The slimmest hint of a rumor can gain steam when cycled around the Internet. It seems to be happening with rumor that Apple is pitching its professional applications such as Final Cut Pro.
The rumor was buried below the fold in the Friday Pulpit posting by Robert X. Cringley. He said Apple was "quietly shopping around" its pro content creation apps at the National Association of Broadcasters show in Las Vegas the other week.
The reason? Here's his take:
It seems obvious to me, however, that there is only one real reason why Apple would sell off its professional applications and that's to avoid antitrust problems when/if Apple buys Adobe Systems as I predicted at the beginning of the year. Final Cut Pro competes directly with Adobe Premiere. While in my opinion the Apple video software is clearly better, Jobs couldn't be at NAB trying to sell Premiere -- software he doesn't yet own. Maybe there's a planned bait-and-switch, seeing who is interested in Final Cut then trying to shift them to Premiere.
The major point here is that Adobe is in play, or at least Apple thinks so. The company has plenty of cash and stock to do the deal and plenty of incentive, too. Apple's goal in acquiring Adobe would be to control first Flash and second Adobe's emerging Air application platform. Adobe announced this week a broad industry initiative to extend Flash to mobile devices, but Apple wasn't a participant. Why bother if you intend to shortly own Flash outright?
There are two big questions here: first is whether or not Apple was pitching its professional softwares at NAB and if so, what company would want them; and second, is whether Apple is looking at buying Adobe. And the whole "obvious" thing.
For the moment, let's look at the first set of questions.
Of course, it makes sense if we take a meta view of Apple that the company would want to focus on its consumer platforms: mobile music/video content players, mobile Internet devices and phones, and computers. It has a much bigger business with these products in the consumer and small business markets than it does with the professional content applications,which are a long-standing legacy segment from Apple's past.
I spoke to a buddy who works in the professional video market about the rumors at NAB. He said he had heard this rumor circulating at NAB as well as one that had Adobe buying the titles from Apple (contrary to the direction of Mr. Cringley's analysis).
Declining attribution, the video developer offered a number of good points about the potential deal. He said the cost would be high — after all, these applications aren't losing money.
"From a value perspective, I can't see Apple selling this for less than $700-800 million, given the run rate and brand value of the apps. This would be very expensive for most companies in the space, outside of Sony or Panasonic."
"Just to give some relative acquisition sizes, the Thomson acquisition of Canopus was $150 million for the whole business including hardware. [Canopus made HD video editing cards and software. He emphasized the idea of "whole" IP here.] So, Apple is not likely to take a stock deal, but would look for all cash for these apps since they have a highly-valued, hot stock and all the other pro players in the media business are very staid and lack the stock upside that Apple would look for."
So, what was fueling this rumor? He said it's coming from an equity company looking to leverage Internet video.
"This rumor is coming from an [leverage buyout] firm or other capital equity company that is looking to value acquisitions in the pro media space because YouTube, and other video sharing sites have made video apps look like a hot prospect. One of these firms may even have approached Apple about a purchase [thus] spreading the rumor that Apple might sell the pro apps."
BTW: Here's a Microsoft angle to consider. Jupiter analyst David Card asked how Redmond can rein-in Google on search, So How Ya Gonna Stop Google Now? He said Microsoft needs to keep Google apps out of the enterprise, and must target small businesses. In addition, he had some suggestions with an Internet video hook:
Attempt to wall off Google in search, by winning the display ad platform and network battles. AOL and Facebook would help here, or MySpace. ...
Keep Google technologies out of mobile, and off of the TV set. I think it’s too late for Microsoft to do something with Nokia; Microsoft has long struggled with carriers and telcos (so will Google); and what do you think Xbox is for?
So, here's more evidence that video content — and by extension, video and audio editing applications — could be strategic to an Internet company.
Remind me again why Apple might want to get rid of these apps?
(I will take up the Adobe part of the rumor in an upcoming post.)