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Is Corel's Linux business for sale?

Signs increasingly are pointing toward a Linux distribution sell-off by the beleaguered Canadian software vendor.
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Written by Mary Jo Foley, Contributor on
Canadian software vendor Corel Corp. is sending some very confusing messages into the open-source ether.

The company is seeking either to sell off completely or to gain additional investments in its Linux business, according to multiple sources. Sources said that company CEO Derek Burney has been actively shopping around Corel's (corl) Linux distribution, which is based on Debian Linux.

A Corel spokeswoman attempted to downplay the news, claiming that Corel could potentially sell off or obtain additional funding for any of its three divisions in order to do right by its shareholders. Corel currently offers products in the desktop office suite (available for Windows and Linux), designer/drawing, and Linux operating system markets.

One source claimed that Burney had attempted to gain additional funding for Corel's Linux business from Linux Global Partners, a New York holding company that has made investments in a number of Linux companies, including Helix Code and Gnu Cash. Linux Global Partners did not return a call requesting comment.

Another source said Progeny Linux Systems was interested in purchasing Corel Linux. The Indianapolis-based Linux vendor, like Corel, has developed a version of Linux based on the Debian distribution.

When contacted for comment on the rumor, Ian Murdock, president and CEO of Progeny said, "If Corel Linux is discontinued, Progeny would be glad to discuss supplying Corel with a Debian-based operating system. However, neither company is currently discussing such a partnership."

One company insider believes that the drive behind this move is simple: money. He said, "the company, even with the Microsoft influx, is short of cash."

The news of Corel's possible sell-off if Linux -- which sent Corel's stock price sliding 5 percent on Monday - came on the heels of the CEO's insistence last week at Comdex that Corel was refocusing, not relinquishing, its Linux business.

(Corl)

Burney said last week that Corel was looking to segment its Linux in a new, solutions-oriented way. Instead of selling a single enterprise Linux product, Burney said, the company was moving toward offering Web-, file-, and print-server Linux offerings.

Burney said to expect more details on the company's Linux moves before the end of this calendar year. On Monday, a Corel spokeswoman said details would definitely be available by early 2001.

Corel's former chief executive, Michael Cowpland, who resigned from the company in August, had predicted Linux sales of $20 million this year. Corel has sold $6.1 million in Linux products in the past nine months.

The company cut 21 percent of its staff, or 320 employees, this summer as part of a move to save $40 million annually.

In October, Corel obtained a $135 million investment from Microsoft Corp. (msft)

Corel said it planned to use the Microsoft cash infusion to make its applications compliant with Microsoft's .Net framework technologies. But, as part of the terms of the deal, Corel also offered to port Microsoft's .Net framework technologies to Linux. It was unclear how a decision by Corel to sell off its Linux operating system assets might impact its ability to port .Net to Linux.

Shares in Corel dropped as low as $5.05 (Canadian) on the Toronto Stock Exchange on Monday before rebounding to $5.20 (Canadian), a drop of 15 Canadian cents, in afternoon trading. On Nasdaq, Corel stock dipped to 3-5/16, a loss of 2/16.

Additional reporting by Reuters and Steven J. Vaughan-Nichols of Sm@rt Partner

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