June 30, 2006

Dropping GNU/Linux helps restore Corel profitability

Author: Bruce Byfield

After six years of financial difficulties and reorganizations, Corel Corp. finally seems on track with promising first and second quarters in 2006 and a return to public trading. One of the first steps in this turnabout, according to Graham Brown, executive vice president of software development at Corel, was the jettisoning the company's products for GNU/Linux, WordPerfect for Linux and Corel Linux.

Corel was one of the first major software companies to offer GNU/Linux ports. The first versions of the WordPerfect word processor for the operating system were released in 1995 and 1997. A Wine-based version of the complete WordPerfect Office suite followed in early 2000. In 1999, Corel also released Corel Linux, a Debian-based distribution based on the KDE desktop with several proprietary modifications, including a file manager.

As Corel's stock prices hit $60 per share in 1999, the company briefly seemed to rival Microsoft in the office suite market. However, a year later the company was struggling. Michael Cowpland, its founder, left amid widespread speculation that his departure was connected to the company's financial misfortunes and plunging stock. By October 2003, Corel was no longer a threat to Microsoft -- in fact, it had entered a strategic relation with Microsoft centering on .Net development that included a $135 million investment by Microsoft.

As it experienced numerous changes in senior management and the board of directors between 2000 and 2003, the company continued to struggle with its efforts to reinvent itself. In 2001, the company licensed the rights to the Corel Linux code to Xandros, which used it as the basis of its own distribution. In 2002, when the next versions of WordPerfect Office were released, Corel dropped support for the GNU/Linux version. In 2003, Corel was acquired by Vector Capital and become a private company focused squarely on the Windows market.

Looking back, Brown describes the decision to drop Corel Linux as "a successful strategy for Corel and an early step toward the refocusing of our business. At the time we knew that Corel's core focus was moving away from the operating system to concentrate more on our application offerings, and this would almost certainly have an impact on the level of service we could afford to customers and users of Corel Linux." Nor, as a company struggling to regain profitability, was Corel inclined to try to develop the GNU/Linux market by continuing to support WordPerfect for Linux.

Andreas Typaldos, chief executive officer of Xandros, suggests that by licensing its GNU/Linux code to a company focused on the commercialization of the operating system, Corel ensured continued development of the code, which could be valuable should Corel decide to offer GNU/Linux products in the future. The alliance, Typaldos, says, "better serves the marketplace, consumers, users, and the shareholders of our two companies, than either of us trying to do it alone."

Xandros is a privately held company, and Typaldos declined to give any financial details. However, he did reveal that the Xandros has increased its revenues steadily since it was founded and is "experiencing and projecting 400% year-to-year growth."

"Corel retains a nice equity position in Xandros," Typaldos says. "We believe that it therefore stands to profit nicely from Xandros' projected success."

After suspending development of its GNU/Linux products, Corel's Brown says, the company continued its reorganization by focusing on "strategically relevant markets" through a series of acquisitions, not all of which were successful. Corel bought SoftQuad, the developers of the XML editor XMetaL, but sold the rights to its software to Blast Radius in 2004. Other acquisitions, such as JASC, the manufacturer of Paint Shop Pro, and WinZip, which markets a software compression application, have had their software successfully integrated into Corel's product line.

Corel continues to have an interest in the GNU/Linux platform. In addition to its relationship with Xandros, Corel sold an updated version of the WordPerfect for Linux word processor on its Web site in 2004 for about six months. This move, Brown says, was "to help us evaluate the status of the office productivity market on Linux."

"This proof of concept [product] is now out of print," he adds. "At this time, we aren't seeing sufficient demand from our core consumer and small business customers to warrant the development of our products on Linux." The product is no longer available from Corel or supported by it, although it may still be available on some download sites.

All the same, Brown does not altogether rule out a return to GNU/Linux by Corel -- not just for WordPerfect Office, but even, perhaps, with its acquisitions of the last few years, such as Paint Shop Pro. "Linux is something that we've been evaluating for some time," he says, "and it's definitely something that we'll continue to consider."

Bruce Byfield is a course designer and instructor, and a computer journalist who writes regularly for NewsForge, Linux.com and IT Manager's Journal.

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