Microsoft to sell stake in Corel at deep loss

Microsoft, the world's largest software company, said on Tuesday it is selling a 20% holding in struggling Canadian software...

Microsoft, the world's largest software company, said yesterday that it is selling a 20% holding in struggling Canadian software maker Corel for $12.9m.

In a recent statement, venture capital investor Vector Capital said that it will buy 22.89 million preferred shares in Corel from Microsoft for $12.9m. Microsoft had purchased 24 million preferred shares in Corel in October 2000 for $135m.

Microsoft, which has been a longtime competitor to the Ottawa-based software company, did not disclose whether it would still hold a financial stake in Corel after the loss-making sale.

"Microsoft maintains an interest in Corel and believes in the technology that the company has to offer," said Megan Numrich, a spokeswoman for Microsoft.

"Microsoft's decision to sell its Corel shares is normal and part of prudent portfolio management," Numrich said.

As a result of the deal, which Vector Capital said will close on or before 24 March, the San Francisco-based investor said it will become Corel's largest shareholder. Its block of preferred shares can be converted into 19.95% of outstanding common shares, Vector said.

When Microsoft announced nearly 18 months ago that it would buy a part of Corel, the companies said they would work together on testing, developing and marketing Microsoft's .net initiative to deliver software and services over the web.

Corel, which was struggling at the time, recently cut 22% of its staff as it tried to cope with weaker customer demand and an ageing product line.

Vector said it will speak to Corel's management about the company's "business prospects and strategy and various strategic alternatives".

"Based on these discussions and other factors, Vector may or may not seek to increase or decrease its stake in Corel or to pursue other alternatives," Vector Capital said.

On Nasdaq, Microsoft shares closed 16 cents, or 0.7%, at $22.79 while shares in Corel fell 2 cents to close at 76 cents.

Corel shares closed down 1 Canadian cent at C$1.07.

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