From Saturday, March 8 Globe and Mail
Cowpland bets the company
COREL'S GAMBLE / The Canadian high-tech powerhouse
is counting on deep price discounts and a new computer
language to knock office software leader Microsoft off its feet.
Saturday, March 8, 1997
By Patrick Brethour
Technology Reporter
VICTORY a single point away, Gene Rheaume drills the squash ball toward the front wall of the court at the Queensview Squash Club and prepares
to hand Michael Cowpland a thrashing.
In most of their weekly matches, Mr. Cowpland dominates the court, pouncing on the ball before it has a chance to make contact with the floor and
forcing Mr. Rheaume to scramble to make a return shot.
But this Tuesday, Mr. Cowpland's aggressive approach isn't paying off, leaving the founder of Corel Corp. trailing 8-6 on what seems likely to be the
deciding serve in the five-game set with fellow club member Mr. Rheaume.
The serve comes--and Mr. Cowpland comes back, winning the point, then the game and then the set. In the end, an axiom of squash catches up with
Mr. Rheaume: whoever runs the hardest is usually losing.
"Just when the going got really tough, he seemed to be able to see the ball that much better," says Mr. Rheaume, adding that the come-from-behind
win didn't seem to surprise his opponent.
Mr. Cowpland, he says, simply assumes he's going to win.
That sense of self-assurance is equally evident in a much different sort of game: Corel's ambitious--some say audacious--attack on the most lucrative
market of the world's biggest software company, Microsoft Corp.
Corel is trying to breathe new life into the WordPerfect office software line it bought a year ago from Novell Inc., using deep price discounts to bleed
market share away from industry leader Microsoft.
"This is critical," says Mark Lawrence, technology analyst with Loewen Ondaatje McCutcheon Ltd. of Toronto. "To a certain extent he bet the
company."
It's a characteristically unorthodox move for Mr. Cowpland, who has made a career of confounding his critics. His goal is to run a strong second for
now, while waiting for new universal programming technology to catch on and pull the $1.8-billion (U.S.) American market out from underneath
Microsoft's quite large feet.
"It's like Lee Iaccoca saying, 'GM's going to be dead in five years,' " says Ann Stephens, president of PC Data Inc., a market research firm in Reston,
Va.
For its part, Microsoft seems to think of Corel more as a gadfly than a serious threat. "They're persevering and aggressive," says Andrew Dixon,
office product manager at Microsoft Canada Inc.
Mr. Dixon concedes that Corel has succeeded in rebuilding the cachet of the WordPerfect brand. But he says the smaller company's marketing
aggression doesn't mean it has a hope of toppling the market leader.
Since the campaign began last May, Corel's 53-year-old chairman, president and chief executive officer has had to skip some squash dates.
Mr. Rheaume, for one, would find Mr. Cowpland's strategy familiar. Strike first--and hard--to try and throw your opponent off balance. And never,
ever, concede that defeat is a possibility. There is just one thing he would find out of place in the Corel-Microsoft match: This time Mr. Cowpland is
the one running the hardest.
The underdog role is an unfamiliar one for Corel, whose CorelDraw program has captured well over 80 per cent of the worldwide market for
graphics software and made the company a Canadian high-tech powerhouse.
Sitting in his modest office in the guts of Corel's Ottawa headquarters, Mr. Cowpland says that success was, well, boring.
"With 85 per cent of the graphics market, things were getting a bit repetitive. Now we've got a major challenge and it's really fun. This is the big
leagues, the major leagues for sure."
A challenge it definitely is: Even though Corel is Canada's biggest software company, Microsoft is 20 times as large. Compare cash levels and the
contest is even more lopsided. For every dime Corel has in cash, Microsoft has $100.
Despite that imbalance, Corel has charged headlong against Microsoft, with some early success last summer. Corel jumped ahead temporarily in the
retail market for office software, although it has yet to make similar inroads in the corporate market.
It might seem perplexing that Mr. Cowpland has charted a collision course with Microsoft. But his career is peppered with such gambles in search of
a new challenge, a different excitement. While some led to the brink of disaster, others were hugely successful, proving Mr. Cowpland's critics wrong.
That history helps to indicate why Mr. Cowpland remains unshakeable in his belief that Corel can beat Microsoft, and relentless in his efforts to
convince others of the same.
Mr. Cowpland's sales pitch was showing two weeks ago as he accepted the annual Ursaki award for the top Canadian marketer from the Sales and
Marketing Executives of Toronto. Stepping up to the podium in the Imperial Room of Toronto's Royal York Hotel, he couldn't pass up the chance to
pump up WordPerfect: "We offer software twice as good as Microsoft at half the price."
