Sleeping with the enemy

— 1:26 PM on October 3, 2000

Or at least taking their money. Here's a article that I never thought I'd see. Microsoft has invested $135 million in Corel, purchasing 24 million shares. That gives Microsoft 24.6 percent of the shares, though the Microsoft shares are non-voting. Investors were certainly happy with the news, as Corel's share price went up 83 percent. Microsoft claims that it wants Corel's help with its .Net project.

Microsoft's explanation notwithstanding, the big question is: Why? Why would Microsoft choose to sink $135 million into its closest (albeit distant) competitor in the business software arena? One possible reason is mentioned briefly in the article: "The two companies have . . . agreed to settle unspecified legal issues between them." Hmm. OK, so there's one possible reason, but Corel was hurting so bad before this, they likely would've died before any legal claims against Microsoft came to fruition.

A more likely reason is that Microsoft didn't want to give the DOJ any more ammo. Corel biting the big one would be a rallying point for the contention that Microsoft dominates the market. I find it difficult to believe that the government won't see through this one, though.

This cash infusion is being compared to Microsoft dumping $150 million into Apple in 1997. Granted, the likely reason for doing so was to prop up one of Microsoft's big "competitors" in the operating system arena, but at least they had a good excuse. They could always claim that they wanted Apple around because they made money off sales of Office for Macintosh. Any side effects of propping up an OS competitor while the DOJ was crying anti-trust were purely coincidental.

But what's their excuse with Corel? The .Net thing? Riiiight. Microsoft is so pumped about Corel Draw and WordPerfect (which it's spent years trying to smack down) that it thinks they're worth $135 million? I don't buy it, and I doubt anybody else does either.

So the question becomes, is the government going to look more favorably upon Microsoft because of Corel's continued existence as a "competitor," even though the only reason that Corel's not spiralling down the bowl is that Microsoft gave them a wad of cash? I would hope not, if only because I don't really want to think about anybody that stupid in a position of power.

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