UPDATE: Corel Posts Q1 Net Loss

SAN FRANCISCO (03/20/2000) - Saying its future lies with the sale of Linux-based products, Corel Corp. today announced a first-quarter net loss of US$12.4 million, or 19 cents per diluted share, compared to a net loss of $14.6 million, or 24 cents per share, for the year-ago quarter.

One analyst polled by First Call/Thomson Financial had expected Corel to post a loss of 16 cents for the quarter.

Revenue for the first quarter, which ended Feb. 29, reached a record $44.1 million, compared with $40.3 million for the same period last year, Corel said in a statement issued today.

The software vendor had $29.3 million in cash on hand at the end of the quarter, the company said.

Earnings per share for the quarter included a gain of $8.9 million or 10 cents per share from the partial sale of the company's equity interest in GraphOn Inc., Corel said.

The software vendor said results in its next two financial quarters are likely to mirror the first-quarter results, as the company moves it focus from selling Windows-based products to systems running on the open-source operating system Linux.

"Corel continues to be in transition between being the legacy of Windows to the exciting opportunities ahead," Michael Cowpland, president and chief executive officer of Corel, said in a conference call. "We are excited we can deliver Linux platforms to the mainstream."

As part of its push further into the Linux world, Corel also announced today that it will begin shipping its WordPerfect Office 2000 suite for Linux tomorrow. The standard edition is priced at $109 and the deluxe edition at $159. Since their release last year, Corel's WordPerfect 8 for Linux has had more than 1.5 million downloads, and the vendor's Linux OS has had over 200,000 downloads from the Web, the company said.

Cowpland also said Corel plans to make use of its proposed merger with Inprise/Borland Corp. to develop more Linux-related applications and services.

"We expect to do very well in the overall Linux market," he said. Cowpland added that shareholders for both companies will vote on the proposed merger in late May.

For the first quarter of fiscal 2000, Corel had $2.3 million in sales from its Linux OS, down from $3.2 million in the previous quarter. However, Linux-related sales should reach $20 million by November this year, Cowpland said.

One analyst said Corel will have to step up its efforts to integrate Linux into its existing products. "The future will depend on how Corel products, particularly graphics (offerings) like CorelDraw, are accepted by customers," said Bonnie Brooks, an analyst with Creative Strategies Inc., based in San Jose, California.

In related news, Corel announced last week that it is offering $5.19 million to settle lawsuits filed by shareholders who alleged that the software vendor improperly inflated its stock price in 1997, and that Cowpland and other Corel executives sold Corel shares at the inflated prices.

The Eastern District Court of New York will rule on the proposed settlement May 12, Stefania Allevato, a Corel spokeswoman, said in a telephone interview.

Corel, in Ottawa, Canada, can be reached +1-613-728-8200 or at the Web at http://www.corel.com/.

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