Microsoft invested $135 million in Corel yesterday, creating a partnership the two companies said would focus on Microsoft's .NET initiative.

Microsoft has purchased 24 million shares in Corel. Corel has laid off about 450 employees this year and seen its proposed merger with Inprise collapse. The firm's misfortunes were punctuated on August 15 with the surprise resignation of founder and CEO Michael Cowpland.

Corel has been a key backer of Linux, the open-source operating system that many believe could be a key competitor to Microsoft's Windows. Corel has pushed Linux on the desktop, where Microsoft feels confident it can hold off the upstart OS.

Net move Derek J Burney, Corel’s interim president and CEO, said "Our most recent work has focused on strategies to move our applications, including CorelDraw and WordPerfect, as well as our Linux distribution - Corel Linux OS, onto the Web.

"By leveraging Corel's development expertise and popular product line with Microsoft's .NET platform, we believe we have found a great combination to accelerate this process."

Although Microsoft's investment gives it a stake of almost 25 per cent in Corel, the company will not have voting privileges. As part of the deal, unspecified legal issues were also resolved.

Wide Windows Microsoft's .NET strategy aims to broaden the Internet capabilities of Windows so the operating system facilitates Internet services on a seamless basis. The initiative includes creating new user interfaces, expanding Microsoft's development tools, applications, and middleware to further the "software as a service" goal.

Yuval Neeman, vice president of Microsoft's developer division, said: "Corel has some of the best-known software on the market and expertise in online-service delivery, graphics, and interface design. Coupled with Microsoft's .NET initiative, our companies will be able to co-operate on projects that will benefit customers worldwide."