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:
- 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. - 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. - 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.