The bundling deal means that Corel's WordPerfect suite of business software programs will be sold with PCs from manufacturers using PC Chips' motherboards.
Corel claims that the deal with PC Chips, which shipped more than 15 million motherboards in 1998, will mean WordPerfect software will be packaged with "almost one-fifth of all computers shipped annually," according to the company.
Motherboards are the main circuit board in a PC which contains all the core electronics. The motherboards from PC Chips bundled with Corel's software will begin shipping this summer, the company said.
The strategic alliance is aimed at raising its brand awareness and mind share, Corel said. The deal, which is expected to bring little or no immediate revenue for the software maker, is aimed at building the installed base of users, with the hopes of eventually upgrading them to WordPerfect Office 2000, said Corel's president, Michael Cowpland, in a conference call.
"This is one of the most significant days ever for Corel," he said. "We're very keen to build our installed unit base to increase mind share and generate upward revenue." The deal is also aimed at driving Internet traffic to Corel's Web site, generating revenue through the company's e-commerce solutions.
Corel is pursuing similar deals with other manufacturers, Cowpland said, but the PC Chips alliance is expected to account for by far the most unit shipments. "This will increase our penetration rate dramatically," Cowpland said, estimating that the deal represents 18 million units for next year.
PC Chips manufacturers motherboards and other basic PC components for "white box" manufacturers, systems integrators, distributors, and resellers who in turn sell to consumers who build their own PCs. This market accounted for about 18 million units shipped last year, according to International Data Corporation, compared to Compaq's 13 million units and IBM's 8 million units.
"In the past, we kept a pretty low profile," said David Wong, vice president of PC Chips. "Our customers are smaller, independent players," who are attracted to the concept of basic PCs, with a full office suite, for a low-price.
These basic computers rarely offer many software options, Wong said, and customers who are buying the pared-down sub-$500 PC most likely do not want to spend $200 to install Microsoft Office software. "The end user of that category, to spend $200 to buy Microsoft Office would be too much," he said. "They're looking for alternatives."
PC Chips also looked into similar deals with Microsoft and IBM's Lotus, but opted for Corel because of price and brand considerations.
Tiger Direct, a reseller customer of PC Chips which sells its own branded PCs, applauded the deal. "It's a lot easier to sell a low cost PC with software than it is without software," said Richard Wallet, a spokesman for the company. "To add a full featured office suite for very little additional cost to the machine is quite a coup."
PC Chips will start shipping Corel CDs with its motherboards in June, Wong said.
Yesterday, speculation over the deal led many to believe that Compaq Computer, the world's No. 1 personal computer maker, would be Corel's partner.
Ottawa-based Corel has struggled for several years to make its WordPerfect suite of word processing, database, and spreadsheet programs more competitive with Microsoft's Office, far and away the industry's dominant software suite. Two weeks ago, Corel announced that it expected losses to deeper for its first quarter ending in March.
Separately, Microsoft yesterday said it had finalized the newest generation of its business software suite, known as Office 2000, and that it would ship to large corporate customers in April and appear in retail stores by June. (See related story)
Stephanie Miles reported from San Francisco and Mike Riccuiti from Boston. Reuters contributed to this report.