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Why Apple Wants to Kill Adobe

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The rivalry may stem from the companies' competing positions in the software market.

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Behold! The Apple (AAPL) iPad has a competitor, and it goes by the name HP Slate.

The Hewlett-Packard (HPQ) tablet, which runs Microsoft's (MSFT) Windows 7, looks pretty dang good. The user interface looks simple and effective, and the screen looks pretty darn snazzy. I won't pass judgment on its appeal versus the iPad until I see both up-close and personal, but my initial impression is definitely positive.

But if you asked me what really stands out most about the Slate, one thought comes to mind: HP's cozy relationship with Adobe (ADBE).

A key differentiating factor between the iPad and the Slate is the latter's inclusion of Adobe's Flash technology, which could make for a friendlier web-browsing experience.

Flash used to make the Internet painful as overzealous web designers used it to overload websites with idiotic animations that got in the way of people getting to what they wanted.

But it's a different story today. Internet connections have gotten faster and Flash has matured. So instead of getting in our way, it now allows us to do useful things like watch videos on YouTube (GOOG), use interactive applications, and play online games -- all within a browser window.

Flash does have competitors like Microsoft's Silverlight and the open-source HTML 5, but for now, Adobe's offering is the de facto standard, having been installed on 99% of computers out there.

Now Flash does have its fair share of critics, the most famous of whom is none other than Apple CEO Steve Jobs. Jobs has called Flash "buggy" and "full of security holes" among other things. So while you'll have Flash capabilities on some Motorola (MOT), Nokia (NOK), and Samsung phones, they're completely absent from the iPhone and the upcoming iPad.

Holman Jenkins of the Wall Street Journal noted that "Flash would also allow iPhone and iPad users to consume video and other entertainment without going through iTunes. Flash would let users freely obtain the kinds of features they can only get now at the Apple App Store."

This makes a lot of sense: Apple clearly likes end-to-end control over the user experience, particularly at the points where dollars are moving. In an Apple-centric utopia, all music would be recorded and edited on Mac Pros running Logic Studio, purchased by consumers using iTunes, and listened to on Macs, iPods, and iPhones. Same with movies -- just substitute Final Cut Pro into the equation.

However, the growing Apple-Adobe rivalry may stem from a different issue altogether: the companies' competing positions in the software market.

More specifically, I think Apple wants to kill Photoshop.

Photoshop is Adobe's big daddy -- the de facto standard in photo editing. Illegal copies sell for $20-30 on Craigslist, while the real deal goes for a whopping $700. Upgrades are $200, and these prices will only go up in the future. Adobe's companion product Lightroom -- the market-leading photo organizational tool -- goes for about $300 (street prices are usually lower).

In Apple's corner lies Aperture, which directly rivals Lightroom but lacks the sophisticated editing capabilities required to do battle with the beastly Photoshop. The latest version, Aperture 3, was released on February 9 at a very aggressive price of $199. As of now, Aperture is something of an also-ran in the marketplace as Adobe has outpaced it in terms of brand power and community interaction.

My prediction for Aperture 4, which we likely won't see until 2012, is that it will feature the advanced editing capabilities required to go head to head with Photoshop. Apple will create one $300 to $400 product that competes with the $1,000 Photoshop and Lightroom package.

Most importantly, that one product will be Apple-only. Photoshop users can migrate between Mac and Windows, but Apple software ain't running on Windows -- no way, no how.

Final Cut Pro's market share among video editors has steadily grown throughout the decade -- surely Apple wants to replicate that success in photo-editing software. Once people commit to Final Cut Pro, they're stuck in the Mac world -- the same can be said for Aperture.

Stay tuned -- this war will heat up.
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No positions in stocks mentioned.
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