As the Canadian insurance industry begins to count the cost of the most expensive ice storms in history, Canada’s other expensive disaster area, software house Corel Corp, produced year end losses to November of $232m, only marginally less than its total revenues for the year, which fell 22% to $261m. Fourth quarter losses came in at $67m, substantially lower than Corel had warned, principally due to the company’s auditors doing some deck chair re-arrangement on the Titanic. After some careful deliberation, they have re-apportioned $28m of fourth quarter losses to the preceding three quarters, all of which were heavily loss making, forcing Corel to re-state its figures for these prior periods. Last September, chief executive Dr Michael Cowpland promised a strong fourth quarter with a good surge in sales and some exciting announcements. The reality is that sales are down to less than half their mid 1997 levels and the only important announcements the company is likely to make in the near future will concern job losses. Corel’s huge losses stem partly from amounts written off after its 1996 acquisition of Wordperfect, but also from its failure to reduce costs in the face of disappearing revenues. Fourth quarter sales are a third of their 1996 levels, while many staff related costs have remained flat or even grown, dragging Corel heavily into the red. Widespread lay-offs are desperately needed if the company is to survive. The cash position improved marginally in the final quarter to $31m; achieved by squeezing working capital (debtors and inventory) which is relatively easy in a company going backwards. But this trick can’t be pulled forever, and although Cowpland says his company remains strong and well positioned for a successful 1998, he’ll need more than just hot air to pay the bills.
