said Monday that it would acquire software maker
in a stock swap that companies valued at $2.44 billion, as it continues its march into the emergent Linux market.
Investors reacted modestly to the deal. Corel's share retreated 1/8, or 1%, to 19 7/8, while Inprise/Borland's stock rose 15/16, or 7%, to 13 7/8. (Corel fell 13/16, or 4.1%, at 19 5/16. Inprise/Borland rose 5/16, or 2.4%, at 13 1/4.)
The combined company, to be called Corel, would step up its efforts to promote Linux-based Internet software and operating systems.
Linux is an "open" operating system that allows programmers to develop their own software without paying a licensing fee. It is increasingly gnawing into
Corel's president, Michael Cowpland, said in a statement that the acquisition would give the companies "an extraordinary opportunity to reach all facets of the exploding Linux market."
Cowpland said in a conference call with investors that Linux products accounted for $3 million of fourth-quarter sales and repeatedly compared that with sales of the Linux darling
, whose stock trades multiples higher, at 89.
Actually, Red Hat reported revenues of $5.4 million, 80% higher sales than Corel in its last reporting quarter.
Under the terms of the proposed deal, Inprise/Borland shareholders will get 0.747 Corel common share for each of their own shares based on Corel's closing price of $20 on Friday. That would value Inprise/Borland at $14.94 a share, although that valued slipped to $14.29 a share in Monday morning's trading.
The price Corel paid for Inprise/Borland represents just a 15% premium from its Friday price. Dale Fuller, Inprise/Borland interim president and chief executive, reacted to the relatively small premium, saying the merger was of equals and shareholders would be able to share in the growth of the combined company.
The Corel chief executive will, in fact, take the reins as chief executive of the new company while Fuller will become chairman of the board of directors. Corel shareholders will retain 56% of the new company.
"With our combined base of 55 million customers -- including small to medium enterprise customers, desktop client customers, and enterprise developers -- our technologies will enable our customers to migrate to Linux faster," said Dale Fuller, Inprise/Borland's president.
Corel, known for WordPerfect and CorelDraw, has been trying to change its image and earnings outlook by transforming itself into a Linux-based software company.
In the last year, Corel's stock has traded as low as 2 and as high as 44 as investors have wrestled with two images of the company -- a software maker with declining sales or a Linux operator in the rough.