Adobe is a software company known mainly for two of its core products; Adobe photoshop and Adobe Flash. Flash is the language behind most of the videos viewed on the web right now, it is a language that was adopted early on by some of the major industry players such as Youtube. Generally, the company has been very quiet and has little competition in its very specialized segments. So how in the world did it end up with Apple (AAPL) as an enemy? Having one of the biggest and fastest growing companies in the tech space write a post describing why it will not support Adobe’s technology is certainly not a good sign for Adobe. That is exactly what happened today on Apple’s blog as Steve Jobs wrote a long post explaining exactly why Apple does not and does not intend to support Flash for its Ipod/Iphone/Ipad business. There are workarounds for specific applications such as Youtube but Apple has complete control over these workarounds and could change them at any moment in time.

The arguments are convincing and it will be interesting to see what Adobe’s response will be. They have been very vocal about their frustration regarding Apple so it would be surprising to not get a reply from Adobe. That being said, how much does this hurt Adobe? In reality, I would say not that much. It will certainly hurt the Flash revenues but those are not a major part of Adobe’s revenues. However, I think it could be seen as a similar situation as Apple vs Amazon where Adobe could be losing focus if it spends too much energy in this battle.

But what is actually happening?

The facts are simple. If Apple continues to refuse to support Flash in its devices, developers will be forced to work on alternatives as Apple continues to gain market shares. Those alternative languages are already very viable options and I would be very surprised if Flash didn’t lose some “market share” in the coming months because of the Apple problem. Sad? Absolutely. But unfortunately, especially after such an email, there does not seem to be much that can be done.

So is it a good investment?

The more worrying trend in my opinion about Adobe is its valuation, just take a look at the numbers below and you will see what I mean. A company that has negative growth should not sell for such a high valuation.

So the bottom line, should Adobe (ADBE) be sold? I don’t think the recent news and blog post by Apple should be the reason to do so. But at its current valuation, I will certainly keep it in my mind in my future stock picks.

It was well known that Palm was in financial trouble. With dwindling revenues and a very very tough market, it had very few weapons compared with Apple’s Iphone as well as the numerous phones powered by Google’s Android operating system. The US smartphone market quickly shrank from 4 major players (Google, Apple, Microsoft and Palm) to 3 and things were only getting worse for Palm. The problem of course when things are not going well financially is that suddenly your partners become less interested in doing business with you. That happened for Palm as it saw partners such as Verizon or resellers like Radio Shack threaten and in some cases stop selling the Palm phones.

I would expect such to more or less stop happening now that HP is behind the smartphone maker. HP does have power and a solid reputation which should be enough to both give confidence to Palm’s partners but also put some fear of having the major Sillicon Valley company as an enemy.

But the phone does not change

TechCrunch has reported that HP intends on keeping the WebOS operating system, seen by many as the biggest asset on Palm phones. That is good but it will also put much pressure on HP to come up with a strategy to compete with Apple and Google. In both cases, the major advantage seems to be in the applications available to those who use the system. While the number of apps available can be intimidating, the overall quality of apps available on Android and the Iphone is just beyond anything Palm can rival right now. And that will not change anytime soon unfortunately for Palm & HP,

Why it won’t change….

Since the apps are not driven by the companies but rather by private developers and companies, the environment needs to be attractive for them to work on your platform. And an environment that has a small and decreasing number of users is far from being attractive. Why work on an application for Palm when a successful app on Apple will generate 10 or 20 x the revenues. The competition is more fierce of course but in general that does not scare the best developers. Which means that those working on Palm apps are not the best, which in the end translates into an inferior user experience.

Is there anything to be done?

It is not game over yet. Google has proved how quickly it was possible to enter the market and in my opinion, it is all about giving incentives for developers. This could be done with major contests, offering cash prizes for the best applications or most downloaded apps, etc, etc. There are many possible ideas but I certainly think that Palm has more of a chance with HP backing it than it had on its own. It did not have the money or time to dedicate to a battle with Apple, Google & Microsoft. Now it does….