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.

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