VNU Net: Corel digs deep for cash

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.