Venture capital firm snaps up Corel

Corel, the maker of the WordPerfect office suite and Corel Draw, is being acquired by Vector Capital.

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

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