Adobe: In Microsoft's crosshairs

Analysts take a different view of the strategic importance of Flash, and compare it to the threat the Web posed to Windows before Microsoft launched its defensive, ultimately successful campaign with the Internet Explorer browser 10 years ago.

"I'd agree that Flash is not a direct threat to the OS, but it's a threat to portions of the OS" such as developers' tools, said Hein. "It's kind of like the old Netscape push in that if you can develop all of your apps in a browser, it makes the OS less relevant."

Unlike Netscape, which came to Microsoft's attention as a head-on threat, Adobe has made its living over the years by dominating areas Microsoft tended to neglect. Until now.

"For Adobe, competition with Microsoft is its manifest destiny," said Jesse Garrett, a consultant with the San Francisco consulting company Adaptive Path, which works with Macromedia. "The Macromedia acquisition makes Adobe a threat that Microsoft can no longer afford to ignore."

For their part, Microsoft executives play down the competition, or as they like to call it, the "coopetition". For years, Microsoft has both competed and partnered with a number of other companies, ranging from database maker Oracle to Intuit, the leader in financial software for consumers and small businesses. Adobe, even with Macromedia, is no different. "There are certain areas where our products overlap. At the same time, Adobe and Macromedia are important partners for us," says John Montgomery, director of product management in Microsoft's developer division.

Assuming Adobe completes its acquisition of Macromedia, the combined company competes with Microsoft in three product areas.

In image editing, Adobe leads the market with its tightly integrated Photoshop and Illustrator applications. Microsoft last week released a test version of Acrylic, a vector- and pixel-based image creation and editing software title, though Montgomery downplays the direct competition.

In digital documents, Adobe rules the roost with the PDF. The core of what the company calls its Intelligent Document Platform, PDF is widely considered the industry standard, in widespread use in government and the enterprise. (Adobe makes a point of noting, in its PDF fact sheet, that Microsoft applications Word, Excel, and PowerPoint all produce PDF files with the click of a button.)