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Corel Q1 disappoints

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There was disappointment yesterday at Corel's Q1 results, probably because the company is still perceived to be mainly a hard-pressed Microsoft-competitor with WordPerfect and some graphics products, rather than as a Linux distributor merging with a tools developer as a result of the Inprise/Borland acquisition. The loss for the quarter was $12.4 million on revenues of $44.1 million, with $29.3 million in cash, compared with $18 million a quarter earlier. This was better than a year earlier - a loss of $14.6 million on $40.43 million (with half the amount of cash). However, the result, was considerably down on the previous quarter, which achieved income of $60.9 million, albeit with an exceptional item. The productivity applications contributed $22.5 million during the quarter, just over half the revenue, up relatively but down absolutely in view of the maturity of the market and the product cycle. The graphics business produced $19.4 million, and there could be some boost from a Linux version of Corel Draw later in the year. There was some financial-analyst unease at the unexpectedness of the results, but since so few deign to follow the company in detail, this was not really surprising. The criteria that have been used to judge performance in the past have largely have to be abandoned, and in any event, Corel's Linux business would appear to be in better financial shape than that of the other major Linux distributors. With CEO Michael Cowpland having forecast Linux revenue of $20 to $30 million in the financial year, there was considerable interest in the figure for Linux revenue. It turned out to be a rather disappointing $2.3 million, but in view of the fact that Corel offers a free download, again this is not so unexpected. Cowpland said he still thinks that $20 million is achievable from Linux revenue this year. He wants Corel to be judged like the other Linux distributors, where substantial losses are the norm - at least at the moment - and to receive recognition that Corel had done what it was said could not be achieved: creating a desktop market for Linux. The one cheery announcement was that WordPerfect Office for Linux was sent for manufacturing yesterday morning. There will be two editions: a standard one for $129, and a deluxe edition for $159 (recommended prices), which will have in addition Paradox, Communicator, more fonts, clip art images and photographs, as well as an entertainment pack. The standard edition includes WordPerfect 9, QuattroPro 9, Presentations 9, CorelCentral 9, and of course Corel Linux OS with updates. It was somewhat surprising that Corel does not see the WordPerfect suite making a big impact in the next two quarters, since it said it expected "results for the next two quarters will mirror those experienced this quarter". Presumably this reflects costs associated with the Inprise merger. Cowpland said that he expected shareholders of both companies to agree to the merger, probably in May, and that no changes in the terms were contemplated. ®

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