Microsoft Kills a Flock of Birds with One Stone
Corel press release]
2nd, 2000 - Corel Corporation and Microsoft Corporation announced that
they have formed a strategic alliance that will see the two companies
expand their relationship to encompass projects related to Microsoft's
new .NET initiative.
part of this expanded relationship, Microsoft (MS) has purchased 24 million
non-voting convertible preferred shares at a purchase price of U.S.$5.625
per share or a total purchase price of U.S. $135 million. The companies
will also work together to support the development, testing and marketing
of new products related to the .NET platform. Joint-marketing initiatives
will include participation in product launches and trade show events and
representation on mutual Web sites. In addition, both companies have agreed
to settle certain legal issues between Corel and Microsoft.
are pleased to announce this latest development in our relationship with
Microsoft, and what we believe to be an important step forward in our
strategy for long-term growth," said Corel's interim President and CEO
Derek J. Burney.
neither Microsoft nor any of its affiliates are entitled to convert the
preferred shares, they will be saleable to, and convertible by other parties,
into an aggregate of 24 million common shares of Corel. Based on the number
of shares currently outstanding, the common shares issuable upon conversion
of the preferred shares would represent approximately 24.6 per cent of
the outstanding Corel common shares after the conversion. The preferred
shares do not carry any preferential dividends over the common shares.
This has a number of implications - both speculative and actual:
the legal battle between MS and Corel
We don't imagine the full $135 Million went toward settling the legal
stuff, but it's yet another step in Microsoft's attempt to eliminate
all their legal woes. We do imagine that Microsoft would love to settle
the DOJ case for as little as $135 Million.
MS (after a fashion) with a Linux offering
There is persistent speculation that MS is looking into Linux. Gaining
access to Corel Linux (although not mentioned as a driver for the deal)
offers the following possibilities:
the latest in the "embrace/extend/extinguish" (E3) practice about
which MS-bashers have complained.
gives Microsoft a foothold in the Linux desktop space. Although
Linux only has single-digit market penetration on the desktop, Corel's
is considered to be the easiest to install. Having this product
in their "stable" would conceivably allow MS to ramp up Linux more
support/infrastructure for the .NET initiative.
Every little bit helps. This also could conceivably lead to an E3 strategy
for .NET having a Linux component. If Corel Linux becomes a standard
- or MS pushes it as the "de facto" standard - Microsoft's battle to
control yet another part of the Internet may be half-won.
Corel afloat, implying that MS still has competition in the office suite
Conspiracy theory time. During their anti-trust trial, MS used the AOL/Time-Warner
merger as an argument that competition in the OS/software space is alive.
By helping to keep Corel from Chapter 11 (or whatever they call it in
Canada), the fig leaf of OS and office suite "competition" is maintained.
Actually, we think there is some credibility to this belief.