Adobe Battles the Flash-Bashing

In the fast-moving world of mobile devices there are many battles brewing. The one to watch may be the standoff between Adobe (ADBE) Chief Executive Officer Shantanu Narayen and Apple (AAPL) CEO Steve Jobs over Flash, the Adobe software that brings interactivity to millions of websites.

"Flash looks like a technology that has had its day," Jobs said at a tech conference earlier this month. In his view, Flash is a bug-ridden battery hog. He favors HTML5, a still-evolving Web technology that does many of the same things as Flash.

In an interview at Adobe's headquarters in San Jose, Calif., Narayen comes across as soft-spoken and measured—not the kind of guy to do battle over competing Web standards. Ask him if the dispute over Flash amounts to a "war," as Jobs has called it, and he smiles. "The words to describe it are irrelevant," Narayen says. "To us, this is about where computing is headed."

The Flash Player software, which is free, powers most of the Web's intro screens, video shorts, inserted commercials, dancing typography, and interactive graphics and is installed on 98 percent of personal computers worldwide. It's used by about 85 percent of the top 100 websites, delivering 70 percent of Web games and 75 percent of Web video, Adobe says. By the company's count, 19 of the top 20 mobile handset makers are committed to building smartphones that support Flash. The lone holdout is Apple and its iPhone and iPad.

Narayen, an Apple employee from 1989 to 1995, says Jobs' gripes about Flash have less to do with the technology itself than the Apple chairman's desire to dominate the future of mobile. "Whenever there's disruption that happens in computing, there are wars that happen that enable people to get disproportionate market share," says Narayen. "You saw that in the PC era when whoever controlled the applications was able to get dominant market share. Apple is looking at Flash and saying that it keeps them from being able to have the kind of closed system that they would like." Apple did not return calls for comment. Unlike Flash, HTML5 is a nonproprietary technology. No single company owns it.

Adobe is banking on a new version of its player, called Flash 10.1, to prove to the market that it continues to be relevant in the world of smartphones and tablet computers. Although the new software was in the works before Jobs went public with his criticisms, it does address a number of his complaints. Flash 10.1 is designed to make video run more smoothly on mobile devices, while also supporting iPhone-like touchscreen gestures such as pinching fingers to shrink a photo, or widening them to zoom in. Adobe says the new application is also better at conserving battery power.

The Flash Player itself contributes little to Adobe's bottom line; the company makes money selling tools to software programmers who build on the technology. The real revenue generator for the company is the Adobe Creative Suite, a collection of graphic design, video editing, and Web development applications that use Flash technology. On June 22, Adobe posted record revenue of $943 million for the second quarter, representing 34 percent year-over-year growth, which the company attributed to strong demand for the latest version of Creative Suite.

Adobe's goal in coming months is to get Flash up and running on as many new mobile devices as possible. Nokia (NOK), Research In Motion (RIMM), and Palm (recently bought by Hewlett-Packard (HPQ)) will be using Flash on soon-to-arrive mobile phones. The Dell (DELL) Streak, a 5-inch tablet that uses Flash and Google's Android operating system, was introduced in the U.K. earlier this month and will hit shelves in the U.S. later this summer. Motorola's (MOT) new Droid 2 phone, set for launch on June 23, the day before the official release of the iPhone 4, also is expected to use Adobe's technology.

Adobe isn't betting that HTML5 goes away. Rather, the company believes it will develop over the years as a technology complementary to Flash, and is creating tools that will work with both. "Ideally, I'd love to see a ubiquitous platform across all devices," says Steve Jackson, president and CEO of Smashing Ideas, a Seattle-based digital media studio that produces content for the Cartoon Network, Disney Channel, Nickelodeon, and other companies. "But we've been hoping for that for a decade. We're going to continue to create content across multiple platforms, and that certainly includes both Flash and the iPhone."

Google (GOOG), which has been waging its own battles with Apple, is emerging as an important ally to Adobe. Flash will be part of the recently announced Google TV, which aims to put Web content on Sony (SNE)-manufactured TV sets powered by Google's Android. Sometime in the coming months, Google is expected to release its own tablet computer that will also support Flash.

"We expect Flash to be part of all of the devices that count," says Narayen. "I think it's going to be an incredible holiday season."

The bottom line: Adobe is getting its Flash software on many smartphones, even though Steve Jobs is knocking it.

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