Selling was Michael Cowpland's first job, but hardly his first love. Peddling ice cream outside of the Wimbledon tennis tournament in 1950s England
was just a little too simple for him, even as a teen-ager. "When it's hot, people buy it," he shrugs.
The young Mr. Cowpland saved his passion--as he does still--for engineering, a career he has had designs on since he was seven years old and was
given the No. 10 Meccano construction set, one of the bigger collections of nuts, bolts, gears and metal plates.
Forty-six years later, a lopsided grin creeps onto Mr. Cowpland's face as he recalls his favourite project: a walking robot powered by
battery-operated motors. The motorized robot is, of course, one of the most difficult designs in the Meccano world.
He moved up to motorcycle tinkering before studying engineering as an undergraduate at Britain's Imperial College in the early 1960s, later adding a
master's degree and PhD from Carleton University in Ottawa.
For nine years the future CEO worked as an engineer, first at Bell Northern Research, then at the much smaller Microsystems International Ltd.
The engineer turned entrepreneur in 1973, the year Mr. Cowpland and co-worker Terry Matthews founded telecommunications company Mitel
Corp. (an acronym for Mike and Terry Lawnmowers). Mr. Cowpland was Mitel's first engineer; Mr. Matthews, now the head of Newbridge
Networks Corp., was responsible for sales and marketing.
Gradually, Mr. Cowpland slipped into the role of Mitel executive as the company grew explosively in the 1970s. After Mitel's meteoric rise began to
flame out in the early 1980s, Mr. Cowpland left to dabble as a venture capitalist.
"It's like betting on horses," he says of his days as a spectator--payoffs, perhaps, but not much action. A year on the sidelines left him itching to return
as a player in the high-tech game.
In 1985, he spent $7-million (Canadian) to start up a small systems integrator called Cowpland Research Labs Corp. More familiar is its acronym,
Corel.
Even though he faced intense competition from big manufacturers of laser printers, Mr. Cowpland steered his infant company into the business of
installing desktop publishing systems. The CorelDraw graphics program was, at first, a mere offshoot of that consulting business.
Launched as a stand-alone program in January, 1989, CorelDraw sent the company's sales soaring that year and drew it international attention. Mr.
Cowpland was a player once again.
He still sees himself as an engineer, with Corel a 12-year-old work in progress. Mr. Cowpland vets most ideas for new products at the company
even now, saying his main job is to pick the technology that Corel will develop.
"I wouldn't say I'm much of a deal-closer," says the Ursaki marketing executive of the year.
It's a curious statement given that Mr. Cowpland emphasizes publicly that Corel's marketing efforts are at least as important as those in research and
development.
But it's easy to see the mind of the engineer at work when he describes his business credo: Do it now. Mr. Cowpland is famed--or notorious--for his
tendency to move quickly to execute a strategy, rather than dither over its merits or formalities. "It happens first and then we get the signatures," he
says.
Mr. Cowpland was moving toward bring WordPerfect to market as a Corel product last March, before its purchase from Novell was even complete.
Such resolute moves are sensible enough in a binary world like that of the computer engineer, where there is a one and a zero. There is no 1 , no
half-measure.
The engineering mindset also helps to explain Mr. Cowpland's seemingly contradictory propensity for tinkering with the strategic direction of the
company.
"If you don't do things in the right order, you have to take them apart again," he says, referring to his early engineering experiences with Meccano and
motorbikes.
That willingness to tinker manifested itself at Corel last December, when the company abandoned its plan to develop a hand-held computer. Only
three months earlier, Mr. Cowpland had begun to enthusiastically promote Corel's push to ship up to one million of the machines by this summer.
Mr. Cowpland labels such zig-zags "small mistakes," a way for Corel to learn a cheap lesson and move on.
He's also familiar with a more pricy sort of instruction, the type he received at Mitel.
Mr. Cowpland's design for a converter for push button telephone signals had sent Mitel revenue soaring through the 1970s. At its zenith in 1982-83,
Mitel had revenue of $255.1-million, more than 10,000 employees and locations worldwide.
Even bigger growth seemed assured when Mitel lined up International Business Machines Corp. as a partner in its development of a new kind of large
telephone switch.
But delays in developing the software for the sophisticated equipment left Mitel's research costs soaring and IBM's patience plummeting. Eventually,
IBM turfed the partnership and instead began to compete with Mitel.
