Reading between the lines..., Q1-97 will be profitable.
Geek Stuff:
Did you notice any change in Corel advertising in the computer magazines?
In January and February, advertising was definitely down. The number of ads were a lot lower than normal. Now that we've officially passed Q1-97, i've noticed that the number of ads are back up to normal levels again. This can only mean that Corel exhibited some control on advertising during Q1-97.
Now lets see if we can't figure something out here.
Since the acquisition of WordPerfect, there exists some relationship between earnings, advertising, and revenues.
Q2-96
Revenues = 87.474 MM
Advertising = 22.674 MM (25.9%)
Earnings = 0.01 / share
Q3-96
Revenues = 84.942 MM
Advertising = 22.921 MM (27.0%)
Earnings = (0.05) / share (quarterly loss)
Q4-96
Revenues = 125.406 MM
Advertising = 31.690 MM (25.2%)
Earnings = 0.09 / share
The relationship seems to be that with advertising around 25%, Corel is profitable with revenues above 85-87MM. I'm assuming all other costs such as SG&A, R&D, etc. remain constant as a percentage of revenues. Now if advertising is lower than 25%, then Corel can be profitable with revenues less than 85MM. I think this may be the case for Q1-97, based just on the ads theory.
The following statement was taken from the Reuters Story - March 04, 1997 12:05 - "Corel to ink more office software deals" (Refer to thread #1591 for full story).
"Corel Chief Financial Officer Chuck Norris said the company's results for the first quarter ended in late February would be in the range of analysts' estimates. Forecasts ranged from nil to a loss of $0.11 a share on revenues of $85 million to $102 million."
From this we know that revenues for Q1-97 will be al least 85MM. Therefore, based on the above trend, we should see a profit.
ah |
