Remember the shock of Q1 revenues? Only $40 Million due to additional write down of unsold products. (Loved the honesty in reporting.) I was certainly concerned with what was in store Q2 and overall direction. Q2 turned out surprisingly strong with $70 M, with assurance of fair level of sales. (No stuffing.) Q3 was slightly better than Q2 revenue at $71 M. (It's interesting to note that the settlement received in Q3 from the Canadian government was not added to revenue, but treated as a separate item. So what can we conclude with this news of Q4?
1. If Corel Linux began shipping on Nov., 30, I doubt that Mr. O'Reilly is including much Linux revenue, if any, in Q4. It will show up in Q1.
2. Corel's strategy in the reporting of Q1 is again being deployed for Q4. Management is simply setting up for strong Q1 results. (If your reporting a disappointing quarter, why not just leave out the timing question between orders and shipments.? Save it for next quarter.
3. December, Corel's first fiscal month, should bring in a fair amount of retail revenue across all product lines. Hey, it's Christmas! I believe there will be a nice retail flow-through from the channels, resulting in more orders for January and February.
4. As Linux spreads generally, Corel Linux will too. If Linux is any "hot" kind of product at all for RHAT or anyone, just think about the upcoming launch of a truly professional office suite and graphics products to be released in February/March of 2000. (I saw tremendous interest for it at Comdex.)
5. Making an assumption about Corel's intitial shipments of shrink wrapped linux are probably about 350,000 units, I figure that represents about $9 Million in revenue directly for Corel alone for that product. Imagine the intial shipments of the WP 2000 for Linux, plus CorelDraw and PhotoPaint. Gotta believe in Q1. (Remember the million downloads of WP8, The CNET ranking etc.)
So where does CORL stand. Still at about 240 Million in revenue, only 230 Million more than RHAT. They are continuing to improve the Win products despite MSFT, which is the correct thing to do. They are moving rapidly into the Linux space, the fastest growing segment in the computing industry.
Hey, I much prefer clean financials, the quality of the product lineup, and yes, a strong prospect for higher profits in FY 2000 and beyond.
Cheer UP all, the stock will shortly be too.
Scott |
