The Day Ahead: Corel hopes Jobs' Microsoft play works twice

Corel is following Apple's lead from three years ago, and 'hopping into bed' with tech giant Microsoft

Commentary: Maybe Corel interim chief executive Derek J Burney consulted Apple's former interim chief executive Steve Jobs before Corel unveiled its "strategic alliance" with Microsoft Monday. At the very least, Burney borrowed Jobs' playbook.

The symbolism between Apple's deal with Microsoft three years ago and Corel's Microsoft pact just bonks you over the head. Way back in August of 1997, Jobs dropped a bombshell on the Mac faithful after announcing that Microsoft would invest $150m in the then-beleaguered Apple.

It was one of Jobs' first moves in Apple's turnaround. In retrospect, hopping into bed with Microsoft was a good move. Microsoft's investment guaranteed that there would be a new Office suite for the Mac -- a big issue at the time. It also buried that silly religious war between the two companies. The rest is history.

Let's fast forward three years. After the closing bell Monday, Microsoft said it would buy 24 million non-voting shares of Canadian software vendor Corel, good for an investment of $135m. Microsoft is also giving Corel a premium at a purchase price of $5.625 a share. Corel closed at $3.68 Monday.

The Corel deal is likely to leave its fans screaming "sell-out", but shareholders will rejoice since Corel was low on funds. The Microsoft pact also shows a pragmatic Corel that may have a shot at a turnaround. Corel's latest quarterly results show the company has some financial discipline.

Corel's deal with Microsoft carries a lot of symbolism -- most of it good from an investor's perspective.

With the pact, Microsoft at least looks like it's committed to Corel's turnaround.

"The strategic alliance is the latest chapter of our relationship with Microsoft," said Burney, who noted that he "couldn't wait to get started" because the pact is key to Corel's long-term growth.

Folks, "long-term" is not something you used to describe Corel before the Microsoft deal.

The Microsoft investment also gives the Corel alliance a little more credibility. Following the Microsoft-Apple deal in 1997, Microsoft officials said Apple pushed for the software giant's investment. "He wanted us to make a visible commitment to Apple and to the Mac, and he wanted us to become an investor," said Microsoft then-CFO Greg Maffei, referring to Jobs.

Corel will also get to ride on Microsoft's coattails with joint marketing and product launches.

For Microsoft, the symbolism is also important. Microsoft can't live in a world without competitors -- real or perceived. By propping up Corel, Microsoft can say to antitrust officials "Hey guys, we have competitors."

In 1997, Microsoft couldn't afford to let Apple struggle. Ditto for Corel in 2000.

Microsoft also gets some traction for its .Net initiative. With Corel using .Net maybe the struggling software vendor will tone down its rhetoric about open source operating system Linux, which threatens Microsoft's dominance.

The biggest question surrounding the Corel-Microsoft deal revolves around Linux.

Will Corel remain on the Linux bandwagon? "It's important to note this isn't a mutually exclusive arrangement," said Burney. "It doesn't mean there's an issue between Linux and the .Net platform."

We'll see.

The other outstanding issue is what Corel will do with its new funding. Corel officials noted that it would have immediate access to Microsoft's investment. That new cash flow may mean Corel's layoffs end.

On the development front, it's not clear what products Corel and Microsoft will jointly market. Will Linux run on .Net? Officials hinted that the idea isn't completely out of whack.

But those questions are relatively minor given Corel's immediate survival is more important. If Corel's Microsoft pact works out only half as well as Apple's, Corel shareholders will be happy. "This puts the past in the past," said Burney.

Investors hope Burney is right.

See ZDII for US tech investor news.

See techTrader for more technology investment news, plus quotes and research.

To have your say online click on the TalkBack button and go to the ZDNet News forum.

Let the editors know what you think in the Mailroom. And read what others have said.

Newsletters

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
See All
See All