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. There is a certain business inevitability to a company
that has major revenue sources like that lopped off, 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 take over 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 GPL'ing 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 GPL'd, 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.
Since 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
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 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 one billion dollars it has earmarked for Linux
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
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