Corel/Microsoft Strategic Alliance

On October 3rd, Corel Corp. and Microsoft Corp. announced that they had formed a strategic alliance to support the development, testing and marketing of new products related to Microsoft’s dot-Net platform. As part of this expanded relationship, Microsoft invested US$135 million to acquire 24 million Corel preferred non-voting shares, representing 24.6 per cent of Corel’s outstanding shares. This technology deal amounts to an investment in Corel that is similar to the 1997 arrangement with Apple Computer, Inc., under which Microsoft invested US$150 million in its rival.

Microsoft’s dot-Net strategy is a plan to integrate its software with the Internet, tying together Microsoft’s work in wireless computing, the Internet and digital media. The two software makers will also work together on some product launches, trade show events and Web sites. Industry analysts view the Microsoft/Corel strategic alliance as a positive deal for Corel and a validation of their technology and vision. Spokesmen for Microsoft said that the acquisition of Corel shares was strictly an investment and did not signal any intent on the part of the software giant to gain a majority share interest in Corel or to influence management decisions.

Microsoft was represented by Osler, Hoskin & Harcourt LLP and Sullivan & Cromwell. Corel was represented by McCarthy Tétrault and Milbank, Tweed, Hadley & McCloy LLP. The Oslers team was led by Frank Turner (corporate) and included Monica Biringer and Julie Colden (tax), Peter Glossop (competition) and Deborah Glendinning (litigation), with assistance from Craig Wright, Shelley Obal and Martin Saipe. The Sullivan & Cromwell team was led by Duncan McCurrach and included Sven Milelli and Andrew Cockwell (corporate), Richard Klapper (litigation) and David Spitzer (tax). McCarthy Tétrault was represented by Robert Chapman and Virginia Schweitzer (Ottawa) and Milbank, Tweed, Hadley & McCloy LLP was represented by Mark Weissler and Martha Zawacki.