What Microsoft bought for $US135 million

When Microsoft "bailed out" Corel for $US135 million earlier this month, analysts compared the move to Microsoft's investment in Apple in 1997. A recent US Securities and Exchange Commission (SEC) filing has confirmed that like its deal with Apple, Microsoft has more to gain than first realised.

Through the investment, it would appear the software giant has modelled Corel into a useful resource for its .NET strategy, gained an entry point into the Linux market and found a defence against future antitrust concerns.

An SEC filing has indicated Microsoft has secured two options on how to make strategic gains through the investment. If Microsoft pleases, Corel is required to port .NET technologies to the Linux platform. And if not, Microsoft will provide Corel with access to the .NET source code, and Corel is obligated to commit 20 programmers and 10 testers to the .NET project. For $US135 million, Microsoft has purchased Corel's labour in porting Microsoft's new technologies to Linux, and will own the rights to any resulting products.

An involvement in .NET may not sound like Corel is selling its commercial soul, but when one considers the struggling vendor will receive no royalties or rights to the work of its own programmers under the agreement, it indicates that Corel's acceptance of Microsoft's rescue bid was one placed with some degree of desperation.

The Linux option is not the only card Microsoft holds under the agreement. According to Gartner analysts David Smith and Chris Le Tocq, there are several legal implications to the deal that will aid the software giant. For example, the move can be seen as a defence against any claims the main push behind the .NET strategy is to secure Microsoft's monopoly in office productivity software.

"By spending a relatively small amount of money, Microsoft helps prop up a once-formidable competitor so that it may claim competition is alive, if not well," Smith said.

Corel does not make such significant gains from the deal. According to Le Tocq, all Corel has gained is time. "An infusion of cash does not rescue a bad business model," he said.

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