WordPerfect maker cuts IPO price
The distant No. 2 to Microsoft in the office application market is poised to list on the Nasdaq, long past its 5-1/4 inch floppy heyday.
NEW YORK (CNNMoney.com) - Corel, once one of Canada's biggest software companies, reduced the size and expected price of its initial public offering Tuesday.
The company, a provider of word processing and digital imaging software, said in a filing with the Securities and Exchange Commission that is now plans to sell 6.5 million shares to underwriters at an estimated price of $16 to $18 a share. The company had originally prepared to sell 8 million shares at about $18 to $20 a share.
Corel is expected to begin trading on the Nasdaq under the symbol "CREL" this week and on the Toronto Stock Exchange under the symbol "CRE," but the company's flagship product may be a relic of the past.
Morgan Stanley is the lead underwriter of the deal. (For a look at all of this week's IPO;s, click here)
Ottawa, Ontario-based Corel is best known for its WordPerfect Office Suite, a set of software that includes word processing as well as spreadsheet and presentation applications. The company's products also include WinZip, which allows users to compress data, and graphic applications such as CorelDraw Graphics Suite.
By offering lower-priced alternatives to products made by rivals Microsoft (Research) and Adobe (Research), Corel claims it has carved a niche market among law firms, small businesses and government departments. The company is also betting its flexible licensing agreements, which helped it win the Department of Justice as a customer last year, will attract more cost-conscious customers.
Growing concerns over reliance on Microsoft's products in the software industry may open a window of opportunity for Corel, which hopes to benefit from software distributors seeking to reduce their dependence on brand leaders, but those market heavyweights pose tough competition.
Microsoft, for instance, accounts for 97 percent of the office application market in North America, while Adobe has more than a 70 percent share of the global packaged graphics software market, according to Corel's prospectus.
Back in the days of 5-1/4 inch floppy drives and text-only screens, WordPerfect was the market leader in word processing. That was when applications were independent and not bundled as part of an office suite, said Jean Orr, an analyst with Nutmeg Securities who covered Corel until it was taken private in 2003.
But WordPerfect had difficulty competing directly with Microsoft Office, as well as office suites for Linux, even before Corel bought the product line, she said.
Revenue at Corel has started growing since private-equity firm Vector Capital bought the company in '03 -- Corel reported revenue of $164 million last year, up about 47 percent from 2004. But that's still a far cry from the $334.2 million the company took in at the height of its sales boom in fiscal year 1996.
Vector Capital has done a good job of slashing costs and turning the company around, but Corel's core products have been market share decliners for years, according to Bill Simpson of Trading IPOs.com.
"Corel lost the standards war a few years ago. It looks more like an also-ran relic from 1993," he said. Corel faces a challenging future, and Simpson thinks the offer will have trouble reaching its price range of $18 to $20 a share.
The company also has struggled with its bottom line. It posted a net loss of $8.7 million last year, compared to a slight profit of $1.2 million in 2004. Corel plans to use proceeds raised in the offering to repay debt and to make acquisitions.
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