Microsoft Cozies Up with Rival Corel

In a case of strange bedfellows, Microsoft Corp. made a US$135 million investment in applications rival Corel Corp. this week, creating a partnership the two companies said would focus on Microsoft's .NET initiative.

Microsoft's purchase of 24 million shares should provide a much-needed fiscal shot in the arm to Corel. The financially ailing company has laid off approximately 450 employees this year, has seen its proposed merger with Inprise collapse, and has lost to resignation its founder and CEO, Michael Cowpland.

Corel has been a key backer of Linux, the open-source operating system that many believe could be a key competitor to Microsoft's Windows franchise. Corel has pushed Linux on the desktop.

Although Microsoft's investment gives it a stake of almost 25 percent in Corel, Microsoft will not have voting privileges. As part of the deal, unspecified legal issues also were resolved.

Microsoft's .NET strategy aims to broaden the Internet capabilities of Windows so the operating system can facilitate Internet services seamlessly. The initiative is to create new user interfaces and expand Microsoft's development tools, applications, and middleware to further the "software as a service" goal.

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