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Inprise + Corel: Can They Be Saved?

In the late 1980s, it was not altogether clear which company would dominate the PC software world. Would it be Ashton-Tate? Lotus? Microsoft? Borland?

Of course, it was the power of Windows that made Microsoft the superpower. As for the rest of the crowd, life was brutal.

Two of the Microsoft wounded are Corel and Inprise . To help fend off Microsoft, both companies entered an agreement to merge. But before the ink was dry on the documents, the deal collapsed.

Actually, the failure of the merger appears to be a godsend to Inprise. Basically, it looks as if Corel has been swerving out-of-control. The cash position is problematic and the product lines are undergoing erosion. True, Corel has entered the Linux world. Unfortunately, the products are focused on the consumer market - yet, Linux has most of its penetration in the corporate market. Worse yet, Corel will not even get the $29.5 million kill-fee for the merger.

So, is Inprise a good deal? First of all, Im concerned why the company wanted to merge with Corel. Why merge with a company with lots of problems? How does that add value to shareholders? The decision to merge certainly casts doubt on the management capabilities of Inprise.

Next, Inprise has undergone a variety of restructurings itself. In fact, it seems that the company has spent most of the 1990s in the restructuring mode. Despite this, the company is still floundering. In the past quarter, revenues were $46.5 million, which was up from $43.4 million in the same period a year ago. The company had a $1.1 million loss in the last quarter. Then again, this was much better than the loss last year: $25.6 million.

Moreover, the software tools market is intensely competitve. Other competitors include such heavy-hitters as Sun, IBM and Oracle. Even worse, the competition does not view software tools as a profit center. Rather, it is a loss-leader, which leads to sales of higher-margin products (for example, in the case of Oracle, it is huge databases).

Even though Inprise does have sufficient cash in the bank: 239.7 million, it looks as if this was a major selling-point for Corel to buy Inprise.

But Inprise will need more than just cash to be successful. The company focuses on the high-end corporate market. In order to sell its products, the company needs to be perceived as a dominant leader. A merger could help with this. But the merger candidate needs to offer strong distribution and brand. Thankfully for Inprise, the Corel deal will not happen. Unfortunately, the failed deal will taint Inprise, making it difficult to merge with a top-notch company.

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