In what appears to be a move to dodge yet another Department of
Justice investigation, Microsoft Corporation may be selling its shares
in Corel Corporation--at half the price it bought those shares.
According to the S-3 registration statement filed by Corel
Corporation Feb. 21, 24 million Series A shares will be converted to
common shares and then registered for sale by Microsoft. This step is
necessary because the Series A shares are not convertible by Microsoft
directly.
What the registration does not say is how many of these converted
shares Microsoft will actually put on the selling block. But, if
Microsoft sells all of these shares at the proposed price of $2.5625
per share, then Microsoft would only make $61.5 million--a figure that
represents half of the $135 million price Microsoft paid for the
shares in October, 2000.
Though no reason was given for the conversion, Microsoft's known
cash reserves, which are fairly large, tends to fuel speculation by
industry observers that Microsoft is not using this sale to generate
cash, but is seeking to avoid yet another Department of Justice anti-trust investigation.
The 24 million Series A shares represent the entirety of
Microsoft's October 2 purchase of the non-voting shares in Corel Corp.
Corel representatives would not comment on the stock conversion, saying only "it's a Microsoft affair." But Mark Lipson, Director of Online Communications for Corel, did confirm that the possible removal of Microsoft from Corel would not change the Ottawa-based corporation's recent decision to spin-off its Linux OS product line.
Lipson declined to comment on the progress of the Linux spin-off, but did emphasize that regardless of recent events, the Corel Linux product line was not going away.
"It doesn't indicate one way or the other whether or not Microsoft is going to sell the shares," said Jim Desler, a Microsoft spokesman.
While Microsoft was ostensibly seeking Corel's aid with Linux, Corel also makes the WordPerfect suite which is in direct competition with Microsoft's Office software. Because of the potential conflict, U.S. and Canadian regulators initiated a probe of the deal. By selling the stake, Microsoft may quash any speculation that it is secretly controlling Corel.
But Desler said Wednesday's filing had nothing to do with the Justice Department's probe. "That simply isn't the case," he said.
"This is based upon an agreement between Microsoft and Corel at the time of the deal."
Desler also noted that the filing simply represents the price of the stock at the time of conversion. Once Microsoft holds the shares, they can either increase or decrease in value.
