Xandros startup buys Corel’s Linux for US$2 million

Corel Corp. finalized the sale of its Linux operations Wednesday, nine months after it said it would try to do so.

The Ottawa-based software company sold its version of the open source operating system (OS) to startup Xandros for US$2 million and minority stakes in Xandros and New York-based Linux Global Partners (LGP), a Linux-specific investment company. Also announced was LGP’s US$10 million invesment in Xandros.

In the deal, Ottawa-based Xandros gets the as-yet-unreleased third generation version of the OS and inherits the channel support, business development relationships and sales pipeline, said Xandros president Michael Bego. A “sizeable portion” of Corel’s Linux developers are expected to change work addresses, but neither company would say precisely how many.

Corel chief technology officer Rene Schmidt says one of the reasons for selling off Linux was the need for an end-to-end solution in terms of back-end integration with the desktop.

“We started exploring what it would take to get us there, and looking at that we recognized that Corel could not provide the focus,” Schmidt said. “For us it’s really a great announcement in terms of allowing the Linux distribution to grow to its full potential by having a company provide focus for it and also, conversely, it allows us to continue on our growth strategy.”

Kevin Restivo, an analyst with IDC Canada’s Global Software Partnering & Alliances group, said he doesn’t think Xandros has purchased an albatross because the market is still young. This doesn’t mean, however, it’s got an easy road ahead.

“For them what’s most important is to build an effective channel. They need the kind of training and support and solution partners to be able to support the Linux distribution,” said Restivo.

Bego said it sees a huge international market potential (from the government to the home) in PCs for Debian-based Linux, but he said he has designs on more than servers and desktops.

“We’re also going to be offering professional services, offering customized IT solutions which we really see as extending our capability to develop large scale partnerships with major OEMs, major institutions and other large companies,” said Bego.

As for Corel, the sale may be of greater symbolic importance than anything else. In an interview with Computing Canada in early August, Corel CEO Derek Burney said there was no burn rate from the Linux group, and the US$2 million won’t go far towards paying off the acquisition prices for SoftQuad Software Ltd. (US$36 million) and Micrografx Inc. (US$32 million).

“It’s another step in the evolution of Corel. What they’re trying to do is shed all non-core assets and this is another step in their evolution in that they are focusing increasingly on graphics and all things surrounding that,” said Restivo.

“It’s not a huge a leap for them to divest themselves of this business unit. It’s more of a stamp on Corel for Derek Burney. It’s certain a big contrast between the two regimes, contrasting him to (former Corel chairman) Michael Cowpland.”

Linux, the technological offspring of then student Linus Torvalds, turned 10 in August.

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