Apple Selling Adobe Stake
Two Could Become Rivals
By Andrew Pollack
The New York Times
San Francisco -- July 6, 1989 -- Apple Computer Inc. said today that it would sell its 16.4 percent stake in Adobe Systems Inc., whose Postscript software controls the output of Apple's laser printers.
The move comes as the strategies of the two companies continue to diverge. Explaining that it wants to control its own technological destiny, Apple said today that it was developing its own software to replace Postscript.
The parting of ways means Adobe's largest customer could eventually become a significant competitor. Apple accounted for 29 percent of the $53.6 million in revenues of Adobe in the first half of its 1989 fiscal year.
But Adobe, based in Mountain View, Calif., said it expects the loss of business to be gradual because Apple's competing products will not be ready until mid-1990 and because Apple will continue, even after that, to offer Postscript to customers who want it. Adobe officials said the company had been reducing its dependence on Apple and now had 30 other customers, including the International Business Machines Corporation, the Hewlett-Packard Company and several Japanese companies.
Adobe's stock fell today on the news, closing at $24.50 a share, down $2.125. Apple's share price rose 75 cents, to close at $41.25. Both stocks trade over the counter.
Apple's 3.42 million shares of Adobe, purchased in November 1984 for $2.5 million, are now worth about $84 million. Based on today's price, Apple would register a pretax gain of more than $80 million in its fiscal fourth quarter, ending in September.
Postscript is a computer language that describes how a printed page will look. For instance, it allows text to be printed at any size and in many different typefaces and for images to be tilted at any angle.
Apple's financial backing and endorsement of Postscript contributed to Adobe's fast growth. In return, Postscript contributed significantly to the success of Apple's Macintosh computer for use in desktop publishing, which involves designing publications on a computer screen.
Apple said in May that new operating system software it was developing for the Macintosh would do some of the tasks that Postscript does. Today it added that it was developing a clone of Postscript that would allow Apple to make Postscript-compatible printers without paying royalties to Adobe.
Risks for Apple
But going its own way could be risky for Apple because Postscript has now essentially become a standard. ''In an environment where customers are insisting on open systems, Apple is trying to introduce something proprietary,'' said Bruce Lupatkin, an analyst with Hambrecht & Quist in San Francisco. He said Apple could meet with the same slow reception that I.B.M. did with its Microchannel, a new system of transmitting data within a personal computer that departed from the existing standard.
Still, Apple has made it a key strategy to disregard standards in hope of offering something unique.
Apple will sell its Adobe shares to Morgan Stanley & Company and Hambrecht & Quist for resale to the public in an underwritten offering.
Copyright 1989 The New York Times Company