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Archive for February 11th, 2008

This may be an old article from Bob Cringely, but I found it very interesting. A merger of Apple and Adobe would certainly be interesting. It would definitely mean Apple would have the world of content creation sewn up. From a photography standpoint I think this would be very interesting, but as the final paragraph states, what would that do to Microsoft and it’s streaming media?

With CES over and the San Francisco Macworld Expo set to begin on Monday, we pundits are turning our attention to Apple, the big technology business success of not only 2007, but of the entire decade. Steve Jobs has his Macworld keynote address coming and will no doubt deliver to us a few of the products we’ve all been predicting, presented with a level of showmanship simply not seen elsewhere in the industry. But my job this week is to look beyond products, to take a step back and give a long view of where Apple is headed. And the centerpiece of this analysis is my conclusion that Apple will inevitably buy Adobe Systems.

About 18 months ago an Apple employee at an internal meeting asked Steve Jobs about Apple’s positioning in the enterprise market. Jobs told the employee that IT wasn’t really Apple’s business and that he should go work at a company like IBM or HP if he wanted to pursue that line of work. Jobs said Apple was in the “content creation” business with the consumer iLife applications as well as professional apps like Final Cut Pro. While Apple doesn’t see itself as an enterprise IT vendor, it sees its technology powering particular types of enterprises, notably those in graphics, media, and entertainment.

Some readers may know what a dongle is. For those who don’t, a dongle is a sort of electronic key that plugs into a PC to enable the use of some expensive software application like AutoCAD. Each copy of the app comes with a single dongle so you can put the software on as many computers as you like but only one — the one with the dongle installed — can function at a time. Dongles, which are rarely used today, were an early and quite effective form of copy protection. Apple uses a variation of the dongle technique for its professional applications, but in Apple’s case the dongle IS the computer. Yes, the software is a good value but you have to buy a computer from Apple — a dongle — to run it on. So Apple runs its professional application business effectively at breakeven, making its profit on the associated hardware.

Last year, for example, Apple bought an application called FinalTouch from Silicon Color that was essentially video color correction on steroids. They changed the product name to Color, added a couple features, then rolled it into Final Cut Studio, Apple’s top-end video application suite. Though FinalTouch sold for up to $25,000, Color is included in Final Cut Studio FOR FREE, which is a kick in the head to Apple competitors like Avid that don’t have hardware sales to count on for profitability. This hardware-software one-two punch is how Apple has come to dominate media creation and is the main reason why those who think Apple will license Mac OS X to other hardware companies are simply wrong.

Of course content creation has been the heart of Apple’s business ever since the original LaserWriter and the invention of desktop publishing, so this is nothing new. What IS new, however, is Apple’s role in content distribution as well. QuickTime enabled Apple to be in the video creation business but iTunes put Apple in the potentially much larger video distribution business. This shift from creation to distribution is vital to understanding Apple’s current strategy and involves a counterintuitive feedback loop to those professional applications. Where Final Cut Pro was useful to Apple as a driver of hardware sales, it is now becoming MORE useful as a driver of content to be distributed through iTunes.

Here is an example of what I mean. Apple has long been a member of the Blu-ray camp when it comes to which high definition DVD standard to support, yet for some reason Apple has yet to ship ANY computers with Blu-ray drives, or HD DVD drives, for that matter. What the heck is with that? How can Apple, as the dominant maker of video creation systems, ignore both Blu-ray and HD DVD? It’s because Steve Jobs sees the logical distribution format for HD as being via iTunes, not on a disc of any sort. Now that Toshiba and HD DVD appear to be on the ropes, Apple may be forced to offer a Blu-ray option on build-to-order Mac Pros, but I haven’t heard any rumors to that effect. Steve would prefer that there be no optical video distribution at all and he has warped Apple to that purpose, probably at the expense of some sales.

Now let’s take this another step and consider how Apple might further optimize itself in its role as enabler of content creation to fuel iTunes. Given this new focus for the company, what might Steve Jobs propose to do with some of that $15 billion in cash the company has on hand that last year earned it a dismal (in VC terms) 5.27 percent interest?

Folks a lot smarter than I have wondered over the years about potential Apple mergers and acquisitions driven by Steve’s bloodlust. Apple-Disney, Apple-Google, Apple-TiVo, even Apple-Sun come to mind, but the only one that makes any sense to me at all is Apple-Adobe.

Owen Thomas at Valleywag made the point recently that overlapping boards mean that Google has great influence over Apple. He went so far as saying that Google CONTROLS Apple. Hardly. It’s an interesting idea, but goes just as well (or better) in the other direction. Google has had far less of a game plan than Apple. There is no Steve Jobs equivalent at Google, for example. Eric Schmidt’s failure at Novell came down to the fact that he wasn’t a strong leader like Jobs, so he built Google as a company that can succeed with a weak leader. That’s fine for Google now, but what happens when the company comes under the influence of a strong leader, though one with patience? We’re seeing that. Jobs will entice Google into painting his fence up to the point where Google needs another fence to paint and looks to Jobs to find it for them. Apple has no need to merge with Google because Apple is already getting everything it wants from Google and Steve wouldn’t be the largest shareholder or even in the top three, for a combined Apple-Google. Forget that.

Apple-Disney is just as unlikely, though for a completely different reason. Apple is about facilitating the creation and distribution of content to consumers. Disney is about the creation and control of content as intellectual property. At the end of the day it all comes down to changing the world and increasing Steve’s wealth. For these reasons, then, I DON’T see Apple ever merging with Disney, because that would corrupt the purity of Disney/Pixar’s task.

