Corel Stake Sold

Microsoft will sell its 25% stake in Canadian software company Corel, taking a loss of more than US$120 million. The sale, to San Francisco–based venture capital firm Vector Capital, brings to a close a curious relationship that never jelled, and that was overtaken by changes in the marketplace and in Microsoft’s priorities.

Context of the Buy

The terms of Microsoft’s Oct. 2000 investment called for Corel to use .NET technologies in its products and to assist Microsoft in porting .NET to other operating systems, such as Linux, if Microsoft requested.

Microsoft never offered a detailed explanation of why it purchased a stake in Corel, but several factors, including the following, likely played a role:

• Microsoft was in the midst of its antitrust fight with the U.S. Department of Justice (DoJ) and saw some value in ensuring that its weak competitors in the desktop applications market did not disappear entirely, leaving Microsoft in an even more dominant position
• The .NET initiative was