Corel changes direction - but is it losing its way?
- Reduce text size Decrease text size
- Increase text size Increase text size
- Print article Print
- Jump to comments Comment
- Share this article Share
- Email article to a friend Email
Corels WordPerfect suite is gaining mind share with OEMs and in government as an alternative to Microsoft. However, beyond word processing Corel is trying to define itself as a business process and XML technology vendor.
In September 2002, Corel announced the first in a series of new products designed to transform the supplier of niche, desktop productivity applications into a more broad-based supplier of enterprise software. It is the latest in a series of twists and turns in Corel's corporate strategy that have left its customers confused and investors frustrated.
The technological foundation for the move comes from two companies that Corel acquired during July and August 2001: Micrografx, a business process modelling specialist,
| ||
Corel executives say that the company is "looking into" the possibility of linking the technologies from these companies into a broad, business process modelling/visualisation solution incorporating Corel's desktop content creation tools, Word Perfect and CorelDraw. As yet, however, all Corel has released are two business process modelling products based solely on Micrografx's technology.
Analysts say it is hard to tell at this stage how well these technologies complement each other, and whether they will be a suitable foundation for Corel's strategy to get deeper into the enterprise market. Certainly the company's recent track record in technology development does little to inspire confidence.
In 2000, for example, Corel made an expensive venture into the Linux desktop software market, developing WINE, a technology to enable users to port Windows application programming interfaces (APIs) to Linux. But few customers adopted the technology, and Corel was saddled with crippling operating expenses that led to it recording a net loss of $55.4 million in 2000, compared with a $16.7 million profit the previous year.
The introduction of a new CEO in October 2000, Derek Burney, preceded another unorthodox turn of events. Having spent many months developing a technology that would encourage organisations to move their desktop operations away from Microsoft, Burney then turned to Microsoft for financial aid.
The result was a $135 million investment from Microsoft under the premise of a research and development partnership. Corel subsequently dumped its Linux development to focus on building applications for Microsoft's .Net architecture. Crucially for Corel, the cash injection gave it the opportunity to acquire Micrografx and SoftQuad, and jumpstarted a move into the enterprise software market.
Ironically, Corel's shift away from its core desktop software focus comes at a time when the prospects for its WordPerfect software suite have improved significantly. Once again Microsoft has played an important part in this turnaround in fortunes, but this time its input was more indirect.
Software Assurance, a new Microsoft software upgrade policy that will drastically increase the cost of ownership for many users of Microsoft office software, has raised the profile of a number of alternative software vendors, and has led to new several new deals for Corel.
First, at the end of August 2002, Corel signed a landmark deal with PC manufacturers Dell and Hewlett-Packard to offer pre-installed versions of WordPerfect Office in selected models of their consumer PCs in the North American market.
Then, in September 2002, Corel signed a contract with the UK government's procurement agency, the Office of Government Commerce (OGC), to supply WordPerfect office software to government organisations. The deal gives Corel the right to compete for 1.4 million users in the British civil service, alongside Sun Microsystems' StarOffice, IBM's Lotus SmartSuite and Microsoft Office.
The significance of these deals should not be overstated, however. For example, Corel's Burney expects the deal with HP and Dell to account for around 4 million unit sales of Word Perfect this year. This represents only 9% of the combined PC sales for HP (including Compaq) and Dell over 2001, according to Gartner Dataquest.
Consequently, Corel's move into new markets is likely to prove critical to the company's long-term success. But Burney needs to come up with a lot more substance before Corel can call itself anything more than a desktop applications vendor.
