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September 24, 1997updated 03 Sep 2016 6:45pm

COREL, IN TRANSITION, POSTS POOR Q3 NUMBERS

By CBR Staff Writer

Corel Corp, in the process of transition from being a retail software vendor to one that lives off corporate licensing, is facing some tough times. The Canadian company posted a third-quarter net loss of $31.4m on revenue that plunged 34.3% to $55.8m, against a loss of $3.2m a year ago. The poor showing is mostly attributable to an excess inventory problem and Corel’s decision to defer revenue recognition from a significant amount of product already shipped into the channel. Inventory sitting on distributors’ shelves won’t be recognized until it moves on to the end user in the coming quarters. For now, that leaves Corel with a weak top line and a grim outlook for the fourth quarter. The company estimates that Q4 revenue will be about $70-$75m, and will result in a loss of $15-$20m. It also expects its cash reserves, currently at $22.5m, to dip to around $15m by the end of Q4 as churns out product for the holiday season, but should then stabilize. Looking ahead to next year, Corel sees revenues flat with FY97, and expects to break even or stray into positive territory based on the upside potential of its new enterprise and web-based products like Remagen (CI 3,229). It figures revenue from business productivity applications will stand at about $200m for the year, with graphics applications raking in another $100m. That will just about cover the planned run rate of $80m per quarter, and anything else is profit. Corel chief Michael Cowpland hints that six major licensing contracts for both new products and old will be announced in the next three months. But Cowpland is looking for ways to cut costs, and has said Corel’s advertising budget – currently at about $20m per quarter – will be cut in half by the end of this year. The company is looking for other fat to trim, but for now says that there are no staff cuts around the corner. For the revenue that was recorded in Q3, 78% ($43.3m) came from productivity applications and 21% ($12m) came from graphics software. Nine-month net loss stood at $136.1m on revenue up 19.7% at $249.9m, up from a loss of $9.3m last year.

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