About Corel's stock,
Thank you for your replies to my writing (Lo and Skye).
In Skye writing, something is incorrect here (I think) about
40 mil. Corel has to pay for Novel in 4 years (total of 150 mil.).
The statement is correct if only within 4 years Corel has to buy
back ALL OUTSTANDING shares which issued for buying WP in equity.
If doing so then the book value of Corel is way up high and the
stock price will be rocketed up to the stratosphere.
Let me clarify this point by an example,
Let assume the company A needs $150 mil. to expand its company
by issuing 10 mil. shares at $15 a share, within 4 years this
company DOES NOT has to buy back all 10 mil. shares. This
$150 mil. came from investors (like you and me). The investors
are very very happy if they get pay $40 mil. per year as you
wrote (more than 25% a year isn't it?).
So that $40 mil. Corel has to pay Novel is not a good number to
use to deduce from the earnings. This number should go to
the income statement and $150. mil. should go to Company's asset
at the same time (on the other column of the balance sheet)
this number is appeared as share holders' equity.
Notice that $150 mil., the worth of WP, does not disappear
after 4 years. After 4 years, Corel can easily (again I believe,
may be not correct) sell WP to other company to recover this
amount.
The only thing that I worry about is the advertising expenses,
not selling of WP or making money out of this product. If you
take a look at the last quarter report you will see what I mean.
Income is right there (good revenue, good income) but the
advertising expenses are eating into the income, so the retaining
income is so low. In addition, Corel doesn't to pay tax until
it recovers capital loss for the previous quarters (two).
To me Corel stock price is undervalue, this price is maily resulted
from a large short-sellers. The chain reaction from analysts,
when these guys short-sell Corel's stock and then make a SELL
recommendation during the BEAR market. When I read the reasons
for the SELL rec., most of them did not convince me.
Does the dogfight from Corel to Microsoft worry me?
Not at all, this is the gamble, if Corel wins it will get a large
chunk of $5 billions Suite market share. If it loses, $150 mil.
The reward is too big compared to the risk. Ofcourse it won't
lose all of $150 mil. because there are a lot of royalists in
the 20 mil. WP users. Microsoft right now is putting all the
energy to fight will Netscape, don't expect it will come out
with a WP killer soon. Be honest with you, in my opinion, WP is
hell far better than Word. I did use Word for my resume (long ago),
but when I wrote my thesis, Word is uncapable to do the job, so
I had to switch to WP.
A Corel optimist still |
