October 15, 2000
Derek J. Burney
September 2000 letter to customers
October 2000
Dear Corel Customers,
We have recently made many important announcements and, as always, I would like to make sure you are informed of what is happening at Corel.
Our biggest news is that Corel and Microsoft Corporation have formed a strategic alliance that will see the two companies expand their existing relationship to encompass projects related to Microsoft’s new .NET initiative. Corel and Microsoft have shared a long and colourful history – both as partners and as competitors. This announcement represents the start of a new and exciting chapter in the two companies’ long-standing relationship. As part of this new alliance, the companies will work together on activities surrounding Microsoft’s new .NET initiative. Specifically, Corel will work with Microsoft to develop new Web-based services and software on top of the .NET platform with the shared goal of providing users with a better and richer computing experience. With this partnership, we will enhance our flagship brands – including CorelDRAW®, WordPerfect® and our Linux® products – by offering them on the .NET platform. As part of the alliance, Microsoft has made a strategic investment in Corel by purchasing 24 million non-voting convertible preferred shares. For more information on this announcement, please see our press release at www.corel.com/news/microsoft_alliance/.
This exciting announcement was preceded by what we believe to be some encouraging news on the financial front. On September 27, 2000, we reported financial results for the third quarter ended August 31, 2000. While we posted a net loss of US $10.7 million overall, the results show our revenues held firm from the previous quarter and our costs are down substantially. The results suggest that our cost-restructuring plan is beginning to have an impact on our bottom line. Our losses were lower than analysts’ expectations largely due to our disciplined financial plan, which is part of our ongoing efforts to put the company on a more solid financial footing. For more detailed information on our Q3 results, please see our press release at www.corel.com/news/Q3_2000/.
We enjoyed some notable accomplishments during Q3. We launched several exciting products on multiple platforms, including the release of our flagship graphics suite – CorelDRAW® 10 Graphics Suite – for Windows® and Linux, as well as Corel® LINUX® OS – SECOND EDITION. We continued to garner industry praise for our existing offerings and expanded our reach to customers through strategic partnerships with companies such as Hewlett-Packard and Wacom.
There have been internal changes at the company as well. We recently unveiled a new executive management team and organizational structure, designed to renew our focus on our product lines. We promoted four talented individuals – who together have devoted more than 30 years of combined service at the company – into positions of executive vice-president, in charge of their respective areas. Ian LeGrow has been promoted to executive vice-president, creative products; Graham Brown, to executive vice-president, business applications; Rene Schmidt, to executive vice-president, Linux products. Annette McCleave has been promoted to executive vice- president, corporate marketing. The company’s new organizational structure is directly aligned with its product groups: Creative Products Group, which includes our flagship graphics suite CorelDRAW; Business Products Group, which includes WordPerfect; Linux Products Group; and New Ventures, which includes new technology opportunities and our Web product initiatives. In addition, the board of directors has appointed me Corel’s president and CEO on a permanent basis and I’ve been appointed to the company’s board of directors. For more information on this announcement, please see our press release at www.corel.com/news/emt_unveiled/.
The internal restructuring is just one of a series of steps we recently announced. These steps are an important part of the solid foundation we are building to support the company’s long-term growth. We took the first step by identifying the elements of our cost-restructuring plan. As a second step, we obtained commitment for long-term equity financing. With the third step, we have strengthened our management team and realigned our internal structure so we can focus all our resources on delivering the top-quality products and services you expect. We are committed to continuing to support and develop the products that you know and love: our graphics, business productivity and Linux applications on multiple platforms, including Windows, Macintosh® and Linux.
I am pleased to report we are making progress on our plan to return the company to profitability. We recognize that we have a lot more work to do but I believe we’re on the right track. My strategy over the next few months is simple. It involves three steps – prioritize, improve and prosper. We are prioritizing with a renewed focus on our product lines and by demanding greater accountability from each of our product groups. We will improve by restoring the company’s credibility through our disciplined financial plan and product-focused approach. Having achieved these two goals, we believe we will prosper and sow the seeds of long-term growth.
Thank you for your continued support.
Sincerely,
Derek J. Burney,
President and CEO, Corel Corporation
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