Linux is real, but Corel doesn't get it. A public letter to Corel's investor relations:
Dear Corel Executives:
As a long time shareholder, and a Linux system provider to a range of entities from Fortune 500 companies to individual consumers, I am dismayed by Corel's recent business blunt related to Linux. Perhaps Corel thought that by simply jumping on the Linux bandwagon, it would instantly deserve a "celebrity" status and high stock prices. Some even talked about threatening Microsoft. But what about the real sales growth? What about what customers really want? It is apparent now that the only thing inflated is Corel's ego. Both its stock price and its balance sheet are bleeding red.
Based on my personal experience, I summarize the current situation in two sentences: Linux is real; but Corel doesn't get it. In my opinion, Corel better focuses on what the market really needs, instead of on PR stunts and needless M&A activities. Look at the press releases of recent: low-cost PCs? Windows/Linux dual-boot PCs? How much money can you make on a $500 pc? How many companies want their employees having two operating systems on their desktop? How does the Inprise/Borland acquisition fits in a Linux strategy? In my opinion, Corel's Linux strategy is deeply flawed, or defocused, or it simply does not have a clearly defined one.
To even think of threatening Microsoft, one had better learn from it. Microsoft does not make most of its money from consumer users. Besides, the strength of Linux is not in the consumer market. What would a consumer choose: a $1000 windows pc with a lot of applications, or a $980 pc with very few applications? The real money lies in the corporate market. In particular, aside from the server market, it lies in the market of small to medium business. Business of a few to a few thousand employees. To crack this market, the key question to ask is what needs to be done to replace a Windows environment in an average corporation with a Linux environment? The answer is not complicated: (1) Word processing/Spread sheet/presentation. In this regard, Corel is on the right track. (2) Email/networking. In this regard, Linux has a lot of powerful tools, but lacks friendly interfaces. For example, if Corel can put an interface as good as Outlook, or Eudora, it will have a winner.
One thing Corel needs to realize is that it cannot carry Linux alone, nor is it the leader in the Linux movement. This is a good thing, because then Corel can concentrate on things it can do best: Linux office applications and their marketing. There are many Linux applications that need developing, but many of them are better left for someone else. Why spend the time and money putting out the 101th Linux distribution? In most aspects Corel Linux is inferior to Red Hat and will never make a significant inroad into the corporate market. Why spend precious time and synergy acquiring Inprise/Borland? It only defocuses Corel and delay marketing of critical applications that the market most wants.
Recent survey shows that Linux only has 4% of the client workstation market (vs. 24% in the server market). It represents several million machines. It is this client workstation market Corel needs to pool its strength and throw a powerful punch on. If Corel can help double the percentage to 8%, and sell a $100 office application to half of them, it will be several hundred millions in the bank.
Linux represents an opportunity, but it won't last forever. On one hand, Microsoft is always looming on the horizon, ready to crush any competition. On the other hand, hundreds of companies are jumping on the Linux wagon everyday. Corel better concentrates and acts efficiently.
Sincerely,
Shi@Silicon Investor Corel board |
