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
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
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
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
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
"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.