COREL NEWS
ANALYST UNCERTAIN ON IMPACT OF COREL'S ACCOUNTING NEWS
ÿ
By Scott Adams
TORONTO (Dow Jones)--At least one analyst is uncertain how news
from Corel Corp. (COSFF) Wednesday morning will affect his
projections for the year.
Michel DeLavergne, analyst with Dlouhy Investments Inc. in Montreal,
said it appears as if the news will change his financial model for the company which he uses to make projections, but couldn't say yet if this will affect his earnings estimates. He said he was reserving judgement until he talked to talk to the company.
Wednesday morning in a press release, Corel said it would report
revenue of US$54 million for the third quarter ended Aug. 31, while
having shipped orders totalling US$96 million. As a result, the
company said it would report a loss of US$32 million.
The market has taken the news badly, shaving the stock down 1.10 to
7.80 on volume of about 340,000 shares. Wednesday on the Toronto
Stock Exchange. On the Nasdaq, the stock is off 57/64 to 5 9/16 on
volume of 490,000 shares.
Corel spokewoman Carrie Bendzsa explained the news saying: "We
basically made the adjustment because we had too much inventory in
the channel and our historical run-rates were lower through the summer than we expected."
She couldn't elaborate on how that will affect the company's earnings. Third-quarter results will be released Sept. 24.
In an Aug. 12 report, RBC Dominion Securities Inc. saw Corel losing
US$1.39 a fully diluted share in fiscal 1997, or 22 U.S. cents a fully diluted share before non-recurring charges. The report rated Corel a "buy" with a 12-month price target of C$12.00. The analyst couldn't be reached for comment immediately. In fiscal 1996, Corel lost 4 U.S. cents a fully diluted share.
Now Sees Break-Even In 4Q
After speaking with Corel Corp. (COSFF) executives, Michel
DeLavergne, analyst with Dlouhy Investments Inc., said WordPerfect 8
sales weren't as high as the company expected in the third quarter. He didn't have numbers on how dissapointing sales of WordPerfect 8 Suite were. That software started shipping in June.
Typically, Corel ships its software to distributors and books that as
revenue, while taking into account that a portion of the shipments will eventually not sell. In the past, Corel has been accurate in projecting how much wouldn't sell, but in this case, an inventory backlog has built up at the distributors, he said.
The US$32 million loss Corel expects to take for the third quarter will translate into about 45 U.S. cents a fully diluted share, DeLavergne said.
Corel lost US$1.46 a diluted share in the first two quarters of fiscal 1997, or had a profit of 7 cents a diluted share excluding charges.
For all of fiscal 1997, DeLavergne had forecast that Corel would earn
28 cents a diluted share, without accounting for charges. He was
expecting earnings of about 5 cents a diluted share for the third quarter and 15 cents a diluted share for the fourth quarter.
He now believes the current inventory backlog will carry forward into
the fourth quarter as well, reducing his expectations for that quarter to about break even. That will mean a loss of about 40 cents a diluted share for the fiscal year, excluding charges, he said.
However, his price target is based on fiscal 1998 earnings - which he
was expecting to be about 40 cents a diluted share. Corel could reduce its overall costs and still make a profit in 1998, despite falling short of 1998 revenue expectation, he said. His "buy" recommendation on the stock is under review until he revises his 1998 financial model for Corel.
<<<END>>>
msb |
