bcoch
I am taking the liberty of posting your Ottawa Citizen article over here on the news thread. If my memory is correct it will otherwise be lost to us forever in 24 hrs.
<<Wednesday 24 September 1997
Cowpland unfazed by expected loss
Investors do not share his confidence in Corel stock
Mark Evans
Bloomberg News
Even in the face of today's expected third-quarter loss of $32 million U.S. and lower sales of its flagship WordPerfect software, Corel Corp. chief executive Michael Cowpland remains upbeat.
His confidence contrasts with the views of many analysts who argue that Corel is waging a fruitless battle against Microsoft Corp. in the
$5-billion-a-year market for software that includes word processing,
spreadsheet and presentation applications. Corel's share performance reflects that pessimism, tumbling 31 per cent this year, compared with the Toronto Stock Exchange 300 Composite Index's 18-per-cent climb.
Corel shares, which recently touched a four-year low of $6.50 Cdn., closed unchanged at $6.95.
"The suite business is so big that even being second is still pretty good," Mr. Cowpland said in an interview last week, adding he expects WordPerfect to be profitable with sales this year of about $200 million U.S.
Corel is hoping the newest version of WordPerfect will win over
consumers. That wasn't the case with its predecessor, which was poorly
received and saw Corel's share of the office suite market fall to 16 per cent in July from 34 per cent in June.
Lackluster sales of WordPerfect means Corel will today report a loss of $32 million U.S. in the quarter ended Aug. 30. Revenue will be about $54 million U.S., compared with analysts' expectations of $93 million U.S.
WordPerfect 8.0 was introduced last month to a series of good reviews.
Still, Corel faces a daunting challenge to gain a foothold in the corporate market now dominated by Microsoft.
Mr. Cowpland, however, is encouraged that WordPerfect can be successful, and its $194-million U.S. purchase from Novell Inc. in January 1996 will be finally be justified. "We are finding there's a real change in perception" about WordPerfect, he said. "We're not getting customer erosion and we're starting to get some wins."
WordPerfect's success is crucial to Corel because sales of its CorelDraw graphics software, which has attracted about 80 per cent of the market since its launch in 1989, have flattened and become a steady, if unspectacular, profit maker rather than an engine for strong growth.
Corel has adopted a number of different strategies to jump-start
WordPerfect sales. The most basic is price: WordPerfect sells for about $440 Cdn while Microsoft's Office is $699 Cdn. That means WordPerfect is a low-margin product that requires high volume sales to be profitable.
Another strategy is the development of specialized versions of WordPerfect for the medical, legal, education and construction markets.
Mr. Cowpland is most optimistic about Java, a programming language that allows software to run on any operating system. Corel, however, retreated from its Java strategy last month when it decided to focus on the development of software to run on a company's larger computers rather than desktop machines.
Corel's focus on Java has primarily been a public-relations campaign to persuade software users, customers and analysts that it's on the cutting edge, said Eric Brown, a senior analyst with Forrester Research in Boston. "Corel has generated a lot of industry buzz to convince the user community that although WordPerfect is today's product, Corel is tomorrow's company," Mr. Brown said.
Corel's main problem is that many companies are still dealing with other technology issues and Java's growth may be slower than expected, he said.
Another area requiring Corel's attention is relations with distributors, who have complained that Corel is more interested in marketing and advertising.
Mr. Cowpland, one of the technology industry's most accessible and
talkative executives, conceded there have been problems in the past.
He hopes the appointment of Don Sylvester as senior vice-president of
sales will improve its sales organization.
Analysts said Corel could immediately improve its bottom line by cutting marketing spending, which has surpassed $100 million Cdn a year. Cowpland said costs should stabilize at about 20 per cent of revenue.
Michael Delavergne, an analyst with Dlouhy Investments in Montreal, said the market is still not sure whether WordPerfect will prove a success even though Corel has made significant improvements.
Feature for feature, WordPerfect 8.0 is getting good reviews and is
probably a better product, but the demand doesn't appear to be there," he said.
The decline of Corel shares has created an opportunity for aggressive
investors, he said, while advising more conservative investors to wait
another quarter before buying. >> |
