Struggling applications and Linux distribution vendor Corel Corp. appears to be slowly putting its past financial, personnel and product woes behind it, and with Microsoft Corp.’s assistance is hoping to move back to profitability while more fully embracing the Web.
At the start of last month, the companies announced that Microsoft was taking around 25 per cent of Corel in a deal worth US$135 million and that the pair would work together on Microsoft’s .Net initiative.
Clare Haney of IDG News Service’s San Francisco Bureau talked to Derek Burney, chief executive officer and president of Corel, at the recent Comdex show about the tie-up with Microsoft and the way ahead for Corel. Burney only stepped up to lead Corel a few months ago, following the resignation of long-time company head and strong Microsoft critic Mike Cowpland.
As well as the Microsoft relationship, since becoming the head honcho at Corel Burney has been responsible for splitting the company into three product divisions – creative products including the firm’s graphics software CorelDraw; business products which contains its WordPerfect office productivity suite; and Linux products, namely the Corel Linux OS, as well as a fourth unit dubbed new ventures which heads up the vendor’s research and development efforts.
Haney: How did the whole deal with Microsoft come about?
Burney: It came together relatively quickly…in less than a month. In my previous role with Corel as an engineer I had continuous discussions with Microsoft – we’ve used their development tools all along. Our relationship was quite good even while Corel’s public relationship with Microsoft wasn’t.
When Cowpland resigned, my engineering counterpart at Microsoft, Tom Button, the general manager of their tools division, called to congratulate me and invited me to come visit them. I spent a whole day at Microsoft listening to presentations on .Net. I was stunned at how it dovetailed into our requirements and thought we could put a deal together.
Haney: What about the suggestions that in investing in Corel, Microsoft is simply acting to ensure it has competitors in the markets in which the company plays, in the same way as when Microsoft put money into Apple Computer Inc?
Burney: They can invest in anyone they like and it will have no effect on that company’s direction. The shares they bought in us are not voting and they have no Corel board seat.
Haney: With the Microsoft investment, does Corel now have enough money behind it?
Burney: Yes, clearly the investment puts to rest any notion of the viability of the company. We have a lot of corporate and government customers and they were quite rightly concerned whether we would be able to continue to support them.
We now know, and Comdex proves it, that you can’t do as much by yourself as you used to be able to, you need partners. You can see on the show floor here that the small companies are diminishing and the larger companies are getting bigger. That’s a reflection of the industry.
Haney: How did news of your relationship with Microsoft go down with your users?
Burney: It surprised a few people. It’s really a technology alliance and a wonderful opportunity for us to work together. We both needed each other in some capacity.
Haney: Could Microsoft’s investment in you, a Linux distributor, be seen as a way for Microsoft to have a Linux test bed?
Burney: It certainly looks that way. If I were Microsoft I’d have two approaches to Linux: one, I hope it goes away or, two, let’s figure out how to work with it, and I’d be opting for the second approach.
Haney: What about Microsoft’s .Net initiative? It still seems unclear exactly what the strategy involves. Is that true?
Burney: It is very nebulous. The good news is that it doesn’t have to be a fait accompli before it becomes useful. Look at the Web – initially only universities used it and nobody at that time had a big plan of what it would be. The beautiful thing with the Internet is that you can react very quickly. Say users are downloading and running applications on a daily or monthly basis, ISVs (independent software vendors) like us providing the software can get very quick feedback on their products and make changes, unlike shrink-wrapped software when it’s a year before you get feedback.
.Net is a bit fuzzy, but the relationship we have now with Microsoft reminds me of the one we had with them back in the Windows 95 days when we were very profitable.
Haney: What do you plan to do with the money you’ve received from the Microsoft investment?
Burney: It may be used in making acquisitions. Three weeks from now, we can tell you about that specifically. With our reorganization into three main pieces, there may be acquisitions in each unit. Each one will come up with its own strategy and then we’ll have an overall company strategy. We’ll complete that all in a number of weeks and roll it out to the public.
Our new ventures unit stresses the ‘R’ in R&D. We’re not pinning hopes for success on their work, but are giving them the opportunity to freewheel. However, last year Corel’s stock went bananas over Linux and it’s possible, based on the new ventures unit’s work, that such a rise could happen again.
Haney: Is it still possible that Corel might spin off or sell off some of its businesses?
Burney: Spin-offs are possible. We’re working with (international consultancy) McKinsey & Co. to help craft our strategy. We made it very clear that there are no sacred cows and we’ll leave no stone unturned in determining our strategy.
Haney: There have been suggestions that Corel will release an open-source version of your WordPerfect software suite next year. Is this true?
Burney: We have no plans to do so. We have open-sourced our Linux operating systems and have shown we are committed to the open-source concept, but I firmly agree with (Microsoft’s CEO and president) Steve Ballmer that there needs to be a business model attached to it.
In my opinion, open source makes sense for operating systems and nothing else. With operating systems, the users are the developers, people like Microsoft and ISVs who have scads of developers who can make use of open source. Users of WordPerfect aren’t developers and they can’t program, so open source makes less sense.
Haney: Is it true that Corel will bring out a combined version of its desktop and server Linux distribution in 2001?
Burney: With Corel Linux OS, we specialize in user interface and we thought there’s no reason why the server version should be more complicated to use than the desktop version. We have changed our direction a bit, we won’t have an all-purpose server version, it’ll be segmented into file, print and Web servers, etc.
Haney: Has desktop Linux made sufficient strides in becoming simple to use and what about Linux desktop applications, are there enough of them yet?
Burney: We think the ease-of-use issue with Linux on the desktop has been addressed. Compared with setting up Windows, our Corel Linux OS setup takes three steps – it’s a joke it’s so easy.
The knock about not having enough Linux applications is still fair, but that will change – .Net and other initiatives will do more for Linux than anything else.
Haney: Is Corel working on optimizing its applications so that it makes sense to access them from Internet access devices other than PCs?
Burney: We are looking at PDAs (personal digital assistants), wireless devices, you name it. We’re also looking at the user interface of applications as well. With CorelDraw (Corel’s graphics software), you need a mouse or some device to use it. I think CorelDraw on the cell phone will be a few years out. (Laughs)
We’re a bit different now, we react to customer demand, instead of in the past when we delivered interesting technology. Almost everything we developed then was ahead of its time, like our network computer. They were considered failures at the time but potentially would’ve been profitable now – they were technologies that the customer wasn’t necessarily ready for.
With our new ventures unit, we are now developing technology which is clearly what users are looking for. When they say it’s something they’d use in a heartbeat, there’s no better music to our ears.