Microsoft Looking To Add Some Flash With Adobe Acquisition?

Microsoft may be prepping a massive coup with rumors swirling that the software giant plans to beef up its arsenal by buying out Adobe, an acquisition that could hit $15 billion.

Word that Microsoft CEO Steve Ballmer has his sights set on Adobe sent massive ripples through all of IT Friday, causing Adobe shares to rise and fall dramatically and prompting industry watchers to call a possible Adobe acquisition a big win for Adobe but questioning the benefit for Redmond, Wash.-based Microsoft.

A technology blog on The New York Timessparked the fervor. That blog indicated that Ballmer recently had a sit-down with Adobe CEO Shantanu Narayen to plot against Apple's smartphone market stranglehold with the iPhone. That discussion, reports indicate, led to Microsoft and Adobe concluding that working together would be their best offense against Apple.

While neither Microsoft nor Adobe would confirm that the meeting took place or that a buyout is in the works, Adobe told The New York Times in a statement that it already shares millions of customers globally with Microsoft and that "the CEOs of the two companies do meet from time to time." Adobe added that it does not publicly comment "on the timing or topics of their private meetings."

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Ballmer, speaking at a conference in Madrid on Friday, threw a little more gas on the Adobe acquisition rumor fire.

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"If you are going to do something, you say nothing. So I'll be entirely consistent with standard CEO operating procedure," said Ballmer.

A Microsoft acquisition of San Jose, Calif.-based Adobe would bulk up Microsoft's software offerings by several orders of magnitude with the addition of Adobe products and brands like Photoshop and its Flash Internet video. Microsoft aligning with Adobe would also be a major slap against Apple, as Apple and its CEO, Steve Jobs, have waged a very public war against Adobe Flash, with its banning of Flash video capabilities from Apple iPhone and Apple iPad devices.

Microsoft is no stranger to acquisitions and blockbuster buyouts. The company wooed Yahoo with a proposed deal that ultimately would have reached more than $40 billion before withdrawing its bid. The company also plunked down $6 billion in 2007 when it scooped up digital advertising software vendor aQuantive Inc. Adobe's market cap sits at roughly $15 billion.

Industry analysts said Adobe would be the big winner if the acquisition did happen. Gleacher & Co. analyst Yun Kim told the Associated Press that it would be "great" for Adobe as it looks to grow its revenue, but that Adobe doesn't fit too snugly into Microsoft's portfolio unless the company is planning to attack Google in the online advertising market.

Meanwhile, other analysts said a Microsoft-Adobe mash-up isn't even in the cards. "I don't think there is an acquisition by any means," Global Equities Research's Trip Chowdry told the AP, calling the swirling rumors "wishful thinking" on the part of investors.