Adobe Systems Inc. (Nasdaq: ADBE) said today that its upcoming version of Flash for mobile devices, Flash Lite 3.0, will include support for mobile video.

The addition of video capabilities to Flash Lite will open up powerful new applications and entertainment forms on mid- to high-end phones, according to Anup Murarka, director of technical marketing for mobile and devices at Adobe.

"Today, with video in the mobile environment, you've got a postage stamp image as part of the on-screen world," says Murarka. "In a few rare cases do you get a really rich, full-screen, beautiful interface that feels like a real integral part of the device.

"That is about to change."

Adobe is hoping to duplicate its success with online video, where the explosion of user-generated content has been a bonanza for the San Jose, Calif., software developer. Since its Dec. 2005 acquisition of Macromedia (developers of the original Flash 1.0 back in Dec. 1996), Adobe has watched sites like YouTube and MySpace open the gates on a flood of video, virtually all of it transcoded and viewed using Flash.

The number of Flash-enabled devices sold worldwide tripled in 2006 to reach more than 200 million. Murarka says 120 million devices running Flash shipped last year, representing 12 percent of the mobile-phone market.

Available starting in the second quarter of 2007, Flash Lite 3 will support the same video formats as Flash Player and will allow users to watch videos on their mobile devices in various forms including downloaded clips, streamed videos, and applications with Flash-based user interfaces.

With the notable exception of Research In Motion Ltd. (RIM) (Nasdaq: RIMM; Toronto: RIM)'s BlackBerry devices and the Treo series from Palm Inc. , Flash Lite runs on almost all "feature phones" and smartphones, including the Symbian and Windows Mobile 5 operating systems.

"Video represents the last major technical hurdle for handset manufacturers, carriers, and application developers," points out Carmi Levy, senior research analyst at Info-Tech Research Group . "Up until now, implementations have typically been proprietary, and the end-user experience has been lacking."

The appearance of smooth, interactive video experiences on handheld devices, Levy adds, "sets the stage for rolling out rich services that potentially carry significant margin for carriers."

The debut of video-enabled Flash Lite 3, which was unveiled today at 3GSM in Barcelona, comes as Adobe prepares to release the latest version of its popular graphic-design software, Photoshop CS3, later this spring. The spread of Flash-based video across the Internet sent Adobe's share price on a 12 percent run-up in 2006, but the stock has stumbled of late as Adobe hired a new CFO, Mark Garrett, replacing Randy Furr, who was at the company only six months. Expectations for both the latest Photoshop program and for Flash's mobile video are high, says Murarka.

"I don’t think anybody at Macromedia anticipated the width and breadth of content created in Flash that we have today in the desktop environment," says Murarka. "That's what so exciting about what we're now doing in the mobile domain."

Flash Lite 3, he adds, will "unleash the creativity of the developer community.

"Just like with the new generation of video games, created with powerful new development tools, Generation 1 didn’t really push the envelope too much. But after some absorption time by the ecosystem, I think we'll see it really explode into that type of range and diversity on mobile devices that we see today on the desktop."

— Richard Martin, Senior Editor, Unstrung