Corel and Inprise Break Off Merger

SAN MATEO (05/20/2000) - After weeks of speculation, the proposed merger of Corel Corp. and Inprise/Borland Corp. dissolved last week, leaving Corel's future, and potentially the future of Linux on the desktop, in jeopardy.

The two companies mutually nixed the merger after Corel reported heavy first-quarter losses and saw its stock value plummet. Corel had filed a report with the Securities and Exchange Commission stating that it would run out of cash in 90 days if the merger did not go through before then.

"A lot of things changed in three months, and the dynamics changed in the marketplace," said Dale Fuller, CEO at Inprise/Borland. "The original attraction was all about applications on the Internet. Three [companies] have the tools to put applications on the Internet, and Corel was the only one we could buy," Fuller said.

Corel President and CEO Dr. Michael Cowpland said that the failed merger would not alter the company's "strategic focus," particularly on Linux.

Still, the crumbling of the Corel-Inprise merger could blunt, at least temporarily, the Linux community's efforts to more firmly plant the open-source platform on corporate and consumer desktops.

Although Linux has made significant inroads into the low and midrange server markets, its loosening of Microsoft's stranglehold on the desktop has been negligible. But Corel appeared to be the first Linux distributor to be making headway on the desktop.

One analyst opined that Corel strayed from its strengths in gambling on Linux.

"What it comes down to is a story of organizations and core competencies," said Evan Quinn, an analyst at the Hurwitz Group, in Framingham, Massachusetts. "I think Corel made a big play in Linux, and it seems to not be working out."

According to figures from Framingham, Massachusetts-based International Data Corp. (IDC), Corel generated $3.2 million in revenue with its desktop version of Linux between its November 1999 release through year's end.

Dan Kusnetzky, an analyst at IDC, said that the failure to merge could potentially have dire effects on Corel but only slight effects on Linux's struggling desktop play.

"I'm not sure [the failed merger] will make much difference because Linux is facing an uphill climb, regardless," Kusnetzky said. "Corel doesn't have the development tools, so [it's] going to have to find partners that have what Inprise/ Borland offered."

The best hope for Linux on the desktop may now rest with Eazel, a start-up basing its efforts around the Gnome graphical interface. Eazel is developing the product under the open-source model, which ensures that source code will be made available free of charge.

Corel Corp., in Ottawa, is at www.corel.com. Inprise Corp., in Scotts Valley, California, is at www.inprise.com.

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