• The New York Times et al., Friday, October 8, 2010 1:30 PM

Fact: Heads from both Microsoft and Adobe recently met in a closed meeting. Rumor: Microsoft is about to acquire the Flash media player maker.

The meeting covered "a number of topics, but one of the main thrusts of the discussion was Apple and its control of the mobile phone market and how the two companies could team up in the battle against Apple," according to The New York Times, citing sources. "A possible acquisition of Adobe by Microsoft were among the options."

What would such a deal mean? First, Microsoft would essentially be throwing in the towel with its Silverlight software plug-in, which, until now, has directly competed with Adobe Flash.

More broadly, the idea is that a merger would somehow help both Microsoft and Adobe better compete against Apple, which has excluded Flash from its popular mobile devices. How exactly it would do that is not quite clear, and, more to the point, many analysts suggest that Microsoft should be spending its money elsewhere.

"At its current market capitalization, Adobe would cost Microsoft $15 billion, a sizable portion of its $40+ billion cash reserve," reports Information Week. "It would be a huge investment in a legacy software business rather than a forward-looking investment in the cloud or mobile -- areas where Microsoft would benefit from further investment."

However, not everyone is scratching their heads over the potential deal. Adobe's software could augment Microsoft's programming language, .Net, which is the basis for programs that run on Windows, Katherine Egbert, an analyst at Jefferies & Co. tells Bloomberg.

"It makes a lot of sense that they would want to get together," Egbert tells Bloomberg. "You're taking Microsoft's millions of .Net developers and marrying them to the millions of creative developers who use Adobe's tools."

Also, some say that an Adobe acquisition could actually aid in Microsoft's mobile efforts.

"In addition to Windows Phone 7 smartphones, Microsoft is planning a series of Windows-powered tablets that will compete directly against the Apple iPad," writes eWeek. "Should Microsoft acquire Adobe, it would potentially allow the latter's software to be integrated more tightly with products such as those tablets and smartphones."

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