The Bloor Perspective: Corel and Inprise fall out of love while IBM and EMC didn't get on in the first place

Back in February 2000, Corel and Inprise announced plans to merge their operations in a stock deal worth $2.44 billion at that time.

Unfortunately, a number of financial factors have seen the value of that deal fall steadily and, eventually, it was called off.

This was a deal that planned to bring together the applications and operating system capabilities of Corel with the development and Web technologies of Inprise.

The emphasis was to be on the creation of a Linux 'powerhouse' where businesses could buy complete Linux solutions from a single supplier. This concept is still believed to be good and only Corel's financial status has stopped the merger completing.

Inprise can look at the failure of this deal with a certain amount of relief. Financially, it has never been particularly strong but it has been showing good progress to record only a small loss of $1.1m in its last quarter, compared with around $25m in the previous year. It has a certain amount of positive momentum that will make it a good prospect for other potential partners.

Inprise is known to have favoured the Linux 'powerhouse' idea and so it is quite likely that it will pursue this direction further.

In the mean time, Corel is left pondering its future. With the failed merger, it is left to seek out a new financial package and is also examining ways of achieving a 40 per cent reduction in annual costs.

With little potential for positive financial results this year, finance may be hard to obtain and the prospects for another merger look slim as the share price continues to fall.

The saving grace is that Corel has some very good products in its portfolio and is a leading Linux player. It could divest itself of some products to raise cash or it could struggle on. However, it is now a good acquisition target if a buyer is out there.

*Online marketplaces come of age*

The market for online marketplaces is changing rapidly. First there were intermediaries, such as Ariba, Commerce One, and iPlanet, which were providing online procurement marketplaces for various industries. Then the bricks and mortar companies started to hit back. Now the marketplace vendors are themselves retaliating. This time they are going to sell you software so that you can set up your own marketplace.

Last week, Breakaway Solutions announced MarketMover and iPlanet showed off Market Maker, a family of integrated iPlanet e-commerce applications underpinned by a sophisticated framework.

Ultimately it looks as if there will be two major models for procurement marketplaces. One will be the sort of market set up and run by intermediaries such as Commerce One. The other will be industry consortia that set up and run their own markets. These will either be developed and run in-house or they will be constructed using packaged software and/or hosted by third party suppliers.

The economics of these marketplaces means that a consortia based approach is likely to prove the most attractive proposition in most industry sectors.

In addition, the construction of such sites based on some sort of package or framework makes obvious sense both in terms of the time it takes to create and set up the market, and with respect to the costs involved.

So the only question remaining is whether the consortia should host the marketplace themselves or pass it over to an Application Service Provider. This decision will simply be one of costs.

Thus the future of the third-party market maker is likely to be numbered, except as an ASP. In this light, iPlanet's move towards software provision and (we would guess) ASP status, seems a sensible one, which we expect other suppliers to follow.

*EMC and IBM: putting a lid on a storage spat*

EMC and IBM have a long history of bitter rivalry in the storage market.

However, in March 1999 the two companies announced a rapprochement with a five year strategic technology and business alliance worth an estimated $3billion. As a part of the agreement, EMC was to buy IBM disk drives for incorporation into its Symmetrix storage arrays, while there would also be some patent cross-licensing between the two companies.

In October 1999, however, EMC acquired Data General, which had an outstanding patent infringement case against IBM dating back to 1994. Then, in December, IBM retaliated by claiming that EMC had violated their cross-licensing agreement signed in March, saying that it was entitled to use technology covered by EMC patents, including those acquired in the purchase of Data General.

This spat was resolved late last week, when the two companies announced that a settlement had been reached. While no admissions of liability were made, IBM admitted that it had made payments to EMC even though it claimed these were negligible when compared to the costs of litigation.

That was the week before last. Last week, EMC announced that it is cancelling its $3 billion deal with IBM because of "IBM's difficulty in meeting quality requirements and deadlines".

While EMC says that it will continue to purchase IBM disk drives it will no longer commit to any particular value.

However, whatever gloss you put on it, it is clear that the writing is on the wall as far as the EMC-IBM relationship is concerned.

EMC's newest enterprise storage system, the EMC Symmetrix 8000, uses disk drives from Seagate Technology.

* Further analysis is available at www.it-director.com