Microsoft confirmed on 14 Feb 2001 the Department of Justice has subpoenaed
information regarding the company's investment of $135 million in
Corel, publisher of WordPefect Office.
In return for it's investment, Microsoft received Class A non-voting stock
in Corel and an agreement.
In conjunction with the investment Corel signed a deal with Microsoft to configure all its products to support Microsoft's .NET initiative. Although not part of the (written) agreement, Corel almost immediately started backing down from its commitment to Linux.
Corel also announced it would concentrate on upgrading it's current users rather than try to win new users away from Microsoft.
Within a few days of the DOJ's subpoena, Microsoft has moved to sell all its stock in Corel. Once on the market that stock will be converted to (voting) common stock.
Meanwhile the OSC (Ontario Securities Commission) has begun a similar investigation of Corel.
AnalysisEven in a Bush administration, the DOJ just couldn't ignore Microsoft buying a hefty chunk of one of its few remaining competitors. For that competitor to immediately move from an anti-Microsoft stance to a pro-Microsoft stance makes it look even worse.
Microsoft's sale of the stock will have no effect now, the damage is already done. Corel is supporting .NET and dropping support for Linux. The financial arrangements are already in place, making any reversal expensive and unlikely. Microsoft will lose $70 million on the stock, but they got their money's worth.
Fortunately (or unfortunately if you are Microsoft) Corel is not particularly important to the Linux movement. There are already Open Source products adequately filling the roles where WordPerfect Office and Corel draw fit. In any case, these products will not be killed, they are being sold off to another company.
The DOJ investigation will not likely result in a specific action against Microsoft (unless a serious "smoking gun" is found in the investigation). Corel is pretty much a "has been" - as a full participant in .NET they will be tightly controlled by Microsoft. Gaining market share is not an option Microsoft will allow.
This investigation is, however, likely to add ammunition to upcoming investigations. We expect at least two:
- Andrew Grygus
- Automation Access
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