) If I wanted to continue the
      business and expand into Adobe's turf, I'd merge with
      Macromedia and/or Metacreations. Quark mgmt come out in
      control after such a merger.

    • la who,

      My best guess is that Quark wants
      to take this public to put pressure on Adobe
      management to look at merging with Quark. I think Quark is
      smart enough to know who would be acquiring who in the
      end, after a definitive agreement has been
      negotiated.

      So the bottom line must be that Quark wants Adobe to
      acquire them or do a merger - the proposal that they be
      the acquiring party is purly positioning.

      I
      can only interpret this as fear of the Adobe
      juggernaut in PDF/workflow/PS Extreme/Photoshop/Illustrator
      and finally K2. Perhaps more importantly, fear of
      Microsoft eventually hijacking the whole graohics and DTP
      industry. You'll see some of that in Adobe's 10-Q as well.


      Quark is positioned right now to get the best price
      possible for their company (see recent press on their
      earnings growth), and to get the best negotiating leverage
      with Adobe on how a merger would take place, what
      would survive, and who would be in control. Much better
      to explore that now than to wait till Adobe gets
      strong again, or Microsoft starts chipping away at both
      of them.

      Given current operating earnings
      expectations for Q3 and Q4, Adobe should be in the range of $2
      per share earnings by Q4, annualized run-rate. With a
      PE ratio of 15 to 20, the stock should get back to
      30 to 40, and it was in that range fairly recently.
      Given this, Quark would have to merge at $35 to $45 per
      Adobe share to get the votes required from the board
      and from shareholders. That will be the target if it
      is to occur.

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ADBE
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