The DOJ Opens New Microsoft Case

14-Feb-01 - Even under Bush, the Department of Justice can't ignore Microsoft's "investment" in rival Corel.

Home
Home

News
News

Topic
Topics

AAx
AAx

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.

Analysis

Even 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:

  • Great Plains: where Microsoft broke its promise never to compete with it's business applications development partners. Great Plains accounting and eBusiness software will be integrated into .NET, and there will be a great slaughter of business software developers.

  • Windows Media Player: where Microsoft does again exactly what it did with the Web browser, which resulted in a guilty verdict for anti-trust. This time the main target is Real Media (publisher of Real Audio and Real Video), which Microsoft intends to put out of business. To this end, Microsoft has made Windows Media Player install automatically in Windows Me, and made it very difficult to uninstall.

- Andrew Grygus

Links

©:Andrew Grygus - Automation Access - www.aaxnet.com - aax@aaxnet.com
Velocity Networks: Network Consulting Service - Internet Service Provider - Web Page Design and Hosting
All trademarks and trade names are recognized as property of their owners