Corel, the maker of the WordPerfect office suite and
Corel Draw, is being acquired by Vector Capital.
In a deal announced yesterday, San Francisco-based Vector will
pay about $96m for Corel. The value will total about $124m,
including convertible securities, according to Corel.
Corel president and chief executive officer Derek Burney said
the company is expected to keep its name and remain largely
unchanged after the acquisition, which is subject to approval by
shareholders. The deal is expected to be closed by early August.
Part of Vector's plan is to own all outstanding shares of the
public company and return it to being privately held.
Burney said he expected some reductions in the Corel workforce,
pending a review by Vector. The business is expected to remain in
Ottawa with its existing management team.
For Vector, the lure of buying Corel is in the company's
WordPerfect and Draw products and their respective customers,
Burney said. "The great brand equity that we have, plus the large
user base ... had tremendous appeal to Vector. I think it's a great
deal for our shareholders and our customers."
Corel has about 800 employees worldwide, including about 500 in
Ottawa.
Vector Capital's managing partner Alex Slusky said, "We believe
strongly that Corel's best opportunity is as a private company.
This all-cash transaction offers Corel's shareholders an attractive
premium and relieves them of market and operating risk."
Illuminata analyst Gordon Haff said the deal closes some tough
times for Corel, which has "tried just about everything" to make
itself a viable competitor in the office suite market.
"They were never really able to replicate the success of Corel
Draw in other product lines. They basically never came up with
anything as strong as Corel Draw," Haff said.
Corel battled for some time to increase its office suite market
share in a world dominated by Microsoft Office. Last November,
Corel announced the layoffs of some 220 workers as it tried to cut
costs.
Last year, Corel signed up several PC makers - Gateway,
Hewlett-Packard , Dell and Sony - to include the Corel WordPerfect
suite with some of their computers.
In August 2001, Corel sold off its Linux distribution business
after unsuccessfully trying to make money selling a Linux office
suite.
"Selling software for Linux, especially for the desktop is,
arguably, not anything that anybody is making money on," Haff
said.
He added that it was too early to say how the Vector buyout will
affect the company long tem.
"They obviously feel there are some assets there. I would expect
you're going to see some housecleaning. Clearly, this is a company
that hasn't had a workable business plan for a long time, and there
are going to have to be changes for it to be a successful
company."
Todd R Weiss writes for Computerworld