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Corel looks at selling Linux operation

The software maker's stock drops on news that it could sell its Linux software operation, once hailed as a new strategy that would rescue the company from its financial woes.

Corel stock dropped Monday on news that it could sell its Linux software operation, once hailed as a new strategy that would rescue the company from its financial woes.

Corel chief executive Derek Burney mentioned the possibility at the Comdex trade show last week, but spokeswoman Louise Hanlon said selling the Linux operation was only one of many possibilities for the Ottawa, Canada, software maker. Corel shares dropped 16 cents, or about 5 percent, to $3.28 at the close of trading.

"We're looking at numerous options," Hanlon said. Selling the Linux operation "is just one example of the options we're looking at." As another example, Corel could sell off equity stakes in companies in which it's invested, she said.

Corel has a stake in Linux computer maker Rebel.com and clip art seller Hemera--both companies that bought a part of Corel's product line.

Corel has hired McKinsey & Co. to look at strategies to return the company to profitability. "Details of that probably will be announced in the new year if not earlier," Hanlon said.

Corel has three major software divisions: one for its WordPerfect suite of office software, one for its graphics software such as CorelDraw and one for Linux.

Linux was to be part of Corel's effort to stave off competition from Microsoft. Though the company had a version of its WordPerfect word processor for Linux, former CEO Michael Cowpland announced the company's full-fledged Linux strategy in March 1999.

The original goal was to create an easy-to-use desktop version of Linux, a direct competitor to Microsoft where Microsoft is strongest. Later, the company announced plans for a server version of Linux as well, the stronghold of established Linux companies such as Red Hat.

One conceivable purchaser CNET's Linux Centerof Corel's Linux work would be Progeny, which is working on a commercial edition of the Debian version of Linux. Corel Linux also is based on Debian.

But Bruce Perens, chairman of the Progeny board and longtime Debian programmer, said he doesn't think Progeny is a likely buyer.

For one thing, Progeny has its own work well under way to create an easier-to-use version of Debian. For another, Corel hasn't always had warm relations with the open-source and free-software programmers who create Linux, Debian and associated software, Perens said.

"They've caused acrimony in their relationship with the free-software developers because they needed to be educated in the licenses with the software they've been selling," he said. With the license under which Linux is released, anyone may modify the software, but those modifications must be published publicly. Perens said Corel didn't always promptly publish modifications to its Linux software.

"When people buy Linux, they generally look around for an expert. The experts don't like Corel because those experts are the software developers, and they don't like the way their code has been treated by Corel," Perens said.

Though Corel's stock surged along with the Linux mania, reaching $44.50 a share in December 1999, it now has sunk back down to its pre-Linux depths, lately hovering below $5. Not even an infusion of $135 million from Microsoft could do more than temporarily bump the share price upward.

The terms of the Microsoft investment included an option under which Microsoft could request that Corel translate Microsoft's next-generation .Net server software to Linux. Hanlon said that regardless of the restructuring options it selects, the company will fulfill its contractual requirements.

Corel has laid off hundreds of employees, including 320 in June and 139 in September. Cowpland left as CEO in June and was replaced by Burney in October.

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