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Struggling applications vendor Corel has found a friend--and a pretty powerful one at that. The company has secured $135 million in funding from Microsoft, part of a strategic relationship that will see the companies do joint development work on Microsoft's .Net Internet initiative.

Ottawa-based Corel endured a number of shakeups in the past year as it struggled to turn around a string of poor financial quarters. In August the company's long-time chief executive officer, Michael Cowpland, resigned to be replaced by interim Chief Executive Officer and President Derek Burney. The vendor has also laid off a number of employees in the course of 2000, including the recent elimination of 139 jobs at its engineering operation in Dublin, Ireland.

Corel said Microsoft purchased 24 million nonvoting convertible preferred shares of Corel stock at $5.62 per share. The companies valued the deal at approximately $135 million, and said it signals the start of increased collaboration between the erstwhile rivals.

Corel and Microsoft said they plan to develop, test, and market products related to Redmond, Washington-based Microsoft's .Net platform--a broad initiative to supply products and services that should enable new types of Web-based services. Trade shows, product launches, and joint marketing efforts are examples of the companies' shared plans for the future.

The announcement will come as a surprise to some industry watchers. The two companies have been fierce rivals in the productivity applications market, and Cowpland has been one of Microsoft's more vocal critics. Part of Monday's deal involves settling various outstanding legal disputes between the two companies.

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