Uh, $10 each SUM OF THE PARTS: Wordperfect + JAVA + LINUX + Quattro Pro + Paradox + Office Suite, this doesn't sound right to me.
$10 times 66 million shares is $660 million. That is a lot of money to pay for each of these components. Recall that Corel paid four hundred and something million dollars to Novell for WordPerfect and whatever else they bought from them -- a price which later proved to have been much, much too high.
"JAVA" -- well, they sold that to Graphon (their jBridge stuff). And for quite a bit less than $660M -- anyhow, it's already gone.
"LINUX" -- that isn't theirs to sell. They don't own it. What reason is there to think that Corel can do a better job with Linux than can the other top companies (Red Hat, for instance) who have been in that business much longer, have top notch products, and a proven track record?
"Office Suite" -- that would be double counting the "WordPerfect" and "QuattroPro" parts, wouldn't it?
The fact of the matter is, they had sales of $44M in their most recent quarter (vs. $40M in the year-ago quarter). Their sales "increased by $6.2 million in the first quarter of fiscal 2000, as compared to the first quarter of fiscal 1999 primarily due to the success of CorelDRAW 9, released May 1999, as compared to CorelDRAW 8 being near the end of its lifecycle in Q1 1999." (source: 1Q00 10-Q, Management Discussion and analysis), so one could argue (I would) that their 1Q00 revenues are cyclically overstated. The idea that they'll have tens of millions of Linux sales Real Soon Now is ridiculous.
They have no growth. They have no earnings. To speak of a P/E or a PEG therefore makes no sense. Their stock price might be "low", but it certainly isn't "cheap".
They are overvalued, cash-starved, and quite likely to be unable to "pull a rabbit out of a hat" this time, in spite of the fact that that phrase ("pull a rabbit") systematically appears in many of the "analyst opinion" news releases/interviews.
Corel might be bought out, but their share price (even at $US3.5) still isn't "cheap". Or, they might go bankrupt, and the shares will (eventually) be essentially worthless. I'd say that an attractive price (for a buyer who intended to make a business out of it) would be $50 to $100 million (US), if a buyer was able to get it soon, and have Cowpland out as part of the fresh start. That's about $1.50 (US) tops, IMHO, if there is a buyer who is interested in paying for a cash cow with a dying stable of products that nevertheless likely have a few years life left in them. But there don't seem to be many cash-flush aggressive buyers these days.....
Anyone trying to make money by buying Corel shares now ought to consider the possibility that they are risking substantial losses, and that any profit they might make will be contingent upon them outsmarting the market (not impossible, but perhaps not the easiest bet in the world either).
- Daniel |
