Corel's desperate gamble on Linux

What do you get if you combine an ailing US application development tools company with a Canadian software house that's also seen better days?

A Linux 'powerhouse', apparently, according to the spin doctors at Inprise/Borland and Corel, which last week decided their last, best hope for the future was to hop on the open source operating system bandwagon together.

Inprise/Borland will become a subsidiary of Corel in a stock deal valued at around $2.44bn (£1.5bn). Inprise's stock price rose marginally, while Corel's actually slipped. It was hardly the most overwhelming reaction to the emergence of a self styled software David to Microsoft's Goliath.

Desperate measures
Part of the problem is clearly that the deal smacks of desperation. Corel has fought a desperate uphill competitive struggle for years against Microsoft, while Inprise has suffered from the same slowdown in the tools market that has afflicted most of the vendors in that space since the emergence of Java.

Of course, the companies themselves say the merger is the fruit of a carefully thought-out strategy to offer end users the chance to exploit Linux as a serious business platform. The combined outfit will have all the tools and software to make the migration from the Microsoft world to the Linux one both painless and attractive.

As if on cue, the latest market research was published last week to show how hot Linux is. According to statistics from IDC, it is now the second fastest selling server operating system after Windows NT.

Around 1.35 million copies of Linux were sold in 1999, a quarter of the 5.4 million copies of total operating systems sales, says IDC. That's twice as many copies of Linux as were sold in 1998, representing a growth rate for the operating system four times faster than that of the overall market.

No rich pickings
If that kind of growth can be achieved with today's handful of commercial Linux suppliers, what riches await a 'powerhouse'? Alas, leaving aside the possibility that NT sales slowed down simply because users were waiting for Windows 2000, there is one pertinent fact that should give pause for thought: nobody grew rich from Linux last year.

According to IDC estimates, Linux sales produced a mere $32m (£19m) in 1999, less than one per cent of the total $5.7bn operating systems market. Windows NT pulled in a cool $1.7bn. And according to the flamboyant Michael Cowpland, chief executive of Corel and head of the combined venture, his company only raked in $3m from its version of Linux last year. To put that in context, Corel's sales for 1999 totalled $243.1m.

Cowpland is well known in the industry for being an enthusiastic and eternal forecaster of jam tomorrow. In 2000, he expects Linux revenues of "anything between $20m and $30m" and 50 per cent of all sales by 2005.

On the other hand, Inprise/Borland bosses remain tightlipped about their operating systems revenue split, or about expectations for future growth.

"Microsoft will continue to be a player in this world for a few more years," said Dale Fuller, Inprise/Borland's acting chief executive, with what can only be assumed to be understatement.

He's not joking. For a start, the IDC figures relate to the server market. But Corel and Inprise's emphasis is very much on Linux for the desktop, with Linux firm Red Hat pretty much given a free reign at the server level.

Danger of free software flood
Then there's the added problem of other suppliers getting the open source bug and starting to flood the market with free software. Most notably, there is a real danger from Sun Microsystems. Corel clearly hopes that Linux will provide a boost to the prospects of its Wordperfect suite, which has lost out to Microsoft Office almost from day one.

But Sun is already giving away personal productivity suite Staroffice on Linux for free. The product is generally regarded as functionally comparable to Microsoft Office, and has been available on Linux for a few years, unlike the relatively untried Linux-flavoured Wordperfect. If a potential customer is actively looking for an alternative office application suite, then which is likely to appear the safer bet?

Reacting to the current trend
The primary reaction to the Corel/Inprise marriage of convenience is an overwhelming sense of 'here we go again'. Both companies have seen major lurches in strategy over the years, seemingly reacting to whatever the current 'next big thing' happens to be.

For example, Corel not so long ago was a devoted Java-head. It was due to release Java versions of all its wares, which would then be able to run on any Java enabled machine. At the time, this strategy was to be the thing that enabled it to challenge the might of Microsoft.

Sound familiar? It's been much the same story over at Inprise, where Java and a shift to the application server model have been among the recent flirtations by which the company hoped to restore its fortunes.

Maybe this is finally the right bandwagon. The longterm viability of the Linux jihad will come in for far more serious scrutiny as Microsoft finally rolls out Windows 2000. Which will undoubtedly make next year's IDC figures interesting reading.