Corel is changing its tune. Gone are the grand , rosy forecasts...Tuesday, March 17, 1998
Corel predicts price wars will erode profit
By JILL VARDY
Technology Reporter The Financial Post
ÿOTTAWA - Software price wars may erode future profit margins at Corel Corp., the company warns in its annual report released yesterday before its April 15th annual meeting.
ÿIn the report, Corel lays out the details of what chief executive Michael Cowpland called a "difficult" 1997.
ÿIt says pricing pressures in the software business have intensified in the past year. "The company believes price competition, with its attendant reduced profit margins, may become a more significant factor in the future."
ÿCorel recently cut the price of upgrade versions of its WordPerfect suite of software to try and capture a larger share of the market.
ÿIt may have to increase spending on advertising as a percentage of revenue should competitive pressures in the software industry increase. That, too, could lower profit margins.
ÿCorel has declined to predict when it will return to profitability after nearly two years of losses.
ÿIt sold US$260.6 million of its products in 1997, and reported a net loss of US$231.7 million (US$3.84 a share). In fiscal 1996, it had a net loss of US$2.8 million (US5›) on revenue of US$334.2 million.
ÿThe notes to the consolidated financial statements contain a warning that the company's estimates and assumptions may affect the reported amounts of assets, liabilities, revenue and expenses.
ÿThis notice appears to be a response to a recent class-action lawsuit filed against Corel by Great Neck Capital Appreciation Partnership. The suit was filed in New York on behalf of shareholders who bought Corel shares between March 26, 1997, and Jan. 20, 1998.
ÿIt alleges securities law was violated when Corel failed to disclose material information about its financial condition. It claims Corel issued misleading financial statements for its first three quarters of 1997.
ÿIn its fourth quarter, Corel, on the advice of its auditors, restated revenue for the first three quarters, abandoning its practice of recognizing as revenue Java technology exchanged with other companies.
ÿCorel shares (COS/TSE) closed yesterday down 3› at $3.01. The 52-week high is $9.70, the low is $2.05.
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