From Merrill research out this morning on Corel Corp.
by analysts Alex Baluta and Malcolm White
they do not rate the stock either short or long term.
(this is page 2. The summary page does not transfer over well from the PDF file without lots of editing..)
Summary
Analyst Meeting Focused on Projected Forward
Synergies Between Corel and Inprise/Borland. On
March 8th, Corel hosted an analyst meeting and its AGM,
both of which were well attended. The analyst meeting
focused on what management of Inprise/Borland (INPR;
Not Rated) and Corel see as the objectives they can reach,
and potential synergies that they can achieve, through their
proposed merger. Dominating the Linux space is not their
primary objective. The real idea is that the combined
entity will be positioned as a cross-platform software
vendor enabling application access and integration over the
Net. Conceptually, Inprise represents the back end (the
plumbing) while Corel represents generic front-end
productivity applications (the fixtures) that almost
everyone will want to access. Inprise/Borland's
development products (Delphi, Kylix) provide the "tools"
to be used in the construction of these end-to-end
enterprise solutions.
We expect, and management appeared to agree, that the
combined entity will turn its focus away from its
traditional Windows roots (where both have little
competitive advantage) towards open standards (Linux,
Corba) opportunities that are not likely to be dominated by
Microsoft.
Forward-looking architectural objectives of both
companies address two needs: the ability to access legacy
systems information over multiple platforms and the
emerging market for ASP-hosted applications. Here,
Inprise/Borland will lever its Visigenic's background and
Corel will use its applications suite and thin client cross-platform
capabilities from GraphON (GOJO; Not Rated).
In our opinion, this is a crowded field and, despite the
opportunities could prove both distracting and challenging
for the combined companies.
Both management teams, despite current market noise,
remain optimistic that the merger will conclude
successfully in May. We are at the preliminary stage of
this merger and both companies have yet to file all of the
necessary SEC/merger documentation.
Benefits of Merger are Clear; Synergies Less So in our
view. We do not see this merger as highly "synergistic" in
the short term although we see some benefits. Benefits to
Inprise include the addition of more (and less expensive)
developers in a tight US IT labour market, access to Linux
expertise, and better retail channel distribution. Benefits to
Corel include a hefty cash infusion, additional managerial
talent and expert software developers, potential sell-through
of end-to-end solutions to Inprise's blue chip client
list (Sabre, Ericsson etc.) and access to strategic partners.
WordPerfect Office 2000 for Linux Looks Impressive.
On a separate note, Corel demonstrated the beta version of
its native Linux version of WordPerfect Office 2000. We
were impressed with the functionality shown in the beta
presentation. WordPerfect, Quattro Pro (spreadsheet) and
Corel Presentations (a PowerPoint-like product) were all
shown in the demonstration. These products are expected
to be released as a suite in early April. We note that the
product has reached the level where the look and feel is
virtually indistinguishable from a Windows-based product.
Wide-Scale Desktop Linux Deployment Still Years
Away Though Channel/OEM Front Could be Active.
We continue to believe that Linux on the desktop is several
years away. Although a recent Merrill Lynch's Corporate
Buyer Survey indicated that many organizations are
considering Linux, we believe that most interest is for
Linux in specific server situations. However, Linux also
needs a substantial set of applications before it is
legitimized as a desktop solution. Corel?s upcoming office
productivity suite will undoubtedly help in this respect.
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