Sorry for the delay, but as promised here is what A G Ewards brokerage says about the stock:
9-25-97
corel reported results for its third quarter last night after the close. Revenues came in at $55.8 million compared to $100.4 million last quarter (Q2) and $84.9 million a year ago. the company reported a loss of $31.4 million or $0.52 per share (primary), compared to a net loss of $3.2 million a year ago or $0.05 per share. These results were in line with what the company had preannounced on Sept. 9. However, they are significantly lower than what was originally aniticipated for the quarter. Prior to the company's preannouncement we were looking for revenues of approximately $95 million and EPS of $0.03.
These shortfalls were due to lower than anticipated sell through rates from distributors to retailers. Because corel's shipments to distributors were based on the anticipated run rates for Q3 97, distributors inventory of corel products increased substaintially. Based on the company's past sell through rates, the company determined that inventory levels were in excess of normal channel levels. As a result the company was unable to recognize revenues for the full amount of product shipped to distributors as in prior quarters.
Guidance for the forth quarter of fiscal 97 and fiscal 98 has led us to be even more disappointed. The company now expects revenue for Q4 of FY97 to be in the range of $70 to $75 million dollars. Again this is substaintially lower than what we and others were expecting. In addition the company is now expecting to report a loss of $15 to $20 million for the quarter of $0.22 to $0.30 per share. Please remember that Q4 is the srongest quarter of the year for the company and first and second quarter results are typically less. For FY 98, corel expects revenues to be flat with FY97. This should lead to break even results for the year due to anticipated cost reductions.
This combined with the company's current focus on the corporate market, leads us to be even more negative on the shares. As stated in prior comments, we feel that given the fact that Microsoft currently holds approximately 85% of the market share, Corel will have a very difficult time penetrating this market. In light of the company's new focus, they will be divesting of certain products which will include some of the company's consumer products primarily on the graphics segment (not Coreldraw)
We continue to recommend that clients reduce positions in corel and take advantage of any tax loss benefit at this time in light of the many of the issues currently at hand.
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In addition a notation indicates the AG Edwards will discontinue coverage of Corel within the next 30 days and the Qualified opinion will become informational only.
Sorry for the long post.
Greg J |
