News

Corel to Become Microsoft of Linux

• By Scott Bekker
• 02/07/2000

Adding to its Linux operating platform and WordPerfect Office suite of tools, Corel (www.corel.com) now has the Visual Studio of Linux and plans to use it to bridge the migration from Windows to the rebel operating system, according to Dr. Michael Cowpland, president and CEO of Corel. "The most exciting part of this deal is it provides a single platform for Linux and Linux resources," Cowpland said in a teleconference today. "We're eliminating all the reasons people thought it would be difficult to move [to Linux]."

Dale Fuller, rookie CEO of Inprise/Borland (www.inprise.com), will take a position as chairman of the Corel board of directors. He joked in the teleconference that he was being demoted as part of the acquisition. Corel will remain headquartered in Ottawa, Canada, with Inprise/Borland operating as a wholly-owned subsidiary out of its current Silicon Valley locations.

The future, as far as the new combined company is concerned, is Linux, and this merger is a direct course heading to that end, according to Cowpland. Ironically enough, it's the Windows business that Corel and Inprise/Borland both conduct that will be the "cash cow" for Linux development efforts, including present combined cash assets totaling over $220 million.

Since there's no overlap of technologies, the companies are referring to the transaction as a merger. The "merger" makes Corel the first company to truly boast an "end-to-end" Linux solution. While it built its customer base in Windows, Inprise/Borland has made numerous inroads to Linux since the platform became mainstream. The company has JBuilder 3 Foundation, a pure Java development environment for Linux, as a free download; Kylix, a rapid application development (RAD) tool for Linux, which is scheduled to be available mid-year; and a free download of the Linux Just-In-Time (JIT) compiler.

While products of the two companies do not overlap, their experience in the market does. Both are long-time software companies that have based their businesses on Windows, only to have countless disputes with Microsoft (www.microsoft.com) over technology sharing, employee stealing, and Internet waning.

Both companies have also had its share of fiscal turmoil. Inprise/Borland has just ended an extremely chaotic year that saw the firing of CEO Delbert Yocam and CFO Kathleen Fisher, followed by announcements of dismal earnings reports, and regret over the change of its name from Borland to Inprise, which was later changed to Inprise/Borland to keep the Borland moniker.

In April 1999, the board of directors brought in Fuller as interim CEO, a man who oversaw the acquisition of his company in his last top role at WhoWhere Inc. (www.whowhere.lycos.com). It was suspected that Fuller was brought on board to facilitate an acquisition. In today's conference call, Fuller denied that, saying his initial job as interim CEO was to clean up the company and make it ready for a new CEO. When that contract ended in October 1999, he decided to stay with Inprise/Borland because he saw the better future it would have with Linux.

Meanwhile, Corel has fought vigilantly throughout the 90s to maintain a steady market share with WordPerfect Office while competing with front office software powerhouse Microsoft. Last year the company received resignations from both its chief financial officer and its head of sales and marketing. Corel spent 1999 moving quickly to port all of its Windows applications to Linux while packaging its own version of the operating system.

Both companies were quick to point out that not only will they be maintaining development efforts on Windows, but working to find ways to integrate the two platforms. "It will be very easy to natively develop in Windows and Linux using virtually the same methods," Cowpland says.

"If you take those billions of lines of code you're using on Windows you'll be able to extend that to Linux using these tools," Fuller adds. "The bottom line is that what we're delivering is the future. We're giving you that bridge from the Windows environment or [Sun] Solaris environment to the future."

When asked directly, Corel's Cowpland had no doubt about Linux's ability to penetrate the enterprise data center, drawing an eerie parallel between Corel's future strategy and Microsoft's present one with Windows 2000. "The sheer strength of the company will drive adoption by the enterprise. The valuation of Linux becomes more and more positive as we move forward," he says. "Because the [economic] benefits are so strong this well definitely break through the enterprise before long."

Under the financial terms of the acquisition, Inprise/Borland shareholders will receive 0.747 Corel common shares for each share of Inprise/Borland common stock held. Corel expects these to amount to approximately 53.7 million common shares. Based on the closing price of $20 per Corel share on February 4, 2000, this represents a value of $14.94 per Inprise/Borland share, totaling $2.44 billion on a fully diluted basis. After the transaction, Inprise/Borland shareholders will hold approximately 44 percent of Corel. -- Brian Ploskina