12/17/96 PM Robert Lewis posted this link on the Corel thread:
ottawabusinessjournal.com
It leads to this article in the Ottawa Business Journal:
<Corel's woes bring speculation of the unthinkable
Observers say tough action needed to pull
software company out of downward spiral
by Derek Mellon
Ottawa Business Journal
Is Corel Corp. finished?
What was once unthinkable has now become the hot question in high-tech circles as Canada's largest software company
suffers setback after setback leading into 1998.
"They're dead," says a former Corel employee, speaking on condition of anonymity. He says the final nail in the coffin was
Corel ceo Michael Cowpland's decision in August to sell $20.5 million worth of stock, a quarter of his stake in the company, a
month before he announced a loss of $32 million for Corel's fiscal third quarter.
"When the president is bailing on the company, that's a sure sign they're in big trouble," says the former employee.
Cowpland said he sold the shares to pay off debts and was not influenced by the upcoming company results. The move
prompted a review of the sale by the Toronto Stock Exchange and contributed to a stock price decline from $8.90 to the $3
mark, where it has hovered for the past month.
Declaring that Corel is about to suffer the same fate as the recently disbanded Gandalf Technologies Inc. is not a popular move
in the capital region. Corel remains the area's most visible home-grown company and there are still a number of Corel boosters
in the region.
But the former Corel employee, who like others in the area has followed the continuing saga of Mike Cowpland and Corel,
may be only saying what many Ottawans are hesitant to express.
Arlen Bartsch, partner at Reid-Eddison and former head of marketing at Corel, has become a media favourite because of his
candid remarks regarding the activities of Canada's largest software company.
But Bartsch will not go as far as to say that his former company is going under.
"I think they will have to do a lot of navel-gazing," Bartsch says.
Bartsch thinks Corel should focus on its dwindling cash position, but he was reluctant to endorse the idea that Corel should
trim staff to help improve the bottom line.
"That's a decision Mike will ultimately will have to make," says Bartsch.
Cowpland continues to say publicly that 1998 will be Corel's turnaround year and senior management have told staff to expect
a return to profitability in the near future.
So what needs to be done to get Corel back on track?
"There is no magic formula here," says David Wright, director of research at Marleau, Lemire Securities Inc. in Toronto.
Wright says Corel will have to "tighten the reins" on its cash flow and begin filling the channels with Corel product -- something
the company has failed to do during the past few months.
But Corel may be facing challenges on other fronts as well.
Rumblings coming out of the recent Comdex show in Las Vegas is that Microsoft is taking a look at launching a graphics
program that would rival Coreldraw, which almost all analysts agree would be devastating to Corel. The company is already
battling the Redmond, Wash., software titan on the word-processing software front.
The company is still servicing the debt acquired by its purchase of WordPerfect and as of the end of August it had only $31
million in cash, down from the $85 million it enjoyed in the pre-WordPerfect era.
Last week, a Globe and Mail report revealed that Corel dipped into its cash reserves, spending $5.4 million to purchase 1.3
million of its falling shares. The move was triggered by the dumping of Corel shares by mutual fund managers. Corel officials
said the stock purchase was made because the company felt the stock is undervalued. Corel's present cash position won't be
known until it releases its fourth quarter results in mid-January.
Corel has also warned analysts that it will lose $15 million to $20 million in the fourth quarter ending Nov. 30 and will only
break even in 1998.
Concerns are also being expressed over Corel's spinoff company, Corel Computer Corp., which is slated to manufacture
video network computers incorporating Office for Java. The company is said to be eating up $1.5 million every quarter and
industry followers say the company will have a tough time selling its product against industry giants ibm Corp. and Sun
Microsystems.
"It's certainly something to look at," says Wright, who points out that the company has yet to ship a product.
To add to its difficulties, Corel Computer Corp. is now saddled with the Corel name which has lost some of its credibility in
the marketplace.
Corel can only hope for a better start to 1998 than the troubles it has experienced at the end of 1997.
In November, Lotus came to Ottawa and launched eSuite, its Java-based software. Lotus was able to deliver what Corel,
with its Office for Java, had hoped for but failed to do.
In early December, its chief financial officer resigned and the company's share price dropped to $2.80, a seven-year low.
And last week pc data, which tracks sales figures in the U.S., said Corel and its Coreldraw software has slipped to second
place overall in the professional computer graphics market behind Adobe Systems. pc data figures also show Corel's
WordPerfect software has less than six per cent of the market share, far behind the 91 per cent enjoyed by Microsoft Word.
WordPerfect's retail market share has also tumbled to 30 per cent, down from the 50 per cent level reached early in 1997.
"I am very concerned about them," says Wright, who has reduced his stock recommendation to a sell.>
Posted here for future reference only. |
