Adobe Systems Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Adobe (Nasdaq: ADBE  ) jumped more than 11% at the end of trading today on rumors that Microsoft (Nasdaq: MSFT  ) will make a bid for the company.

So what: Rumor has it Microsoft is trying to team up with Adobe to take down Apple's (Nasdaq: AAPL  ) iPhone. Both companies have had their feuds with Apple, and Microsoft is reportedly trying to use Apple's resistance to Flash as the fuel for a takeover.

Now what: An Adobe buyout makes a lot of sense for Microsoft, which has been losing share to Apple in the PC market. Adobe's flagship Creative Suite is used primarily on Macs in the design business, and Microsoft may be able to steal some of this share. It would also give Microsoft software for use on upcoming Windows Phone 7-based mobile phones. This is great news for Adobe shareholders, and I think the stock moves higher as more rumors spread and a possible bidding war starts, a la 3Par.

Fool contributor Travis Hoium does not have a position in any company mentioned here. Microsoft is a Motley Fool Inside Value pick. Apple and Adobe Systems are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, and Microsoft. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On October 07, 2010, at 4:58 PM, lales wrote:

    Didn't the thought "anti-trust" even pop up once before writing this? How about the phrase of "anti-competetive"?

    I mean I realize that the FTC has become rather toothless, but if this deal gets done, they might as well just hit delete on the Sherman Anti-Trust Act.

  • Report this Comment On October 07, 2010, at 5:12 PM, AngelTread wrote:

    Microsoft wants to get its hands on Flash.

    It has tried for years to own Flash, but was pushed back due to anti-trust fears. Now Microsoft is trying again.

    So what if Microsoft does own Flash? What then? What does it mean for Microsoft's own Silverlight? What does it mean for Microsoft's Windows Phone 7, which is based on Silveright?

    Apple has been trying hard to keep both Flash and Silverlight off the iPhone. Apple and Google have a preference for HTML5. Would Microsoft's ownership of Flash dent HTML5 at all?

  • Report this Comment On October 07, 2010, at 6:36 PM, ryanalexanderson wrote:

    I can't believe I'm even writing this, but maybe Microsoft's QC procedures can help Adobe finally sort out a version of Acrobat Reader that doesn't crash and require a software update every couple days.

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