Corel unloads its Linux division

Capping months of speculation, and a summer of big moves, Ottawa’s Corel Corp. has sold its open source Linux technology – shelved since January – to Xandros, a small startup also headquartered in the nation’s capital.

During a Wednesday afternoon press conference from the LinuxWorld convention in San Francisco, Michael Bego, president of the newly formed Xandros Corp. explained that the 18-month licensing agreement gives his company access to Corel’s yet-to-be released, third-generation Linux operating system and related applications.

“We’re also inheriting from Corel their channel support, their business development relationships, sales pipelines, and Linux customer base. This isn’t so much a one-time deal, as a partnership going forward where Corel’s experience and contacts in worldwide distribution will really come to aid and benefit Xandros Corporation,” he said.

Xandros is licensing Corel’s Linux technologies with US$10 million in financing from Linux Global Partners (LGP), an investment firm that has its hands in a number of Linux desktop software startups. The New York-based firm’s investment portfolio includes Ximian Inc., the maker of the GNOME desktop for Linux, and an open source project called GnuCash, which developed a Linux-based financial software product.

In exchange for its Linux OS Corel will receive US$2 million, plus a five per cent equity stake in Xandros, and a two per cent equity stake in LGP.

Bego said that by packaging a suite of applications with Corel’s operating system Xandros will become the first vendor to offer an end-to-end Linux desktop solution as a low-cost alternative to Microsoft Windows

“Everyone knows very well about Linux’s ability to deliver functionality and the promise of the technology, and we’re going to put behind that a corporate attention to support and usability that we really see is needed for Linux to go the next mile,” Bego said.

Microsoft currently controls about 95 per cent of the desktop operating system market, and has overshadowed Linux desktop products that have entered the market, according to market researchers.

Although Corel saw the need for a complete Linux solution that included back-end integration several years ago, the company realized that it needed Linux-focussed partners to develop a comprehensive desktop product, said Rene Schmidt, Corel’s chief technology officer.

According to Will Roseman, co-chairman of LGP the goal of this end-to-end Linux solution is no less than to “change the way the world thinks of desktop computing on a global basis.”

Xandros has also hired “the vast majority” of Corel’s Linux developers – 20 so far – and plans to add more Corel expatriates as the project evolves, including “many of the world’s top Linux people,” Roseman said.

In terms of market opportunity, Bego said that Xandros sees a huge untapped domestic and international potential for a non-Windows desktop solution, noting that Japan, China, France and Scandinavia have already standardized on Linux.

In January, Corel announced that it would restructure its business, and signaled that it was looking to spin off its Linux operating system and take a financial interest in a new company to distribute the software. The announcement was part of a continued effort by Corel to revive its flagging business.

This sale completes a busy six weeks for Corel during which it also made surprise, high-profile acquisitions of two Canadian software companies – XML pioneer SoftQuad, and imaging specialist Micrografix.

In an earlier interview with IT World Canada, Corel president and CEO Derek Burney characterized these moves as part of Corel’s new plan to become “the de facto leader” in cross-media publishing – the simultaneous creation of content for both print and the Web.

With files from Matt Berger IDG News Service, San Francisco Bureau

Corel’s Linux unit is online at

Xandros is available online at