Corel handed over its Linux distribution to Xandros, yesterday, as sources close to the deal had forecast.

The deal is described as a "strategic licensing agreement" and, indeed, it's not a straightforward sale. Corel will take a five per cent stake in Xandros and a two per cent stake in Linux Global Partners. In return, Xandros gets a licence to the Corel Linux OS distro - "and related technologies" - for 18 months.

In fact, that's essentially what's happened now. LGP is superficially connected to Xandros through its $10 million investment in the open source software development company. However, Xandros is new, and appears to be staffed almost exclusively by former Corel Linux OS development staff.

So you can see the scheme: LGP configures the deal by forming a new, majority-owned company out of Corel's Linux division. That provides it with a self-contained operation it can sell off or float at a later date, and helps limit its own exposure should the move prove unsuccessful.

A titsup.com scenario seems to have been allowed for in other ways: Corel's stake in LGP and, because it's a licensing deal, Corel gets its distro back if Xandros collapses. In the meantime, Xandros gets start-up cash and access to technologies being fostered by LGP's other companies. Indeed, the tone of LGP's statement on the deal, suggests said firms may well soon find themselves folded into the Xandros venture.

Xandros' focus is on the corporate market. It's building a desktop environment - shades of Eazel here? - based on Corel's Linux distro, which it will release early 2002, followed by "server and enterprise management solutions" later in the year. ®

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