Lousy formatting (don't have time to fix)
Cheers!
Pete
Analysts give Cowpland benefit
of doubt
But facts on stock sale won't bolster Corel's
credibility, one says
Andrew McIntosh
The Ottawa Citizen
It doesn't look good, but we'll give the man the benefit of the doubt.
That's how investment analysts reacted yesterday to a report in Saturday's
Citizen that raised questions about what Corel Corp. chief executive
Michael Cowpland knew when he sold $20.5 million in Corel stock in
August.
The Citizen reported that Mr. Cowpland was in possession of data
reporting Corel had suffered significant market share losses for its software
products in 1997 when he sold 2,432,100 shares between Aug. 11 and
Aug. 14 for between $8.20 and $8.80 each on the Toronto Stock
Exchange.
The data Mr. Cowpland had, which was not available to the public, came
from PC Data Inc., a respected market research firm based in Reston,
Virginia, that focuses on the computer hardware and software industry.
Michel De Lavergne, a high-technology analyst at Dlouhy Investments Ltd.
in Montreal, said the facts reported and statements made by Mr. Cowpland
will do nothing to bolster the company's credibility problems.
"It doesn't look good, but I'm prepared to give him the benefit of the
doubt," Mr. De Lavergne said.
"What I have learned from this is that Corel was being too aggressive in
terms of their revenue recognition in the past and that they finally paid for it.
As for the rest, I'll leave that to the regulators," Mr. De Lavergne said.
Mr. Cowpland's stock sales came one month before Corel announced on
Sept. 10 that its third-quarter sales were far below expectations and that it
would lose $31.5 million U.S. for the three months ended Aug. 30.
Two weeks later, Corel said it would lose another $15 million to $20 million
U.S. in the fourth quarter ending Nov. 30 and would only break even in
1998, again because of slow software sales.
The two announcements caused the stock to drop a total of 38 per cent;
Corel shares closed at $5.60 yesterday on the TSE.
Duncan Stewart, an investment analyst and partner at Tera Capital Inc. in
Toronto, said he was not prepared to pass judgment on Mr. Cowpland's
stock sales based on the PC data Mr. Cowpland possessed.
"A reasonable person can look at these PC Data reports and say we're not
doing great, but maybe we can turn it around. What those figures would
give Cowpland is an indication of the difficulties facing Corel," Mr. Stewart
said.
"How he could publicly say sales were strong and rising when they weren't
is another matter," Mr. Stewart added.
Mr. Cowpland told the Citizen he received the PC Data report before he
sold his shares, but that the figures in it were "irrelevant" and didn't influence
the timing of his decision to sell his shares.
Several PC Data reports were obtained by the Citizen, including one for
June 1997 -- a report delivered to Mr. Cowpland in the third or fourth
week of July.
That report stated Corel's market share in terms of units sold had fallen 32
per cent during the past 12 months in the business software category, which
includes sales of Draw graphics and WordPerfect word-processing
software.
Corel's market share, when measured in terms of total sales dollars spent by
consumers, was 19 per cent lower than 12 months earlier, the report
showed.
Corel's market share losses were evident as early as April 1997, when PC
Data's March report found Corel's market share in terms of units sold was
already down 28 per cent compared year-earlier sales levels. Corel's
market share measured in dollar terms had already fallen by 17 per cent in
12 months.
A Corel spokesman contacted the Citizen yesterday morning, saying that
many employees at the Ottawa software company were upset by the story.
The Citizen, however, received no calls from employees.
Mr. Cowpland has denied he profited from insider information when he sold
his shares, saying he believed Corel would meet its targets for its third
quarter, despite its market share losses. He said he needed the cash to pay
debts.
He said he was not surprised by the market share losses because Microsoft
had introduced its new Office 97 word-processing suite product in January
1997, and Corel's new WordPerfect Suite 8 upgrade wasn't out until June.
But the market share losses included sales of Corel's graphics software,
too.
PC Data reports are sold to corporate executives, who pay thousands of
dollars in subscription fees. They aren't generally available to the investing
public.
The Toronto Stock Exchange's policy statement on timely disclosure of
information by companies whose shares are publicly traded states:
"It is a cornerstone policy of the TSE that all persons investing in securities
listed on the exchange have equal access to information that may affect their
investment decisions."
The TSE's policy requires that information defined as "material" ought to be
disclosed as soon as possible by companies. Failure to do so may result in a
trading halt placed on the company's shares or suspension of its listing.
Authorities at the TSE define "material" as "any information relating to the
business and affairs of the company that results in or would reasonably be
expected to result in a significant change in the market price or value of any
of the company's listed securities."
The TSE's vice-president and general counsel, Leonard Petrillio, did not
return telephone calls left at his office. |