What I DO see happening is Apple buying Adobe, which would give it effective dominance of digital content creation and distribution on a global scale. Bruce Chizen suddenly stepped down as Adobe’s CEO without warning: why? A caretaker CEO (my characterization — no slight intended) is in place. Steve has always viewed Adobe co-founder and co-chair John Warnock like a father. Warnock and co-chair Chuck Geschke are losing interest in Adobe day-to-day as they move on with their lives. Acquiring Adobe would make Apple much more of a cross-platform company. The combined professional applications could be placed in the Adobe division of Apple where they could go up in price for some markets, becoming VASTLY more profitable. But most important — keeping in mind the whole purpose here is driving content distribution — merging Flash and QuickTime would make any other video standards (like Windows Media) simply immaterial.

If such an acquisition were to take place it would have to be in 2008 while Avid and Microsoft still present credible competition to keep the Department of Justice and the Federal Trade Commission from opposing such a merger. It would go easier, too, on W’s watch. I knew he was good for something.

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Polaroid’s United States office has confirmed press reports that the company is exiting the film business as it focuses on digital photography and flat-panel televisions.

Amateur Photographer (AP) magazine’s photo-science consultant Geoffrey Crawley described the news as ‘the end of an era’.

However, Polaroid Europe is still to release an official statement on the news that Polaroid is pulling out of the instant film business and closing plants worldwide.

The reports, verified by a US spokeswoman this afternoon, suggest that Polaroid has enough instant film to last into 2009.

‘It plans to license the technology to third party companies for diehard customers,’ add the articles, the first of which appeared in the Boston Globe newspaper at the weekend.

Confirming that the reports were factually correct, the US spokeswoman told us: ‘Due to dramatic technological changes in the photographic industry, Polaroid is transitioning from its analogue instant film business into new and innovative digital instant photography techniques.

‘The company looks forward to creating instant memories for customers, with exciting new digital instant and consumer electronics products.’

Production of Polaroid consumer-level instant cameras ceased in 2007, a year after commercial-use instant camera production ended.

The firm will shut its large-format film facilities in Norwood and Waltham, Massachusetts, axing 150 jobs by the end of March.

Production of consumer film packs in Mexico and the Netherlands will cease by the end of this year, resulting in 300 job losses.

Polaroid’s European offices declined to make any immediate comment following widespread reports, which emerged on Saturday, that Polaroid is ending instant film production.

We understand that Philippe Kalmbach, senior vice president and general manager of Polaroid Europe, was due to brief Polaroid’s UK management on the matter this lunchtime.

Despite numerous calls to Polaroid’s UK office we were told that no comment would be forthcoming until tomorrow (Tuesday) afternoon, when Kalmbach will personally call AP’s newsdesk.

Amid the confusion Polaroid’s global website crashed this afternoon.

The Polaroid Corporation was set up in 1937.

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Polaroid Corp., the Massachusetts company that gave the world instant film photography, is shutting down its film manufacturing lines in the state and abandoning the technology that made the company famous.

“The Norwood plant is shutting down, and we will soon be winding down activities at the Waltham facility as well,” said Kyle MacDonald, senior vice president of Polaroid’s instant photography business segment. The closures, set for completion during this quarter, will eliminate about 150 jobs. In the late 1970s, Polaroid employed about 15,000 in Massachusetts.

The Norwood and Waltham plants make large-format films used by professional photographers and artists. Polaroid also makes professional-grade films in Mexico, and its consumer film packs come from a factory in the Netherlands. All these plants are slated for closure this year. Polaroid chief operating officer Tom Beaudoin said the company is interested in licensing its technology to an outside firm that could manufacture film for faithful Polaroid customers. If that doesn’t happen, Polaroid users would have to find an alternative photo technology, as the company plans to make only enough film to last into next year.

Polaroid has already quietly halted production of instant cameras. “We stopped making commercial-type cameras about 18 to 24 months ago, and we stopped making consumer cameras about a year ago,” said Beaudoin.

“It’s about time,” said Ron Glaz, director of digital imaging program at IDC Corp. “The fact that they’re getting out of film makes complete sense.”

In the years following World War II, Polaroid’s instant photography products established the company as one of Massachusetts’ leading industrial concerns, and made its brand name famous worldwide. But in the late 1980s the company went deeply into debt to fend off a hostile takeover. It invested heavily in products that failed and was unprepared for the surging popularity of digital cameras. By 2001, Polaroid was forced into bankruptcy; privately held Petters Group Worldwide of Minnetonka, Minn., bought the company’s remaining assets in 2005.

The Massachusetts Executive Office of Labor and Workforce Development is providing employment assistance to laid-off workers, some of whom were warned about the cuts two years ago. Along with standard job-placement services, the state agency joined with Worcester Polytechnic Institute last year to retrain laid-off Polaroid workers for manufacturing jobs at biotechnology companies. About 30 workers have been retrained under the program so far.

The company will retain about 150 executive and administrative employees at its headquarters in Concord and a smaller office in Waltham. “We’ll continue to have a strong presence in Massachusetts for the next 30 or 40 years,” said Beaudoin. But Polaroid will now focus on flat-panel TVs and digital photography gear.

Polaroid has also struck an alliance with Zink Imaging Inc. of Bedford, a company founded by former Polaroid scientists and executives. Zink makes a system that generates pocket-sized prints of digital photos. Polaroid will begin selling Zink photo printers under its brand name this year.

Ed Lee, a digital photography analyst at InfoTrends Inc. in Weymouth, said the Zink printer could have a bright future in the long run. But he said the current model, which produces images about the size of a business card, probably won’t appeal to the mass market. “I don’t see a lot of people using it for printing photos that will wind up in photo albums,” he said.

IDC’s Glaz added that sales of home photo printers have slowed in recent years. He said today’s consumers prefer to look at photos on their computer screens, and are more likely to say, “E-mail that to me, rather than give me a hard copy.”

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