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VNU Net: Corel digs deep for cash

May 04, 2000, 08:18 (3 Talkback[s])
(Other stories by Karen Rollins)

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By Karen Rollins, VNU Net

Software vendor Corel has announced that it could run out of cash if its proposed merger with Inprise/Borland is not approved by investors at a shareholders meeting in June.

In a statement to the Securities and Exchange Commission last week, Corel admitted that it will experience "a cash deficiency within the next three months if the proposed merger with Inprise/Borland does not occur, other sources of financing are not secured and/or Corel's operating results do not improve".

The company also repeated a previous warning that losses suffered in the first quarter of 2000 will occur again over the next six months. Corel reported a loss of $12.4m (£7.87m) for that period.

Corel's proposed merger with software tools specialist Inprise/Borland to create a "Linux powerhouse", would give it access to a reported $200m in cash. However, the merger has met with resistance from investors, and one major Inprise/Borland shareholder has applied to a US court to halt the deal.

Carey Gray, research analyst at the Butler Group, said Corel would find it hard to turn its financial situation around with the current management team.

Referring to security law violation charges faced by Michael Cowpland, Corel's chief executive, Gray said: "Once the management team begin getting into trouble with the regulatory bodies, investors can get an uneasy feeling. It is also hard to see where the synergy lies between Corel and Inprise/Borland, apart from the access Corel will have to Inprise's cash."

"Corel is under financial pressure from a number of quarters in the market. The Linux space is overcrowded and WordPerfect is no competition for Microsoft Word and Sun Microsystem's free StarOffice software," added Gray.

In a statement, Corel said it was examining its cost structure in order to save money.

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