Corel Goes Private

prostoalex writes "Ottawa-based Corel, known for its CorelDRAW, WordPerfect, Painter and Bryce products, has been acquired by Vector Capital Corp. for $124 mln. with the intent to get de-listed from Nasdaq and Toronto stock markets and go private. 80% of shareholders approved the deal, according to the story. At certain points of its corporate history Corel was a Linux vendor and even partially owned by Microsoft. Microsoft paid $135M for 25% of the shares, so Vector Capital paying $124M for 100% stake looks like a pretty good deal." It's been over a month since this was first announced, but it's actually come to pass now.

Comments

Does anyone see IP issues inthe future?

[WanderingGhost]

How much did Corel contribute to Open Source projects? With all the problems SCO has been causing, the news about Corel going private makes me sort of uncomfortable. Could they start doing the same?

Re:Does anyone see IP issues inthe future?

[kfg]

Corel's attitude is now irrelevant.

What is that attitude of Vector Capital, for whom Corel is simply now an owned brand?

I think you might find that it's very different than Corel's traditional point of view.

KFG

Re:Does anyone see IP issues inthe future?

[Daniel Dvorkin]

What is that attitude of Vector Capital, for whom Corel is simply now an owned brand?

Good question. Here's a partial answer: a list of software companies owned by Vector. The majority of them seem to be the types of names you don't recognize unless you work in a specific field -- "enterprise software" tailored to a very specific business application. And like it or not, that usually means Windows these days. I'd love to see more Linux and OS X releases from Corel (I'd love an OS X - native WordPerfect) but I'm not terribly optimistic.

OTOH, "simply an owned brand" might be a bit harsh -- I get the impression that VC (nice abbreviation, huh?) is basically a holding company and doesn't necessarily run the businesses they own. So who knows. Maybe given some money to play with and some space to breathe, the forward thinkers at Corel (there must be some left, right?) can come up with some good stuff.

Re:Does anyone see IP issues inthe future?

[Planesdragon]

With all the problems SCO has been causing, the news about Corel going private makes me sort of uncomfortable.

You misunderstand the stock market.

A publicly-traded company, like SCO or Microsoft, has to issue quarterly earnings reports, and is simply unable to focus on anything but profit. OSS is very, VERY hard to sell to publicly-traded software shops because OSS means that they're spending capital and getting no resources in return. (Publicly-traded hardware shops, like IBM and Apple, or service-shops, like AOL, are much easier sells--they simply write off the OSS programming as "support and maintenance")

Privately-held companies, like Corel will be, are a LOT easier to convince to use OSS. They can issue earnings reports at about any interval they want, they can market themselves in odd ways, and, being free of the whims of the stock market, they can pursue their business plan without worrying too much about hostile takeovers or the tides of politics.

A good release of Wordperfect office and a very stable Linux desktop would make an almost perfect MS replacement. Even though Word is the market-leader in word-processing (which, I wager, is what most users-hours are), Wordperfect still has sufficient mindshare to challenge MS--espeically in the legal field.

context

[RobertTaylor]

"Microsoft paid $135M for 25% of the shares, so Vector Capital paying $124M for 100% stake looks like a pretty good deal."

Microsoft paid that in 2000, the year when anyone with an understanding of Frontpage Express could get zillions in venture capital.

$124 million in 2003 however is a fair whack!

gmip, pah

[DrSkwid]

you should try Corel Painter

It's where Fractal Painter went

it is one of the best "natural media" packages available

Gimp will *never* catch up without massive input and to be honest, I'd rather Gimp was frozen and another application started.

Well lets hope.

[jellomizer]

Now that Corel is no longer under the whims of stockholders they can actually get to making a really good product and focus on other platforms and finally declaired that they loss the Windows Market. Including a Good modern version of WordPerfect for linux (Not that crappy windows emulated version) and I hope they will be more Mac friendly.

Re:Well lets hope.

[Anonymous Coward]

It's sad to say, but as a company that is prone to jump on every band wagon and falling off - Corel simply lacks the direction needed to set the company strait. They take in good products, and they watch them spiral into oblivion.

If I were Corel, I would be setting up a relationship with Novell like yesterday. Novell will move to a Linux solution - and with the purchase of Ximian they seem to have some end user software package in mind as well. So why not try to get Word Perfect in there? If the Novell thing takes off they'd be sitting pretty well off as an office suite distributed with a buisness package where Microsoft can't touch them.

Word Perfect has better name recognition, but if they don't get their ass in gear, then open/star office will be the last nail in the coffin.

A Pretty Good Deal

[Waffle Iron]

Microsoft paid $135M for 25% of the shares, so Vector Capital paying $124M for 100% stake looks like a pretty good deal.

If you've think that's a good deal, I've got some great deals on stock. I'll sell you shares of pets.com, PanAm airlines, 3dfx, and hundreds of others for a mere fraction of what they used to cost! You can't go wrong!

"It's a steal"

[smallpaul]

This deal is so sweet for Vector that it is barely legal. $124M is nothing for a company with annual revenues of $127M and 70M in cash. This is also the most illogical time to sell the company. The market is in the toilet, Corel shares are at an all-time low, Corel has plenty of cash in the bank, Corel has new product lines that have not been given time to prove themselves, etc. The whole thing looks very poorly thought out.

Re:"It's a steal"

[ortholattice]

I agree it's a terrible deal for the stockholders. For example, its price/sales ratio is only 0.76 (compared to say 4 for Amazon, 17.5 for Yahoo, 21.41 for Ebay). I bought 3700 shares on 8/29/02 at $1.04 expecting to hold them a long time and to appreciate considerably, since my research at that time indicated it was severely undervalued. Now I'm forced to sell, against my will, at $1.05 a share. So even though I'm making a $37.00 profit before commissions, I'm actually losing $39.98 - $37.00 = $2.98 after commissions are taken into account. At least I won't have to pay taxes.