Mitel's $15-million profit for the year ended Feb. 25, 1983, degenerated into a loss of $32.4-million in 1984. The next year, Mr. Cowpland and Mr.
Matthews sold 51-per-cent control of the company to British Telecommunications PLC for $322-million.
The very big mistake of development delays taught Mr. Cowpland two very big lessons, he says. One was a wariness of financial overextension. He
says the overhead costs of Mitel's many locations exacerbated its difficulties. Today, Corel has only three major sites--its headquarters in Ottawa, the
WordPerfect operations in Orem, Utah, and a much smaller operation in Ireland.
The other lesson was the need for speed in the high-tech industry. Corel takes 12 months to develop new versions of its software, half a year less than
its main rival, Microsoft.
The agility that Mitel lacked, but Corel possesses, will allow Mr. Cowpland to best Microsoft in the office software market--or so he believes. His
belief is unshakeable, even though Microsoft has regained its lead in the U.S. retail market for office software since last September.
"There's a benefit to being a contrarian if you're right, like with Java," Mr. Cowpland says, never missing an opportunity to promote the technology
that he says will turn the tables on Microsoft.
His company is working on a version of its office software in the universial computer programming language called Java. Mr. Cowpland says Java will
create a new way of using computers that will break the stranglehold that Microsoft has on many software markets, including that for office software.
"A new playing field creates a new leader," he says.
He says Corel, of course, will be the new leader.
Mr. Cowpland faces lots of skepticism, says Mr. Lawrence of Loewen Ondaatje McCutcheon, who says he's reserving judgment. "It's still, in my
viewpoint, too early to tell how this game will be played out."
The office software war isn't the first time Mr. Cowpland has been told that his plans for Corel spelled disaster. His 1989 decision to package
CorelDraw as a product for sale separate from the company's desktop systems met with cries of alarm from his salespeople.
His strategy to keep old versions of CorelDraw on the market was also viewed with deep skepticism. Why would anyone buy outdated software,
analysts asked. But that approach, designed to move the software from its customer niche of artists to the broader mass of computer users, helped
Corel win dominance in the graphics software market.
In the late 1980s, Mr. Cowpland also gambled and designed CorelDraw 3.0 to work on what seemed to be an unimportant computer operating
system called Windows 2.0, Microsoft's forerunner to the spectacularly popular Windows 3.0. When Windows began its rapid spread in the
computing world, Corel was there to ride the wave.
Not all of Mr. Cowpland's gambles with Corel have paid off so handsomely. CorelDraw 6, launched in 1995, was designed to work only with
Windows 95, the operating system that Microsoft introduced that year.
But businesses were slow to adopt Windows 95, dealing a sharp blow to Corel's sales and profits.
The skeptics were out again in force when Mr. Cowpland bought WordPerfect last year, even though the $185-million (U.S.) price tag was less than
20 per cent of the $1-billion Novell had paid two years before.
But Mr. Cowpland has surprised many observers, including PC Data's Ms. Stephens, with his success in grabbing market share from Microsoft.
"I thought this market was dead," the analyst says, adding that Mr. Cowpland has succeeded in reviving the WordPerfect brand as a realistic
alternative to Microsoft's Word. "What Corel has done is make Microsoft open its eyes for the first time."
After 24 years as a player in the high-tech game, Mr. Cowpland clearly relishes the notoriety that goes with tweaking the nose of Microsoft.
He has confounded his critics before many times. He believes, utterly, that he will do so again and topple Microsoft. Whether that is within his grasp is
a matter for debate.
But one thing is sure. Whether Corel succeeds or fails, Mr. Cowpland says that, at 53, this is his last and best chance to be at centre court.
"This is the one, as far as I'm concerned."
Financials
$million (U.S.) Revenue Profit Advertising budget
1194 $164.3 $32.5 $31.9
1995 196.4 14.5 55.1
1996 334.2 (2.8) 92.7
SOURCES OF REVENUE ($U.S.):
Productivity software, includes WordPerfect: $178-million; 53%
Graphics software, includes CorelDraw: $141.9-million; 42%
Multimedia, includes CD ROM titles: $13.6-million; 4%
Communication hardware: $566,000; 1%
U.S. RETAIL SOFTWARE MARKET:
January December
Revenue Revenue
$million (U.S.) Units $million (U.S.) Units
Microsoft $44.8 151,473 $18.8 65,460
Corel 5.6 49,015 5.4 49,629
Lotus 1.0 6,104 1.1 7,931
Excluding Macintosh sales |
