Apple Computer To Sell Its Holding Of 16.4% in Adobe

By William Celis III, Staff Reporter
The Wall Street Journal

July 7, 1989

Cupertino, Calif. -- Apple Computer Inc. said it plans to sell its 16.4% stake in a major supplier, Adobe Systems Inc.

Apple's plan to sell the stake, which has an indicated value of $83.3 million, comes as the computer maker is becoming increasingly competitive with Adobe.

Apple has been using Adobe's PostScript software, laser printers and font software in Macintosh computers ever since Apple started making them. Although Apple credited Adobe with helping to make Macintosh successful, Apple said it now wants to move into the fast-growing area of printing technology itself.

Apple clearly signaled its intention to compete in May, when it unveiled Systems 7, a new version of its Macintosh operating system that controls the basic functions of the computer. Systems 7, which is equipped with printing ability largely similar to that provided by Adobe's products, includes Apple's own competing technology in the areas of screen displays and printers.

The planned sale of the stake, which Apple said it will recognize in its earnings for the fiscal fourth quarter ending Sept. 30, also has been spurred by the rapid increase in Adobe's stock price. Apple bought the 3.4 million Adobe shares in 1984 for $2.5 million as part of a joint product development pact.

After Apple's announcement yesterday, Adobe shares fell $2.125 to close at $24.50 in national over-the-counter trading.

In Mountain View, Calif., Adobe said that "following Apple's sale of its Adobe stock, our companies will continue to have a mutually beneficial relationship."

Analysts said that Apple's move wasn't surprising, and that the sale of its Adobe stake had been widely rumored for two years. Speculation was heightened after Apple unveiled Systems 7. That announcement indicated, analysts said, that Apple was interested in developing technology so that customers could buy an entire line of computer products from the company.

Even so, both Apple and analysts said that it is unlikely that Adobe technology will ever be entirely eliminated from Macintosh systems. Adobe's PostScript products, analysts said, remain the industry standard, and Apple itself conceded that some customers might continue to prefer PostScript over new Apple technology.

Apple's pullout isn't expected to hurt Adobe's earnings in the short-term, analysts said. They added that it's too early to assess the longer-term impact of Apple's efforts to develop a competitive product.

For the six months ended June 2, Adobe had net income of $14.5 million, or 67 cents a share, on revenue of $53.6 million.