Newsmaker: Chizen: Friends, foes and China

newsmaker Adobe Systems' $3.4 billion purchase of Macromedia has been one of the big stories in software this year.

With the deal approved in the U.S. and on the verge of being approved in Europe, Silicon.com editor Tony Hallett recently caught up with the San Jose-based software company's chief executive, Bruce Chizen.

With an "intra-quarter business update" forecasting Adobe will once again beat analyst expectations and the merger with Macromedia almost put to bed, you can forgive those at the company--one of the few standalone software outfits to endure over the past 20 years--for feeling like they have some momentum.

But with Microsoft looming larger, the rise of open-source alternatives and China a problem as much as an opportunity, CEO Bruce Chizen--as always--has some strong views on what lies ahead.

Q: Some people say you're trying to make a break from your traditional market.
Chizen: It's still all about helping people express information.

What is it that has made Adobe endure?
Chizen: Where a Microsoft caters to a wide variety of people, we really focus on the professional--whether that be an IT professional or a creative professional, a Web designer, a graphics designer. They really care about the quality of the output of their information. It's where good enough is just not acceptable. And because we stay focused there, I think we do what we do well.

Are you limited to that type of professional?
Chizen: No, because of this information explosion we're living in.

DRM, and rights management more generally with issues such as "digital leakage" of documents, is a hot area right now. Is it a big opportunity for you?
Chizen: There's B2B (business-to-business) rights management and B2C (business-to-consumer)--which we tend to stay out of as it's pretty messy, with lots of patent issues--and our focus tends to be on the document security side, (working with) regulated agencies and industries. It's one of the great value propositions of PDF.

For every dollar I invest in China on intellectual property education and enforcement, I can get a much better return if I put that investment in the U.K., in Germany or in the U.S.

Example?
Chizen: Take pharmaceuticals. On the policy server side, if new information on a drug comes to light, if I learn about something harmful, I can quickly terminate (outdated information on its) application with a doctor.

Tell us about China.
Chizen: Every time I talk about China I get into trouble! I know I irritate the Chinese government. It's frustrating. We'll do--and these are approximate numbers--about the equivalent of $300 million in business in Japan. We have similar market share in China--it's all Adobe--and we'll do maybe $3 million to $5 million. It's a problem.

Yet you persist.
Chizen: Yet it's the largest IT market in the world right now in terms of growth. So we're working with the U.S. government to educate, push and help the Chinese government in understanding the problems it's creating. I think it was in the middle of July, there was a very successful meeting with representatives of U.S. Trade and, I think, the State Department, with Chinese officials, which ended with the Chinese government talking about a renewed effort in terms of intellectual property.

Second thing we can do is continue to look at ways we can change our business models, looking at hosted applications, instead of pushing shrink-wrapped software, looking at server-based solutions. We can try to reduce the price of shrink software but when we just did that--even to below where it is elsewhere in the world--it wasn't successful.

Ultimately what it's going to take is for its internal, commercial software developers looking to do business in China and outside China to put pressure on their government--and we're probably years away from that.

For years now we have been anticipating a move by Microsoft--it's actually taken them a lot longer than I thought it would, especially as related to PDF.

But you continue to fight counterfeiting there.
Chizen: Yes, but for every dollar I invest in China on intellectual property education and enforcement, I can get a much better return if I put that investment in the U.K., in Germany or in the U.S.

And the U.S. government isn't just fighting on behalf of poor old Adobe?
Chizen: If you look at the amount of lost revenue to the theft of intellectual property by Chinese from intellectual property companies in the U.S., it's a significant number--which results in less jobs, less tax paid to the U.S. government, less R&D and innovation, and it also means less offset to the trade balance which is already out of whack. The U.S. government has a lot of incentives to push--not Adobe's agenda but the intellectual property agenda.

Is hosted software the way to go?
Chizen: No one's really figured it out.

But how come you have this piracy problem? We thought you were the DRM experts. Will you build in more checks and balances?
Chizen: We can and we will. But there is no such thing as absolutely secure.

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