Microsoft bails out Corel with $135 million stock purchase

In a move reminiscent of its 1997 $150 million bailout of Apple Computer, Microsoft surprised the high tech world late Monday by announcing a similar deal with besieged Corel Corporation, which had been floundering on the edge of bankruptcy all year. Under terms of a new strategic alliance between the two companies, Microsoft has purchased $135 million worth of Corel stock. In return, Corel will work with Microsoft to develop the .NET initiative, and participate in trade shows, product launches, and other events. Corel has recently moved into Microsoft territory by offering a rival OS based on Linux, and the company has ported its WordPerfect Office suite and CorelDRAW products to Linux as well. But an attempt earlier in the year to become a "Linux powerhouse" failed and Corel has fallen on hard times. Corel maintains, however, that the alliance with Microsoft will not affect its Linux products.

"We 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 Derek J. Burney, interim President and CEO of Corel. "Corel has long recognized the potential of the Internet to speed up the delivery of applications and services to our customers worldwide. Our most recent work has focused on strategies to move our applications, including CorelDRAW and WordPerfect as well as our Linux distribution, Corel LINUX OS, on to the Web. By leveraging Corel's development expertise and popular product line with Microsoft's .NET platform, we believe we have found a great combination to accelerate this process. .NET promises to be a robust platform that we can use to build innovative, easy-to-use and reliable Web applications and services that will benefit our customers."

Despite the glad-handing revolving around this deal, Microsoft and Corel have been bitter enemies for years: Corel's Linux OS and Office suite are obviously direct competitors with Microsoft's similar products and Corel has been one of the most vocal critics of Microsoft. But money can heal all wounds, and like the Apple deal, the companies also settled some legal disputes, though the details were not available to the public. "We've just decided that we're going to put all that behind us and not pursue it," Microsoft developer tools general manager Tom Button. Tellingly, the word "Linux" did not come up once during a conference Monday until a reporter asked about the open source OS: Corel's Burney admitted that his company's version of Linux would probably be melded into Microsoft's .NET strategy as a result of the alliance