Corel Unveils New Corporate Strategy

Corel Corporation (TSE: COR) on Tuesday (Jan 23) unveiled a blueprint for the future that includes a new logo, new emphasis on creativity and a new vision: to Illuminate the Creative Soul.

Designed to reposition the struggling software vendor for long-term growth and profitability, Corel’s strategy was outlined today by Derek J. Burney, president and CEO of Corel Corporation. The initiative includes selling off its Linux distribution while retaining its Linux versions of its WordPerfect and graphics software, paring down its WordPerfect offering from 30 international flavors to 4 English-language versions that will also incorporate elements of Microsoft’s .NET framework, and placing a renewed emphasis on its graphics software, especially in the Macintosh market.

“This strategy represents the start of an important new chapter in Corel’s history,” Burney said. “It is a long-term program based on three key principles that will form the basis of Corel’s business philosophy for the future: Dynamic Technology, Dedication to the Customer and Disciplined Financial Management.”

This blueprint for the future includes a solid foundation, a clear plan, and space for growth through strategic investments and acquisitions, resulting in Corel’s return to profitability by the third quarter of this fiscal year, he said. Revenues are predicted to grow at a compounded annual growth rate of at least 20 percent over the next three years, Burney added.

These targets are based on the objectives that have been established for each of Corel’s product groups — Linux, WordPerfect and Creative Products — over a three-phased plan.

Pursuing Opportunities to Spin Off Linux

The company’s expanding vision for Linux includes providing customers with a bundled solution that minimizes the total cost of ownership and eliminates integration issues. To realize its Linux vision and to increase the value of its Linux equity for both customers and shareholders, Corel is actively pursuing opportunities to allow it to spin off the Linux Distribution element of its Linux division while retaining an interest in the new prospective company. Corel will continue to develop brand name applications for the Linux operating system including WordPerfect Office for Linux and CorelDRAW for Linux.

“We’re firmly committed to the success of Linux, but our new focus is entirely on creative products.” Burney said. “Keeping it inside Corel as a whole could hinder its potential growth.”

Making Smart Decisions About WordPerfect

Corel’s flagship office suite will generate significant revenues and contribution for the company. Corel recognizes that there are untapped opportunities within its existing user base of dedicated WordPerfect customers and that there is a strong business in satisfying this community.

Corel is reducing the number of WordPerfect versions from the 30 international flavors to 4 English-language versions, with a French Canadian version for Canadian government use. This will allow Corel to gain efficiencies and increase marketing effectiveness for each version, Burney said.

Corel will further enhance its relationship with its WordPerfect customers to ensure that their priorities are addressed with each release and update to the product. Over 70 percent of the new features and enhancements planned for WordPerfect Office 2002 — scheduled for a second-quarter 2001 release — are based directly on client feedback. Corel’s commitment to its WordPerfect customers will be reflected in targeted sales and marketing programs that will reward customer loyalty through preferred pricing and licensing options. In addition, the company will leverage premium sales channels to service its professional customers in the small-to-medium sized corporate market.

Corel acknowledges Microsoft’s dominance with Word, and rather than attempting to fight head-to-head, Corel has chosen

to focus on existing users and give them a reason to upgrade. This will be accomplished by focusing on customer needs, as well as by incorporating elements of Microsoft’s .NET framework into future releases.

For example, instead of a static list of formulas available in a spreadsheet program, that program with .NET capabilities could generate an up-to-date list each time the customer looks at the menu, and the computation of that formula could take place on the more-powerful server instead of on individual workstations, Burney said.

These .NET-enabled products would likely become available six months after Microsoft releases its .NET framework, expected to be late this year.

Emphasis on Creativity

Corel’s creative products are expected to provide the primary engine for revenue growth. Corel will investigate and identify opportunities in new and fast growing markets fueled by the increasing demand for web content and graphics. The company has established a framework for the future that will unfold in three phases:

Phase 1: Over the next twelve months, Corel has the opportunity to significantly grow its creative products revenues by successfully:

  • Upgrading users to CorelDRAW 10 Graphics Suite
  • Launching CorelDRAW 10 Graphics Suite for Macintosh
  • Releasing new versions of Corel KnockOut masking software, Corel Painter, Bryce and KPT
  • Implementing targeted sales and marketing programs for new vertical markets

Phase 2: Over the next one to two years, Corel will expand the scope and reach of its current suite of creative products through strategic investments in infrastructure and new growth opportunities. Corel is taking steps to transform its current graphics suite to deliver creative solutions to customers who work primarily on the Web.

Phase 3:Over the next two to three years, Corel’s advanced technologies incubator, the New Ventures division, will investigate acquisition opportunities and new market segments where Corel can leverage its graphics software assets to generate new revenue streams for the company.

In addition, by working on projects related to Microsoft’s powerful new .NET framework, Corel will be better positioned to provide its customers with the most up-to-date technology as soon as it becomes available. Corel’s alliance with Microsoft, which includes a $135 million investment by Microsoft in Corel, is part of the company’s commitment to deliver applications, expanded services and content over the web.

A new strategic purpose — to give customers “Boundless Power to Create. Anytime. Anywhere.” — hints at Corel’s plans for developing its applications for other devices, including handheld and wireless devices. “If we continue to develop applications just for the PC, we can’t live up to that,” Burney said.

Having successfully restructured and realigned its operations, Corel is turning its attention to the future. “We’re focused on results. I want judgments about Corel, and about myself to focus on results,” Burney said. The strategy is the culmination of a comprehensive corporate review directed by the company’s senior executive team over a period of several months.

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