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Technology Stocks : Corel Corp.

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To: Mr. Bean who wrote (4048)	12/23/1997 2:48:00 AM
From: Tommy D	Read Replies (2) of 9798

I think everyone is missing the point on the latest news release. I previously posted that the operating loss is projected to $5 million for the 4th quarter. The other $90 million are not ordinary operating expenses. I think the company is clearing the decks to go into 1998 with all the crap behind them and to be in a position to show a profit as there will be less depreciation/amortization expense or other capitalized expenses(perhaps certain R&D expenditures) to write off in 1998. You have questioned how the cash could go up with a loss. Anumber of possibilities exist; increasing payables or reducing receivables are a possibility but more likely it relates to reduced expenditures that previously were capitalized (such as capitalized R&D expenditures) or depreciation/amortization for the quarter exceeded the $5 million operating loss. As I read it the $90 million of writeoffs were not cash writeoffs but rather adjustments to book value. I did not have the quarterly financials available but the 1996 financial statements showed depreciation/amortization expense of $56 million or about $14 million per quarter. Therefore, depending upon the capital expenditures and the source of funding for the capital expenditures, there is a reasonable possibility the operating loss actually generated positive cash flow as a result of reducing capital costs or matching capital costs with long term borrowing. Just a thought. Clearing the books and taking the one time write-offs to start off fresh in 1998 may frustrate many of the ex-shareholders but for us remaining shareholders, it could result in a much better 1998 if they can show some ability to turn things around as the earnings per share will be higher as a result of the writeoffs this year. I have posted before and have been critical of the current management and have my reservations as to whether they can produce this time around but I do think that taking the hit in 1997 is the right thing to do. TommyD

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