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What happens to Adobe’s HQ (and good citizenship) if Microsoft buys the company? October 12, 2010

Posted by Bob Cook in Company Case Studies, Corporate HQ, Silicon Valley.
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Rumors are still floating that Redmund-WA-based Microsoft might buy San-Jose-CA-based Adobe.  Rumors were set off by a New York Times blog last Thursday revealing a meeting between company CEO’s.   Adobe’s stock price soared more than 11% the day the rumor started.  It’s settled back a bit since then, but still lies above the pre-rumor price.

The purchase of Adobe would be huge.   First, the price … likely to be more than $15 B …  would make it one of the most expensive tech acquisitions ever … more than Oracle’s$10.3 B purchase of PeopleSoft, its $8.5 B purchase of BEA or its $7.4 B purchase of Sun Microsystems, more than Intel’s $7.7 B purchase of McAfee, and more than Cisco’s $6.9 B purchase of Scientific-Atlanta.   It would also be the most expensive acquisition ever by Microsoft, bettering its $6.3 B purchase of aQuantive. 

More importantly, though, from a Silicon-Valley perspective, a Microsoft purchase of Adobe would be the first purchase of a sizeable Silicon Valley company by an “outsider”.   How would an out-of-town Microsoft handle Adobe?  Would it treat it as a semi-autonomous subsidiary, getting the benefits of teaming up against Apple and Google but letting Adobe manage its own way operationally?  Or would it subsume Adobe into its folds, use the Adobe operation as a foothold to tap the Silicon Valley talent pool and just merge it into other business units … so that eventually the only remaining vestige of the company we-know-as-Adobe would be the .pdf  file extension?     (Not to overdramatize, but maybe this is what Scott McNealy, former Sun Microsystem CEO, was talking about when he said “it really is mankind against Microsoft … this is why I don’t quit … I don’t want to leave my children to a Microsoft-only world.”)

As for Adobe’s HQ real estate, it would be a shame if Microsoft … or any other out-of-town buyer .,. did not let the Adobe folks run independently and call the shots vis a vis the Silicon Valley real estate strategy.  For in this regard, Adobe has been a particularly good citizen … for San Jose, in particular, and, more generally, for the “green movement”.  It would be good to keep that good citizenship going.

So what has Adobe done to be a good citizen?  First, Adobe alone, among large Silicon Valley companies, has had the nerve to locate its headquarters in downtown San Jose … and in, of all things, a group of high-rise buildings!   A million-square-feet worth!  This seems to be anathema to other Silicon Valley companies where the de rigueur is to locate in low-slung, big-footprint buildings where it’s easy to roller skate from department to department.  Sure, these buildings have lots of roof space for solar collectors, but nothing compares, from an energy perspective, to being downtown.  High-density downtowns are much easier to serve with energy-efficient public transportation than are the Googleplex’s and the Googleplex-wanna-be’s that sprawl across the Silicon Valley landscape.  (Although, to be fair, Silicon Valley is much less sprawling than are business landscapes elsewhere; some might even call Silicon Valley “urban”.)  Downtown San Jose has light rail, good bus service, might eventually get an extension of the BART subway, and probably will even get a stop on the high-speed rail line going from S.F. to L.A., if it ever gets built.  Adobe deserves kudos for being downtown.

Adobe also deserves kudos for its efforts to “green” its HQ buildings.  Back in 2006 Adobe was one of the first companies to get its headquarters a LEED (Leadership in Energy and Environmental Design) Platinum certification from the U.S. Green Building Council.  A host of environmental-friendly measures were implemented from water-use efficiency to energy-saving lighting systems to avoidance of hazardous chemicals in building maintenance.  Adobe has even installed vertical wind turbines on its buildings to generate electricity … not a lot of it … but every bit helps.

And Adobe’s good citizenship extends beyond energy-savings and the environment;  it has also had its impact on San Jose’s art scene and the scenery of downtown’s skyline.  A few years ago it installed, at the top of one of its buildings, the Semaphore, an enigmatic art piece visible from miles away that emits a secret code (which has been cracked and turns out to be the full text of Thomas Pynchon’s novel The Crying of Lot 49.)  

How would things change with a distant owner whose performance metrics for its business units would  probably not include measures of good citizenship?  Would the Semaphore remain on San Jose’s skyline?  Would the vertical windmills be maintained so they generate electricity properly?  Would the Adobe operation be eventually moved to some low-rise buildings in a misguided effort to improve expense metrics?

It’s always sad when a hometown company gets bought by an outsider.  We’ll see if the purchase happens or not.   Outsiders have tried before to buy into Silicon Valley.  There was the failed attempt by Microsoft to buy Yahoo back in 2008 and an unconsummated deal for IBM to buy Sun Microsystems in 2009.  Even if the Microsoft deal does go through, though, Adobe might be too big for even Microsoft to swallow.   Microsoft might have to leave Adobe to operate on its own.  Whatever … let’s hope the Adobe windmills keep turning.