Speculation follows Corel NetWinder sale

Depending on who you ask, the planned passing of the NetWinder torch from Corel Corp. to Hardware Computing Canada (HCC) may spell the end of the Ottawa-based company – or it may save it.

The NetWinder is part of Corel’s line of Linux-based thin clients and servers, based on the StrongARM 275MHz chip. Corel Computer, Corel’s hardware division, designed several different NetWinders, including a development machine and a Web server. At the time of the HCC deal, a group server was also ready for production, as was a more general-purpose Linux computer.

Under terms of the deal worked out with HCC, on the same day that Corel announced its first profitable year in three years, Corel has signed over all of Corel Computer’s NetWinder assets. In return, Corel gets a 25 per cent stake in HCC. The deal is still subject to approval, but both parties expect to make it official sometime in the first quarter.

“My first reaction was mixed,” said Evan Leibovitch, partner in Brampton, Ont.-based Starnix Ltd., a reseller and consulting firm specializing in Linux and Unix. “On further reflection, it seems that Corel is concentrating its strengths, which is as a software company, and it’s probably a good move for them not to be getting deep into hardware.”

In a prepared press statement, Corel CEO Michael Cowpland said the agreement with HCC is mutually beneficial; that Corel had taken the NetWinder’s development as far as it possibly could and was handing the reigns over to HCC to give the NetWinder a better chance in the market.

HCC president Michael Mansfield said the public can expect to see the first HCC NetWinders “on March 1, plus.” The newer group server and Linux computer NetWinder servers will be on the street by June, he added.

A privately held value-added reseller based in Ottawa, HCC has thrived primarily through its line of Sparc-based systems, which it sells under the brand name Horizon.

Why the sudden move to Linux? According to Mansfield, the NetWinder gives HCC a foothold in an emerging market, and lets them take advantage of a cutting-edge product. “It is a very hot, fast piece of hardware that is small and reasonably inexpensive.

“And maybe more to the point, the bulk of the money that Corel had been spending was all in the Linux arena, which was an area we wanted to focus more and more on,” he said.

As for moving into Linux territory, Mansfield is confident that HCC is up to the task. “We are a hardware business. We understand the material management of production or purchasing, and of the cost of goods in the hardware environment.

“Corel was a software company, and it wants to return to its core focus, which is software. And that’s what they’ve done.”

Paring back its hardware efforts, and focusing more on software, makes good short term sense for Corel – but the larger picture is less certain, said Ross Laver, journalist and author of Random Excess, a book that profiles Corel’s turbulent history and its often flamboyant CEO and founder.

“It may have been the logical move all around, but I think it was probably a tough decision for Michael Cowpland to make,” he said.

Laver speaks with Cowpland often, and said HCC and Corel only began discussing the NetWinder sale in mid-January. After an informal discussion about the future of NetWinder with other Corel executives, Cowpland arranged a meeting with HCC — a friend had referred him to the company at an earlier date. The talks moved rapidly, and Cowpland agreed to a deal.

“Ron McNab, who was the executive in charge of the hardware division, was on his honeymoon in Fiji when Cowpland walked in and told everyone,” Laver said.

But the signals coming from Corel, including the departure of another long-time Cowpland friend and colleague, is leading Laver to read more into the HCC deal than otherwise seems apparent. “I’m one of those who believes that we may be seeing at Corel right now a kind of cleaning up of the books in preparation for a sale. I’ve asked Cowpland; he says absolutely not. But he’ll continue to say absolutely not until it actually happens.”

Leibovitch said Corel, with its heavy emphasis on Linux, including the development of a Linux versions of its WordPerfect software, still has a vital role to play in the success of the NetWinder.

“As long as Corel stays heavily involved, that’s the key to it,” he said. “They have a presence in the international computer world, HCC does not. And it’s still going to be up to Corel to help the NetWinder succeed in the marketplace.”

Corel Corp. has recently been fighting off rumours that it is the target of a hostile takeover bid from San Jose, Calif.-based Adobe Systems Inc.

The rumours surfaced after a Globe and Mail article — which cited unnamed sources — said Corel was concerned about defending itself against a possible Adobe bid.

The company has also recently adopted a “shareholders rights” plan, which the company will use in the event of a take-over attempt. The plan gives Corel’s board and executives time to evaluate any takeover offer, and judge whether or not it “maximize(s) shareholder value,” while ensuring that all shareholders are treated equally.

Corel said the move is not intended to deter takeover bids. In regards to the Adobe rumour, a Corel spokesperson said it had no basis in fact, and added that “this is the third or fourth time in the past year that we’ve heard similar reports.”

A spokesperson at Adobe concurred, and said there’s “absolutely no truth” to the rumour.”

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