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Corel tells SEC 'we'll run out of cash next month'

Unless investments sold and non-core units spun off, that is

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Corel has issued its second cash-flow warning in as many months. The software company yesterday admitted it will run out of money by the end of August if extreme measures are not taken.

Only last week CEO Michael Cowpland told Canada's CBC that the company's financial worries were over. He told CBC that Corel had $25 million in the bank. "Basically, we're a very resilient company," he boasted.

That doesn't quite tally with a filing Corel has made with the US Securities and Exchange Commission that notes the company's cash pile will be $500,000 in the red by 31 August, the last day of the business' current fiscal quarter.

The filing says, however, that the company will remedy the situation by selling more GraphOn shares. It also warns that the company will sell off other investments and possibly even some of the business' "non-core activities".

That's already happening: earlier this week, Corel sold off its GraphicCorp digital image library for an undisclosed sum. Corel also walked away with a 23 per cent stake in the buyer, Canadian company Hemera Technologies.

Meanwhile, Corel's SEC filing also notes gloomily that there's no guarantee that any of its key applications - CorelDraw, WordPerfect Office and Corel Linux OS - will do much for the company's revenues, which have been declining throughout the last nine months or so.

Recent software bundling deals with Hewlett-Packard are unlikely to do much for Corel's bottom line, but the company clearly needs all the help it can get. It is already embarked on a programme to cut costs by $10 million, a process that involved the loss of 320 jobs, 20 per cent of its workforce, which should reduce the Corel's loss - though the SEC filing says the current quarter will still be a loss-making one - but without a significant boost to the company's revenue, it's hard to see anything but a slow decline ahead, for all Cowpland's bullish spin.

Last quarter, Q2 2000, it lost $23.6 million on revenues of $36.6 million. Its cash reserves stood at $6.6 million. For Q1 2000, Corel lost $12.4 million on revenues of $44.1 million. ®

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