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Community: Corel/Vector Takeover Open Letter from Director of Center of Open Source & Government

Mar 25, 2003, 21:00 (13 Talkback[s])
(Other stories by Tony Stanco)

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Yesterday, with the market down 307 points in one of its worst days in months and with an IT slump the worst in decades, Corel shares rose 27%, because Vector Capital launched a takeover bid. Why with all the bleak news in the IT industry is there a takeover bid for a company commonly regarded as comatose, owning supposedly dead-end products, and until recently trading at its cash value of $75 million?

Because Corel has hidden value of between $500 million and $1 billion.

Corel, unlike any other company, has the potential to be the Open Source XML standard for e-Government, e-Commerce, and e-Health.

I made a presentation to that effect last week in Washington, D.C. at the Center of Open Source & Governments 2nd Open Source in Government conference [www.egovos.org]. There I explained the strategic value of Corel to over 100 conference participants, including senior government IT officials from the U.S., European Commission, Canada, Korean, Mexico, Japan, and France. Also, all the major vendors were present at the conference, including Microsoft.

The main benefits of Corel are:

  1. WordPerfect remains the only real competitor to the Microsoft Word platform hegemony, with important hold-outs using it in the legal industry and in some government agencies around the world. This at a time when governments and companies are seriously looking for alternatives to Microsoft products.
  2. Corel has embarked on a major XML initiative. If XML open standards take hold as many in government and industry hope, Corel has the potential to benefit in a very significant way as the world moves to a Web services computing platform.
  3. Most significantly, Dell and HP have recently begun to pre-install Corels products on their PCs as a result of the Microsoft antitrust settlement.

The stakes for the technology industry are high, because while Corel can gain up to $1 billion in stock price in the next couple of years, that would come mostly at the cost of Microsoft losing up to $100 billion in market value as it sees a significant portion of its applications revenue evaporate. This would compound the problems Microsoft is having with Open Source Linux on the operating system side, and could fundamentally cause the displacement of it as the leader in the software industry, with better placed companies, like Oracle, taking the leadership role moving forward to an Internet-centric world.

In conclusion, Corel has the potential to leverage the gaining Open Source momentum like no other company and can position itself as a major IT player either alone or with strategic partners. Therefore, Corel has significant hidden value for its shareholders or a strategic acquirer in a rapidly changing IT landscape.

Yours truly,

Tony Stanco

Tony Stanco is the founding director of the Washington-based Center of Open Source & Government, and is associate director of the Cyber Security Policy and Research Institute at The George Washington University. Before this, he followed Corel for almost 6 years as a senior securities attorney in Corporation Finances Internet and Software group at the U.S. Securities and Exchange Commission. Mr. Stanco neither has nor intends to have any stock ownership in Corel. The opinions expressed are his own.

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