Ironically even though the stockholders got screwed, they screwed themselves by voting for this, or more likely by not voting at all (I voted against it). Apparently it was 37.8 million in favor versus 8.1 million against; the rest of the 91 million shares didn't vote. Now of the 37.8 million in favor, 23 million were controlled by Vector, who is now laughing all the way to the bank. Moral: always vote your shares. You may think it won't make much difference, but this is what happened when everyone thought that way.

Once bitten, twice shy.

[FreeLinux]

While I agree that your suggestion would be nice, I wouldn't hold my breath. The fact is that, even if Corel is not answering to shareholders anymore, they are still a for profit company and will do their best to generate profit.

Corel tried the Linux route, producing their own distribution and a few Linux native versions of their apps. That endeavour failed miserably and they abandonded the effort completey, similar to their plan to port all their apps to Java.

Having already failed in the Linux arena and "wasted" millions of dollars in the process, Corel is unlikely to revisit what was for them a boondoggle anytime in the near future. Frankly, I do not know where Corel is going to go. In all likelyhood they will develop for the most pervasive platform but, they are unlikely to make inroads against MS Word with Wordperfect and PhotoShop seems to have a firm grip on the would be Draw market. They need a new product and I'm not sure they know what that is.

Re:Once bitten, twice shy.

[TeXMaster]

> Corel tried the Linux route, producing their own distribution and a few Linux native versions of their apps. That endeavour failed miserably and they abandonded the effort completey, similar to their plan to port all their apps to Java.

Corel's attempt at Linux were not successful by themselves, but the 'heirs' of Corel in the Linux world (i.e. Xandros) managed to turn it into a pretty effective product; at least for what I hear from people that have been trying the various distributions, Xandros is one of the easiest to install, most user friendly and it's rather complete too.

The most dangerous competitors for Corel now are precisely those in the open source world: for example, OpenOffice.org is in a good position to steal market from WordPerfect Office, even though Writer is not as good as WordPerfect and QuattroPro doesn't suffer from the size limitations that haunt Calc (or Excel).

Statements made by Vector Capital in this article

[Kircle]

Does anyone have references to statements or whatever else by Vector Capital on their plans for Corel?

Interesting quotes from this article:

"At this point, nothing has been contemplated that would change [as a result of] this transaction," Alex Slusky, Vector Capital managing partner, said in an interview yesterday. "Current Corel management continues to run Corel."

[Slusky] believes Corel is going to be "very successful" if it doesn't have to worry about all the costs and complexities of maintaining its public status.

poop.

[twitter]

$124 million in 2003 however is a fair whack!

Considering Microsoft pays about one billion dollars each time they lose an anti-trust lawsuit, $124 was nothing. They got to shut down a Linux distro and crippled Word Perfect, the then dominant comercial text editor and main competitor to Microsoft Office, Microsoft't big cash cow. It was a predatory practice and Corel decline in value of 75% reflects the result. 75% is much greater than the decline of other IT firms with as much going for them. Corell lost that value because Word Perfect lost it's market share, market share it could easily have maintained with it's Linux distribution. Lawfirms still use Word Perfect and they cry out for stable software underneath it. Had they been given that platform, they would have eaten it up and proved the value of a comercial Linux distribution five years ago as well as it is proven today. By purchasing 25% of Corel, Microsoft pushed back Linux competition five years, prevented an anti-trust lawsuit and gained all the fruits of predatory behavior. It saved them a minimum of a billion dollars and much more in lost sales revenue.

and fast!

[twitter]

Let's hope they revive that Linux package before Paladium swings into action. People want what they have and the people who want it are influential.

There's a huge market of lawfirms just waiting for this one. They are sick to death of M$ nonsense and know about free software now. Between a Linux Word Perfect for their documents and printing and Star Office for M$ translation, Microsoft does not stand a chance there. I don't have to mention that government offices would be happy to have this too, do I?

When free software makes it into those places, where everyone can see them, the myth of Microsoft dependence will be completely crushed. There's something about seeing free software running where you go for good advice that does way more than an IBM advert in the Wall Street Journal. Many good things will come from that.

Go Go, Vector!

great advantage to Vector in free software.

[twitter]

a list of software companies owned by Vector. The majority of them seem to be the types of names you don't recognize unless you work in a specific field -- "enterprise software" tailored to a very specific business application. And like it or not, that usually means Windows these days.

So, by purchasing a company with experience porting software to free they could establish a distro and port all their other stuff to free and save themselves that many coppies of M$ dependence and development costs? What could be better for specialty software than that?

The direction Microsoft took Corel when they bought 25% of them and shut down their Linux work was obviously and disaserously wrong. Corel has continued to lose market share, even in government work where it once ruled. Hell, they used to rule the comercial text editor world. They did not lose out because Microsoft made something better, they lost out because Microsfot made Word Perfect into an expensive Windows only additional purchase most people would not make. They OS/2'd them, making Word Perfect more expensive than Word in all cases. That's easy to do when you own the platform and sell everyone else required libraries.

There is still a market and it seems obvious that Linux is the way to go. Those who remember Word Perfect want it back on a stable platform. It will cost less for Vector to do things this way and customers will get more of what they want.

Re:Corel Draw

[WindBourne]

yes. The reason is that vector is the company that originally supported the linux stuff. Hopefully, they will do it right this time. If they are smart, they will move all the graphics to Linux and then catch the rest. Why graphics? one word. Hollywood.