October 9, 2002 3:21 PM PDT

Adobe digests Microsoft move

Investors and analysts were divided Wednesday over how Microsoft's new XDocs electronic-forms software would affect Adobe Systems, which has identified online forms as a significant new business direction.

Microsoft CEO Steve Ballmer on Wednesday unveiled XDocs, corporate software for harvesting and sharing data submitted through online forms.

Although Adobe is mainly known for working with static, read-only documents through its PDF format, the company is trying to expand into dynamic online forms. Earlier this year, Adobe acquired Accelio, a Canadian software maker specializing in server products that capture, store and process data submitted through electronic forms.

Accelio's Integrate software, for example, was designed in part to let various workers take customer requests arriving by phone, Web and e-mail and enter them into a standardized form. That data would then be stored on a central server for analysis and could be automatically routed to relevant departments for handling.

Adobe sees the Accelio acquisition, along with a subsequent partnership with business-software giant SAP, as a way to expand the role of the Acrobat software used to create PDF documents, turning them into a broad framework for collecting and sharing corporate data.

The company's Acrobat Capture software, for instance, lets companies convert piles of paper documents into searchable Adobe PDF archives. And its Acrobat Messenger software is designed to let work groups easily scan paper documents--such as contracts, color brochures and documents with handwritten notes or signatures--convert them into electronic files and share them via e-mail, Web or fax.

William Lennan, an analyst for W.R Hambrecht, said in a report issued Wednesday that XDocs could constitute a significant blow to Adobe's efforts to expand the Acrobat adoption. The Microsoft product is "essentially the same value proposition as Acrobat--to eliminate the inefficiencies of paper workflows," Lennan wrote.

Meta Group analyst David Yockelson agreed.

"Adobe has designs on getting content into PDF and having it be more dynamic," Yockelson said. "XDocs could certainly impact that by not only doing unique things with a Word document but (by) pulling things out from all over the place and giving you a much more dynamic container."

The sincerest form?
Harry Vitelli, senior director of product management for Adobe's ePaper Division, said he saw Microsoft's XDocs announcement as supporting Adobe's approach.

"We've been articulating a strategy for the last couple of years that says we're very focused on documents...and how those documents interact with a company's back-end systems," Vitelli said. "We felt today that Microsoft's comments really validated what we've been saying. We think that having them articulate a similar message to the rest of the industry is only going to help our strategy."

The online forms segment that XDocs targets is only a small part of Adobe's overall "network publishing" strategy for boosting PDF and related technologies, Vitelli added.

"When we talk to customers...they look at forms as a very small part of the problem they're trying to solve," Vitelli said. "They're looking at how all their documents are getting handled on a day-to-day basis--things like contracts and marketing materials. Forms are really a small part of that."

But investors weren't so sure. Adobe shares were down $1.80, or 9 percent, to $18.17 at market close Wednesday.

Keith Gay, an analyst for Thomas Weisel Partners, said the market was overreacting to the Microsoft news, noting that Acrobat has an established record with business and the first version of the XDocs won't hit the market until mid-2003.

"This does represent a potential long-term threat to the direction in which Adobe is taking Acrobat...changing static PDF templates into dynamic, interactive electronic forms," Gay wrote in a report.

"Microsoft may be seeking to combat at least the e-forms creation capability of Acrobat," Gay wrote. "However, any creation will be based on Microsoft Office and limited to Microsoft platforms. Thus, over time, Microsoft will add e-forms capability but still will not be able to replace the core value proposition of Acrobat: reliable, precise presentation regardless of application or platform."

But Microsoft's Scott Bishop, Office product manager, positioned XDocs more as a replacement for proprietary or Web-based informational retrieval systems than as an alternative to PDF.

"This is really about helping organizations take advantage of the vast array of information scattered throughout the enterprise by integrating people into the process," Bishop said.

Microsoft also has to do a lot of work on the back end with its server products to bring XDocs up to the place where the product would pose any serious threat to Adobe in the short term. Long term, much depends on Microsoft's broader goals.

"It's kind of catching the tiger by the tail," Yockelson said. "Microsoft has so many places it could point this (technology), so they're being a little cagey about what they could attack directly. If you look around a bit, the things you do impact are Adobe PDF, (Lotus) Notes or e-forms."

News.com's Joe Wilcox contributed to this report.

 

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