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Corel Notches Graphic Deal

Graphics software specialist Corel Corp. Monday bought Micrografx Inc., a smaller firm with similar interests, for about $32 million in stock.

The agreement has been forged in such a way that Micrografx shareholders will get a transaction value equivalent to one times Micrografx's fiscal 2001 annual revenues, or approximately $2 per Micrografx share.

Interestingly, the deal has been posited as a kind of restructuring on Corel's part to return to profitability. After layoffs left the company 20 percent leaner in terms of manpower last year, Ottawa, Canada-based Corel (which for years slugged it out with behemoth Microsoft Corp.) said it would embark on a three-phase strategy to prepare itself for long-term growth. Buying Dallas' Micrografx, a creator of technical illustration apps, is primarily part of the first phase, which consists of strengthening its position in the graphics sector through acquisition and expanding its user base.

Corel plans to shift focus to the Internet in the second phase, by making its existing products Web-friendly. In the final phase, the outfit will gird up its research and development team to sculpt new, cutting edge technologies for wireless and Web-based services.

Derek Burney, president and chief executive officer of Corel, said buying Micrografx will allow the firm to increase its portfolio of products for graphic technicians.

The acquisition is expected to be accretive to cash flow and cash earnings per share (as well as closed) in the fourth quarter of Corel's fiscal 2001. While financial terms of the deal have been hashed out, who is going to do what remains murky; the firms said they would spend the next several weeks figuring out how to integrate the firms.

In June, Corel announced that net income for its quarter ending May 31 was $2.3 million -- or 2 cents a share -- on revenue of $36 million.