Analysts applaud Corel cash position
Some disappointment shown over size of revenue increase
Andrew McIntosh
The Ottawa Citizen
Software developer Corel Corp. yesterday reported higher sales and profits for its fiscal second quarter and ended with a much improved cash position despite boosting its research and development spending.
The Ottawa-based company said it had a $4.1 million U.S. profit on $100.4 million in sales for the the period ended May 31, 1997.
After taking a one-time, previously announced write-down of $113.7 million during the quarter, Corel lost $105.7 million or $1.49 per share.
In the quarter a year ago, Corel made $506,000 on $87.5 million in sales.
Earlier this month, Corel said it would take the $113.7 million write-down to account for the reduced value of the original WordPerfect office productivity technology it acquired from Novell Inc. last year.
Since the March 1996 acquisition, Corel has reworked and improved WordPerfect in a major way and just released its WordPerfect Suite 8 package.
Corel chief executive Michael Cowpland said he was pleased with the results.
"This is the third consecutive quarter in which we have increased
our cash position," Mr. Cowpland noted.
Corel's cash position increased from $6.9 million at year's end to
$12.1 million at the end of its first quarter to $20.6 million at the
end of quarter two.
"This is good news," said Duncan Stewart, a partner and technology investment analyst at Tera Capital Corp of Toronto.
Pierre Boucher, a technology analyst at HSBC James Capel Canada Inc., was also pleased by Corel's improved cash position, but he warned that the market might be disappointed that the increase in sales was 15 per cent.
"The sales growth is not that amazing. Some investors might have been expecting more," Mr. Boucher said.
But Mr. Stewart was particularly pleased to see Corel increase its
R&D spending.
He noted that Corel boosted research-and-development spending to $22.3 million during the quarter, up a lot from the $17.3 million it spent in the period a year ago. (Corel's larger rival, Microsoft Corp., spent $492 million on R&D during the three month period ending March 31 during which it had $3.2 billion in sales.)
For the first six months, R&D spending totalled $41.1 million, representing 21 per cent of its $194.1 million in sales. Industry
analysts like to see a company spending at least 10 per cent of its
revenue on R&D. Corel spent $25.6 million on R&D for the first six
months in the year-earlier period.
Analysts expect Corel's results in the next two quarters will improve more as revenues for the sales of its latest WordPerfect Suite begin to increase amid favourable product reviews by trade and consumer magazines.
Corel's results were released after the markets closed. The shares
ended the day down 10 cents at $8.65 in trading on the Toronto Stock Exchange.
ottawacitizen.com
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The analysts are starting to notice.
ah |
