Another article in laymans terms. According to this article the remaining concerns seem to be on the competative front. Nothing one can do there other than go out & sell like crazy!
June 12, 1997
WORDPERFECT PULLS COREL DOWN
By STUART McCARTHY
Technology Editor
Corel Corp. says it will take a huge $113.7 million US hit this quarter, but that will clean up the
books and boost the bottom line for future quarters, the company said yesterday.
The bulk of the hit is related to the acquisition of WordPerfect Corp. from Novell Corp. about 15
months ago for $200 million US.
Under Canadian accounting rules, Corel has had to amortize that over five years -- about $10
million a month, which has hurt the profit/loss line.
"We've been able to achieve what we've been trying to do for the past couple of quarters," said
Corel CEO Mike Cowpland. "All the U.S. companies have been able to do this."
Cowpland said the company convinced Canadian security regulators that WordPerfect as originally
acquired, bore little resemblance to the product Corel now produces and even less compared to the
Java version it hopes will eventually be the flagship product. Therefore, the original software could
no longer be considered an asset.
"Even though we talked to the analysts and explained this, they always said, `Yes, but you have this
depreciation ...'" Cowpland said. "They weren't able to differentiate between the two."
Of the $113.7 million, about $8.8 million US relates to development costs and advance royalties
from the CD HOME line Corel recently sold off.
Corel vice-president and CFO Chuck Norris, said the write down in the second quarter for which
figures will be released June 23, means a loss in the range of $1.50 to $1.60 US per share for the
write off.
Excluding the write down, analysts had projected results for the quarter ranging from a 9› a share
profit to a 3› a share loss.
For the year, the spread from analysts before the write off ranged from a loss of 17› to a profit of
32›, on revenues ranging from $404 million to $453 million US.
Norris said people looking at the results for the full "are going to see a huge loss relating to the
write down" but that's not a figure the markets care about.
"Most analysts don't target annual numbers, they look at things quarter by quarter," he said. That
means Q3 and Q4 will look considerably better than they would have.
David Wright, research director at Marleau Lemire Securities, said "the net result is it will help
report profits.
It's a substantial change and it could add about $5 million after tax to the bottom line," said Wright.
"A lot of people prefer to own a share reporting profits, but there are still some competitive issues
and it doesn't affect the cash picture," he said.
- MEANWHILE: Cowpland last night was honored as Ottawa's Business Man of the Year for
1997 by the Consumers' Choice Awards, run by the Consumers' Choice Award Institute (U.S.A.)
and Pelcard Marketing Inc. Canada.
Goldfarb Consultants were hired to poll 1,400 people in the Ottawa area to choose the winner.
The award was presented by Ottawa Mayor Jacquelin Holzman at the Chateau Laurier Hotel. |
