Microsoft Floats Ailing Corel

Financiallyailing Corel received a $124 million investment from Microsoft, joining Appleas a Microsoft competitor that has been bailed out by the software giant. Theannouncement and accompanying legal agreement may point to a potential Linuxstrategy for Microsoft’s .NET platform.

Microsoftand Corel describe the investment and agreement as a joint partnership. Corelplans to aid Microsoft in the development of the .NET platform. Corel has experiencein creating client software, as well as network-enabled office productivitysoftware. In addition, Microsoft may be able to benefit from Corel’s experiencewith the popular Corel Draw and Corel Paint graphics packages.

Corel alsohas a flavor of Linux, Corel Linux, designed for desktop users. Based on theDebian version of Linux and the KDE desktop environment, Corel Linux isGUI-focused, which helps new users navigate the sometimes-tricky operatingsystem.

When CorelLinux was first launched, Corel’s goal was to create an alternative operatingsystem for the desktop. Most commercial Linux vendors focus primarily on serverdeployments of Linux, assuming the desktop market holds limited Linuxenthusiasts and anti-Microsoft zealots. Corel hoped to find a niche by cateringto and supporting desktop Linux users.

A closelook at the SEC filings related to the Microsoft investment in Corel revealsthat Corel products could play a role in Redmond’s .NET strategy. In thefiling, Corel pledges to include MaterialSupport for the .NET Framework, in at least one version in each of its productreleases,” except for products Corel has no plans to maintain. In addition,Corel agreed to make its products “fully consumable as .NET Services,” ensuringthere will be third-party support for Microsoft’s .NET framework.

One section of the filing is concerned entirely with portingMicrosoft products to Linux environments. Under the terms of the investment,Microsoft laid out a project for porting the .NET framework to the Linuxplatform. Microsoft has a three-year option to call on Corel to port theframework at no charge. If Microsoft decides to exercise the option, Corel mustcommit 20 developers and 10 testers fulltime to the project.

Although Microsoft traditionally attempts to leverage itsown operating systems, Redmond seems to be hedging its bets to ensure that .NETwill be compatible with other operating systems.

Unlike most software written for Linux, Microsoft intends toretain the rights to the source code and binaries, which it will license for afee. Most Linux software is open source and freely distributable.

Inaddition, Microsoft and Corel settled some of the legal battles between them.Corel and Microsoft had been in court fighting over patents. The agreementbinds Corel not to sue over certain patented technologies.

Rumorsabout a Microsoft Linux play circulated when Microsoft announced a deal withMainsoft to port Internet Explorer to Unix and Solaris systems. Some observerssuggested the partnership would lead to a Linux port of Microsoft Office.Microsoft quickly put down the rumor in a press release

In additionto the Corel Linux operating system, Corel also competes with Microsoft in thedesktop productivity space. Corel’s WordPerfect was once the dominant wordprocessor in the PC world. WordPerfect now consists of an entire office suitethat competes with Microsoft Office on the Windows, Linux, and MacOS platforms.

Once asuccessful player in the graphics market, Corel has fallen on its share of hardtimes. It’s investments in developing its Linux distribution, as well its Javaflavor of WordPerfect for network use, failed to materialize into profitableproducts. This summer, Corel faced two major blows: its proposed merger withBorland/Inprise, a vendor of developer tools, was called off, and MichaelCowpland, its outspoken CEO, resigned. Due to additional difficulties, Corelwas expected to run out of cash by year’s end.

This is notthe first time Microsoft has made a large investment in an ailing competitor.Microsoft shocked the industry in August 1997 by investing $150 million inApple, then considered to be a bitter rival of Microsoft.

MicrosoftCorp., Redmond, Wash., www.microsoft.com

Corel Corp.,Ottawa, Ont., www.corel.com