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Technology Stocks : Corel Corp.
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To: A. Hayer who wrote (292)5/20/1997 6:18:00 PM
From: Dr. J   of 9798
 
Yikes! How is Corel going to go from 0-13% PM? Yes, the amortization gives you about 1/2 of that, but GM is probably stuck where it is because of the sales model. Are they going to cut SG&A? or R&D? The latter (at 16%) is relatively high, but also offers the greatest hope for the future.

I can't agree that a PE of 25 is "conservative"!! Look at SYMC (another company I am following); it is profitable, growing, and about the same size as COSFF. It has a forward PE of about 16.

B. CASH FLOW
Backing out the amortization gives you about 42c/share free cash flow (very rough); this suggests a fair price of about US$6 for COSFF (hmm; i'm assuming COSFF is 1:1 with COS - is this true?). Given how little of a premium this is over current price, I think analysts aren't expecting any margin improvement for next year or so. They may be right - R&D costs are 16% of revenue, which is certainly high (not outrageous however, and could be positive). There is also payment on LT Debt which I left out of above calculation

C. BALANCE SHEET
Doesn't look so great right now after spending all that cash on WP acquisition.

D. OPERATIONS
I don't know anything about this - anybody have any insights?

E. PRODUCTS
WP Suite 8: Uphill battle against MS Suite. Niche versions for lawyers etc. is a great strategy. WP is good, Quattro Pro mediocre; I haven't tried the presentation package

Java Office: A "proof of concept" for now; won't be a serious revenue generator for at least a year

CorelDRAW: The bread and butter. Who are the competitors? What do they look like? Have any of you out there used CorelDRAW and like it?

etc etc
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