Adobe Systems halted development of its Flash Player for mobile browsers, surrendering to Apple Inc. in a war over Web standards as the company surprised investors with a restructuring plan.
The move is likely to improve the browsing experiences of tens of millions of iPhone and iPad users, who have trouble accessing sites built with Flash.
That is because Adobe's decision means Web developers who currently use Flash tools to produce Web content will likely move over to the newer HTML5 technology, which Adobe embraced Wednesday.
Adobe's concession to Apple and its late founder Steve Jobs, who famously derided Flash as an inefficient power-hog, came as the design software specialist warned that revenue growth will slow next year.
That is because the company is scaling back development of some products and shifting towards leasing other types of software via the cloud on a subscription basis, instead of selling licences up front.
The news, detailed Wednesday at the company's annual analyst day, sent shares in the company tumbling nearly 8 per cent.
Adobe announced a restructuring plan on Tuesday that involves laying off about 7 per cent of its workforce.
Adobe said revenue growth is expected to slow to 4 to 6 per cent in fiscal 2012 – below the roughly 9 per cent Wall Street was projecting, on average.
Analysts were uncertain when Adobe's moves would deliver, despite executives saying that top line growth should return to normal in 2013.
"Shifting from a license model to a recurring model is hard," said Brigantine Advisors analyst Barbara Coffey.
"Longer term, Adobe will be a stronger company. However, in the meantime we believe that the shares will languish until revenue growth is evident."
Adobe's surrender signals the end of a long-running war with Apple that has overshadowed the software maker's other activities.
At one point in the battle, Steve Jobs wrote a nearly 1,700-word "manifesto," calling Flash unreliable and ill-suited for mobile devices. Adobe retaliated by taking out newspaper ads saying Mr. Jobs was just plain wrong.
Analysts say the cessation on Flash development might be a setback to rivals of Apple who tout the ability to support Flash as a reason to buy their equipment. They include Asustek Computer Inc., Google Inc., HTC Corp., Motorola Mobility Holdings Inc., Research In Motion Ltd. and Samsung Electronics Co. Ltd .
"It certainly changes the position a little bit for those who said that iOS products such as iPhone and iPad were disadvantaged for not supporting flash," said Michael Gartenberg, an analyst with Gartner.
While Adobe only publicly conceded Wednesday that HTML5 has become the preferred standard for creating mobile browser content, it has long been investing in the technology.
For example, it worked with magazine publisher Condé Nast for about year developing software that allows for the use of HTML5 technology to publish digital editions of magazines, including The New Yorker and Wired.
This means any content producer can use Adobe's publishing software to build video and motion graphics suitable for the iPad, as well as most other mobile devices.
Plus, Adobe incorporated HTML5 into its popular Illustrator and Dreamweaver software programs and highlighted an HTML5 program dubbed Edge for creating animated Web content it highlighted at its analyst meeting.
The company said it plans to infuse HTML5 technology across its entire product line over the coming years, offering increasingly sophisticated tools and services to design professionals, publishers, retailers and other businesses.
The ABCs of HTML5
While the difference between Flash and HTML5 might seem like inside baseball for the average person, it is of keen interest to developers and device makers from Motorola Mobility Holdings Inc. to Samsung Electronics Co. Ltd.
HTML 5, a code used to publish words, pictures and videos, is quickly becoming the globally accepted standard for the Web. It was developed with the goal of better handling multimedia and graphics, and to work across multiple platforms, as they have become more central to Internet browsing.
Since Apple refused to adopt Flash, HTML5 has taken off. Developers who used Adobe's proprietary Flash technology did not want to miss out on having their content viewed by iPhone and iPad users. So while Flash applications were not visible on Apple's iOS system, developers used HTML5 to ensure content like YouTube videos could be viewed on Apple products.