Corel knocks Microsoft off HP desktops
Published: 27 Aug 2002 09:10 BST
Hewlett-Packard is booting Microsoft Office software from its Pavilion line of consumer PCs in favour of software from Corel, as more PC makers consider cheaper Microsoft alternatives.
The deal, announced on Monday, marks a significant win for the scrappy Canadian software maker. HP is currently the largest manufacturer of PCs in the world and commands more than half the US retail market.
Under the deal, all Pavilion desktop PCs will ship with Corel's WordPerfect Productivity Pack starting next month. The Productivity Pack is a "productivity suite," similar to Microsoft's Office, that includes the WordPerfect word processing application and the Quattro Pro spreadsheet program. Currently, Pavilion PCs come with a choice of the full version of Office XP or Microsoft's stripped-down consumer alternative, Works.
Corel is discussing possible expansion of the deal with HP, said Steve Houck, executive vice president of strategic relations for Corel, including options for adding WordPerfect to the Presario line of consumer PCs that Hewlett-Packard picked up in the Compaq acquisition.
HP's shift underscores a race among consumer PC makers to cut costs from their software budgets.
In recent years, prices on processors, hard drives, memory and other components have declined to historical lows, but the price of Office has remained high.
Emachines' T1221 computer, for example, sells for $475 (about £310). That's four dollars less than the standard home version of Office XP.
Toni Duboise, an analyst for research firm ARS, said HP's move is a sign of intense competition at the low end of the PC market.
"I don't think it's as much a slap at Microsoft as just the reality of today's PC market," she said. "Anything that's going to allow (HP)to lower their cost and the end price for the consumer, even in the slightest, will be a benefit for them in today's market."
Houck said price was the main factor for HP. "I think it was just the economic environment and some of the issues there with Microsoft," he said.
Microsoft didn't appear to be worried about the competition.
"With over 300 million users worldwide, Microsoft Office has become the choice of individuals who need to be more productive and organisations who need a reliable set of tools to run their businesses," a Microsoft representative said in response to the HP news.
Representatives of HP and Compaq did not immediately respond to requests for comment.
Getting by without Office
Consumers are also showing increasing acceptance of non-Microsoft suites, although Microsoft still outsells its competitors. Sony, the fastest growing PC manufacturer in the world, features the WordPerfect suite on a number of high-end and budget PCs. Swapping in Office XP adds $470 to the total price of the hardware. for example.
Toshiba, which reclaimed the top spot in worldwide notebook shipments in the first quarter, incorporates the Lotus SmartSuite from IBM on a variety of its models.
Dell has also used Corel in its budget SmartStep PCs (recently replaced with an equivalent Dimension machine) since October 2001.
Possibly to combat this trend, Microsoft has been selling the academic version of Office XP, once typically only found in campus bookstores and educational outlets, in Target, WalMart and other large stores, according to analysts. Although it can't be upgraded, the academic version contains the same applications as the regular version of the software, but costs $330 less. As a result, sales have been climbing.
In the business market, several foreign governments have begun to experiment with Linux desktops, while US corporations have been less than pleased over new Microsoft licensing terms.
Houck said he expects the HP deal to give Corel an additional three million WordPerfect users over the next year. All together, the recent deals will more than double WordPerfect's user base over the next year and boost its position in a market long dominated by Microsoft.
"I think we have an opportunity to pick up a couple of points of market share in the next year," Houck said.
The deal came after several years of negotiations with HP, Houck said, which became more serious as pressure increased on PC makers to trim costs and drive down selling prices.
Corel is also hoping to capitalise on frustration among business software buyers over new Microsoft licensing plans that lock them into expensive upgrades. Houck said there are similar complaints among PC makers over changes in original equipment manufacturer (OEM) licensing, leading them to look for alternatives.
Houck said he couldn't estimate Corel's price advantage over Microsoft because he isn't privy to Microsoft's licensing terms. The retail version of the WordPerfect suite sells for about $100 less than Office XP, however, while a consumer-oriented WordPerfect package is $30 less than Microsoft's Works.
Houck said there's nothing contradictory about Corel competing vigorously with Microsoft, despite Microsoft's $135m investment in Corel, which gave Microsoft a 24.6 percent nonvoting interest in the company.
"Microsoft takes up so much space, you're going to compete at the same time as you cooperate with them," Houck said. "It's happened with Apple, it's happened with other people."
WordPerfect is also a familiar Microsoft antagonist. As an independent company, WordPerfect competed against Microsoft for years before being bought by Novell in the mid-90s. Novell then sold the program to Corel in 1996. Corel has experimented with touting the suite for network computers and as a Java alternative.
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