DOJ investigates MS investment in Corel

An end user with a very big stake in the future of Corel Corp. -- the US Department of Justice (DOJ) -- is using its legal powers to probe the antitrust implications of Microsoft Corp.'s recent US$135 million investment in the struggling software vendor.

Officials at both Microsoft and the DOJ Wednesday confirmed that the agency is seeking documents related to the investment deal and strategic alliance that Microsoft and Ottawa-based Corel announced last October. The two office software rivals said the agreement signalled the start of increased collaboration, including joint development, testing and marketing initiatives.

Corel's WordPerfect suite of office applications competes against Microsoft Office, but market research firm International Data Corp. in Framingham, Mass., said Microsoft controls about 94 percent of the word-processing portion of the market. However, the DOJ is a major WordPerfect user: In 1999, it bought an enterprise site license that covered the installation of Corel's software on a total of 35,886 PCs. That contract runs for three years, according to a DOJ official.

Some critics of Microsoft welcomed the DOJ's investigation of the Corel deal.

"Microsoft has market power in Office, and to invest in its only significant remaining competitor has got to raise questions," said Ken Wasch, president of the Washington-based Software & Information Industry Association, which has filed briefs in support of the DOJ's antitrust case against Microsoft.

Wasch called the request for information about Corel "a perfectly reasonably inquiry" into antitrust concerns. In particular, he cited a restructuring announcement made last month by Corel, in which the company said it will target WordPerfect at the current installed base and try to spin off its Linux operating system distribution division.

But Microsoft spokesman Jim Cullinan said there was nothing in the software giant's agreement with Corel that asked the latter company "to do or not do anything" with its products. Corel officials "can make their own decisions about what software they want to develop for what platforms," Cullinan said. The only exception, he added, was an agreement for Corel to develop software supporting Microsoft's Internet-based .Net initiative.

In any event, Corel's Linux operating system efforts aren't making money, said Bill Claybrook, an analyst at Aberdeen Group Inc. in Boston. If Corel's Linux distribution plans are "the basis of [the government's] investigation, it's pretty shallow as far as I'm concerned," Claybrook said.

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