Price Wars...What Price Wars?!
Has anybody noticed that neither of Corel's primary competitors have ever "stooped" to competing on price? Neither Microsoft or Adobe have lowered their prices in response to Corel's pricing pressures, preferring instead to maintain pricing/margin integrity (and increasing shareholder wealth in the process)!
Competing on price is a losing proposition.
Has anybody asked what effect this drop in price at retail will have on Corel's enterprise licensing revenues? Enterprise licensing is a highly profitable play (no disks/dox = $0 effective Cost of Goods). Can you imagine a corporation paying more than $25 seat for WP8 when they can go to egghead.com (or Corel's own website for that matter) and order full box product, with disks/dox for $79.99.
What does a box of $79.99 software sell into distribution at? Around $55. What is the cost of goods on this (packaging, media, manuals, 3rd party royalties, etc.)? What is the gross margin to Corel on this?? My guess is somewhere around $25. With Corel's propensity for spending on advertising, and with no announced layoffs, it's not hard to see why there's not enough money generated in terms of margins to go around...(I thought they had a hot-shot new CFO?? Maybe a basic course in cost accounting would go along ways...Come to think of it, so would Marketing 101!)
The Board of Directors needs to realize that the Emperor has no clothes, nor does any of the supporting cast, if this is the kind of knee-jerk strategies that continue to be implemented.
It's a long way from the pricing that WordPerfect (or competing applications) have historically commanded. |
