Microsoft to Buy Adobe? Rumors and Stocks Fly

Left Brendan Smialowski/Bloomberg; right, Matthew Staver/Bloomberg. Shantanu Narayen, president and chief executive officer of Adobe. At right, Steve Ballmer, chief executive officer of Microsoft. A meeting between Microsoft (MSFT) and Adobe (ADBE) execs which was apparently supposed to be about how the two software giants could collectively hate on apple, but turned into apparent merger discussions if the blogs (and the stock market) are to be believed.

Nick Bilton of the New York Times seems to have broken the story, calmly referencing how among other things a (ho-hum) possible acquisition came up:

The meeting, which lasted over an hour, covered a number of topics, but one of the main thrusts of the discussion was Apple and its control of the mobile phone market and how the two companies could partner in the battle against Apple. A possible acquisition of Adobe by Microsoft were among the options.

Adobe stock, which grew +$2.96 (11.5%) reached as high as $30/share today in active trading although still off their 52-week high of $38.20. 

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Some think the merger between "frenemies" might be a way to keep pounding on (APPL) for the way Steve Jobs came out aggressively against Adobe for it’s Flash application. As Bloomberg reports,

Adobe has clashed with Apple CEO Steve Jobs, who banned Adobe’s flash video software from Apple’s mobile devices. Adobe won a partial victory on Sept. 9, when Apple eased restrictions on creating applications for its iPhone and iPad devices. Apple had prevented developers from using Adobe’s Flash video software.

Still, some like Marketwatch  point at Microsoft’s history of big acquisitions and think buying Adobe may simply be bad news for Adobe’s software developers (, A, etc.), others like the Wall Street Journal think Google would be a better buyer of Adobe for a few reasons, ending with this one:

And as sugar daddies go, Google [GOOG] remains among the sugar daddiest. Microsoft had $5.5 billion in cash as of June 30. Google? $10.7 billion.

As Jon Ogg points out from 247Wallst.com, "Whether anything is brewing, who knows.  Microsoft has more cash than ambition at this point.  Adobe has more challenge than it ever has before."

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