Originally Published: Tuesday, 3 October 2000 Author: Matt Michie
Published to: featured_articles/Featured Articles Page: 1/1 - [Printable]

Corel Complications

In the software industry, only one company has impeccable business strategy. Although one can often find fault with these business practices or their products, Microsoft is the penultimate company carnivore. Yesterday, the news wires hummed and out came an announcement that Microsoft is purchasing 24 million non-voting shares of Corel for over $124 million.

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In the software industry, only one company has impeccable business strategy. Although one can often find fault with these business practices or their products, Microsoft is the penultimate company carnivore. Yesterday, the news wires hummed and out came an announcement that Microsoft is purchasing 24 million non-voting shares of Corel for over $124 million.

Corel had bet the farm on Linux. Corel rode the Linux hype wave for a time; it even appeared they would be able to acquire what was left of Inprise/Borland. It was not to be. The Linux stock market hype soon soured. The day traders moved on to another hot buzzword, and Corel found itself in trouble. They had counted on getting Inprise's cash reserves to keep their company from folding, but Inprise's stockholders called off the deal. Interestingly, Microsoft has a $25 million, 10% equity investment in Inprise/Borland, plus $100 million paid to resolve patent disputes.

Although gutsy, Corel was competing with the likes of Office, Windows, and Adobe Illustrator/Photoshop. Few computer companies could compete in that market. Corel wasn't one of them. Hence, Corel's stock began to plummet even further. One has to wonder who approached whom first. It would be telling if Microsoft approached Corel, because they would have been part of the Inprise stockholders calling of the earlier Corel/Inprise merger. However, the ultimate result stays the same. Yet another competitor of Microsoft has been leashed.

Perhaps Chairman Bill is collecting equity in companies from each letter in the alphabet. He already has Apple, Borland, Corel, Digital Entertainment Network, Equinix, Fasa Interactive, General Magic, Hotmail... If you can't beat them, buy them. If Linux was on Microsoft's radar before, they've now launched surface to air missiles and begun to fire triple-A bursts into the belly of the flying penguin.

Over a year ago, I predicted that if Linux continued to challenge Microsoft, that they would grab a BSD and market their own closed source Linux clone ala MacOS X. It seems that prediction was off a bit. Instead, they take equity in a Linux company with experience porting a Win32 office suite to Linux, a company which also has their own Linux distribution. It doesn't hurt that this puts a leash on the only other major office suite left standing and gives Microsoft the skills needed to port their suite to Linux.

It seems ludicrous, but Microsoft will continue to offer the Linux and Apple markets as examples of competition in their continuing anti-trust appeals. Never mind the fact that they have hundreds of millions of dollars now invested in companies within this market. After all, it is non-voting stock. No need for concern. Does anyone really believe that anyone who has just been saved from bankruptcy with millions of dollars is not going to be influenced in some way by their benefactors? Is the puppet master so skillful that no one can even see him?

Perhaps this is all hand-wringing. Corel is saved from folding altogether, and perhaps they will experience a renaissance the same way Apple did when it was on its deathbed. Of course, Internet Explorer is now the preferred browser on Apple operating systems. What is the price Corel must pay to their new investors?

The sparse press releases mention that Corel will be, 'work[ing] together in testing, developing and marketing on Microsoft's .NET platform. It will work with Microsoft in product launches, trade show events, and on mutual Web sites.' Perhaps Corel will be the penguin that Microsoft trots out in trade shows and press releases to prove that .NET is cross-platform. 'See, we are supporting Linux,' they'll shout. Of course, it will only run on proprietary libraries that just happen only to work on Corel Linux. Perhaps they'll be more benevolent and allow the library to be used on other distributions, but without official support.

Either way, .NET gets a boost as a cross-platform, standards compliant, and buzzword enabled program. Upper management will be falling over themselves trying to buy it (never mind no one is quite sure what it is yet). This strategy has the advantage of being so flexible as to be winning in almost every outcome.

Which is worse: Corel going out of business, or Microsoft leashing the company in exchange for their souls?


Matt Michie exists in the New Mexican desert. Please visit his web site at http://daimyo.org.





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