Staff abandon Corel ahead of cutbacks, layoffs
May 26, 2000 11:18 AM
(All figures in U.S. dollars unless indicated otherwise.) By Susan Taylor
OTTAWA, May 26 (Reuters) - Employee morale is slumping and several senior executives are jumping ship as struggling Canadian software developer Corel Corp. CA:COR CORL readies a dramatic cost-cutting plan that could include hundreds of layoffs.
Ottawa-based Corel, which late on Thursday announced a much-needed financing deal worth C$15 million to C$30 million, is now expected to slash expenses in the wake of its failed merger with Inprise/Borland Corp. INPR
Best known for its word processing and graphics software until last year's push into the Linux operating system market, Corel had warned it could run out of cash by July if the Inprise/Borland merger failed or if it didn't find financing.
The aborted merger withdrew Inprise/Borland's $240 million cash reserves from Corel's reach and nixed a $29.5 million termination fee.
Corel said in March it expects to lose money for the next two quarters.
Analysts are now waiting for details on how Corel will cut costs by $40 million annually -- savings widely expected from dramatic layoffs among the company's 1,391 full-time staff. Including part-time and student staff, the company has a total of about 1,500 employees.
The company would not comment on a media report that 400 jobs could be cut, but that figure may be conservative, said Jean W. Orr, an analyst at Bluestone Capital Partners, who follows Corel.
The company may need to trim about 500 jobs, which at an average salary of $60,000, translates to $30 million annually. Corel could also cut about $10 million from advertising to meet its $40-million target, Orr said.
"It's basically a work in process," Corel chief executive Michael Cowpland told Reuters of the cost-cutting plan. "I think we're only a couple of weeks away really."
Meanwhile, the mood among staff is "good, considering the fact that, obviously, we've got to go through a bit of a gear change and tune up," he said.
Sources close the company, however, say that uncertainty has left staff dispirited and apprehensive.
"There's certainly a lot of resumes floating around," said a former Corel employee who did not want to be named.
Morale took another hit last week when Corel employees travelling for trade shows were forced to pay hotel bills with their own credit cards after learning the company's credit cards had been cancelled. Any "glitches" could be attributed to Corel's transfer to another credit company, a Corel spokeswoman said.
"The longer it takes them to implement this cost-cutting, I would think the worse it is for morale, and the problem is that you do lose the good people," said Orr.
"When they go voluntarily, those are the ones that (find it) easiest to get another job -- and you don't get them back."
The company confirmed its executive vice-president of corporate services, a 10-year Corel veteran, and its vice-president and general legal counsel have resigned. Corel said the departures, effective in June, are not related to performance or financial issues.
Corel also confirmed to Reuters that its vice-president of finance left in April, and that a Linux product manager and vice-president of new ventures marketing have also departed. Corel has since appointed a vice-president of Linux and a director of Linux product development.
"It's not going to impact our ability to meet our deadlines with regards to Linux," said Corel spokeswoman Catherine Hughes. Corel will launch a Linux version of its graphics software in July.
Investors, who sent Corel stock into dramatic declines after the Inprise/Borland deal died, appeared unimpressed by the company's financing news. Corel stock dipped 78 Canadian cents to C$4.92 on the Toronto Stock Exchange on Friday morning, while on Nasdaq the issue slipped 18/32 to 3-9/32 on slim trade.
"We've been through challenging times before and we're actually very, very confident," said Cowpland. "Once we're through this kind of little cloudy stage, we'll be looking real good."
($1=$1.50 Canadian)
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