It would appear that Microsoft is selling at least 25 million copies of Office each year, and perhaps many more. (I came up with that number based on at least $5B in Office sales, and divided by an average price of $200 per copy).
What if Corel sold a combo of WordPerfect, Quattro Pro and some kind of scheduling software for $49 retail. Upgrades, first-time users, all pay the same price. No confusion, just one simple, extremely low price.
If one were to assume that Corel could sell 20 percent of the units Microsoft sells, that would be 5 million units. Assume they get close to $40 in their pockets for each sale.
That would be $200M in annual sales of this product alone. Let's further assume that this price includes no free support. If users want technical support, they pay on a per incident basis.
Let's say that the company could show before tax profits of 25 percent (or $50M) and after tax profits of $30M. With 60M shares outstanding, that would produce $0.50 per share annual profits.
The $50M before tax profit seems reasonable with the following distribution of funds: $100M to research and development, $20M to cost of goods, $10M for administrative costs, and $20M to sales and marketing. (Sales and marketing costs can be kept low because their real promotion comes from the super low price of $49.)
$100M for research and development of this product would allow for 500 really good programmers, and 700 quality assurance people and project managers. Surely, this would be enough to produce good qulaity software that is also file/format compatible with Microsoft Office. Technical support would be paid for by those asking for it
So, why is Corel bleeding money?
As you have stated, very poor management.
This seems like a no-brainer for making money. Microsoft would not dare to come close to the $49 price (or it would kill their stock price.)
Obviously, there are many ways for Corel to improve its business, but they already have an asset in WordPerfect and Quattro Pro that they are not utilizing well at all. $0.50 per share earnings would easily translate to a stock price of at least $5 per share (about triple what it is now).
Do you see any errors in this logic? |
