– By Tony Stanco–

A free software strategic analysis –

There is a certain irony in hoisting protagonists by their own petard
that
appeals to my
sense of poetic justice.

Everyone knows by now that Microsoft netscaped Netscape by “cutting
off its
air supply”
to a major revenue source when it bundled Internet Explorer with its
Windows
OS. That
act became the central issue in the federal government’s anti-trust
case,
U.S. v. Microsoft.
A company that has major
revenue
sources lopped off faces a certain business inevitability, and it was only a matter of time before Netscape
atrophied
to the point
where it either had to shut down or be purchased by another company.
Netscape
was
eventually purchased by AOL.

So what if someone did the same thing to Microsoft, wouldn’t that be
a sweet
irony?

Here’s the strategic analysis:

IBM should takeover Corel and turn the WordPerfect office products over
to
the free
software community.

IBM is trying very hard to befriend free software developers, and
nothing
excites the
community like GPLing proprietary code. Free software developers are
like
piranha to
fresh meat in that regard. So by purchasing Corel and turning over the
WordPerfect
software to the community, IBM cements its position with the GPL
developers
more
firmly than any PR program, jawboning, or mere monetary largess can
ever do.

At the same time, IBM will severely weaken a major competitor, because
with
the
WordPerfect product line GPLed, IBM and other hardware companies can
bundle
the
products into their PCs without paying licensing fees. They can then
leave
further
maintenance and development costs to the free software community, as
they
live off the
hardware sales.

Because Microsoft’s office productivity line is a major revenue stream,
IBM
would be
“netscaping” Microsoft, just like Microsoft netscaped Netscape half a
decade
before. So
there’s a certain delicious irony in that.

But it gets even better.

Recently, the market price for Corel shares was as low as $1.25, which
gave
it a market
cap of less than $100 million. Well, Corel has about $125 million in
cash in
the bank, so
effectively IBM can get the company with Corel’s own money. It’s
been a
while since the
financial markets allowed this kind of transaction. But the current
market
conditions are
such that companies are once again selling for less than what the
companies
have as real
assets.

Why is that a perfect irony?

The cash in the bank at Corel that IBM can use to purchase the company
to
netscape
Microsoft came from Microsoft itself a few months ago when it invested
$135
million in
the company! Now that’s sweet.

Microsoft gave the money to Corel when it was in financial straits
after the
Borland deal
unraveled, and Microsoft saw the opportunity to marginalize a
competitor by
embracing
its products into its .Net strategy. Since then, rumors in the press
are that
anti-trust
officials thought that Microsoft’s investment was best undone, and it
looks
like the
company’s is now obliging.

If that bad investment in Corel finances the purchase of the
WordPerfect
assets by IBM
that then cuts off the air supply to a major revenue stream at
Microsoft,
that is poetic
justice and the world is again just.

(While the market price for Corel has bounced off from that $1.25 low,
it
still has a
market cap not far from the amount of cash in the bank and this would
be a
very strategic
move for IBM at any price, even if it had to use a few million dollars
of its
own money
from, say, the $1 billion it has earmarked for Linux
promotion).

Tony Stanco is a former securities attorney from the Securities and
Exchange
Commission, Internet and software group. He left the Commission to
found
FreeDevelopers.net, because proprietary software must be defeated
before it
puts all of us
in cyberchains. FreeDevelopers.net is an international, professional
organization of GPL
software developers. All GPL developers are invited to join
FreeDevelopers.net.

Copyright 2001 Tony Stanco
Verbatim copying and distribution of this entire article are permitted
in any medium without royalty provided the copyright notice and this
notice are preserved.

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