The CEO of Corel plans to resign, two weeks after an investment firm that owns a majority stake in the Ottawa-based graphics and desktop applications software vendor offered to acquire all of the remaining shares and take the company private for the second time in five years.
David Dobson, who has been Corel's CEO for the past three years, is expected to leave by the end of June, according to a press release issued by the company on Monday. Corel said that Dobson is leaving to take a senior management job at a Fortune 500 company in the US and that it has begun searching for a successor.
Corel's majority shareholder, San Francisco-based Vector Capital, proposed late last month that it buy out the 31 per cent of the company's shares that are publicly traded for about US $84 million. If Corel accepts the offer, it would be the second time that Vector has taken the software vendor off of the stock market: the equity firm bought Corel in 2003 for $98 million, then partially spun it off two years ago.
Corel, which has hired an independent advisor to weigh the new buyout offer, has long played second banana in the desktop applications and graphics software markets to Microsoft and Adobe, respectively. Some of its graphics software, in particular the CorelDraw Graphics Suite and Paint Shop Pro Photo, remain popular low-end alternatives to Adobe products among home users.
But Corel's highest-profile product, the WordPerfect Office suite, has not only failed to make significant ground against Microsoft's dominant Office, but has slipped, at least in market momentum, behind free open-source products such as OpenOffice.org and online office suites such as Google Docs or Zoho Office.
Ironically, WordPerfect Office X4, a new release that Corel announced last Wednesday, is being touted by the vendor for its strong compatibility with its rival's document formats, including Microsoft's Office Open XML, Adobe's Portable Document Format and the vendor-neutral OpenDocument Format for Office Applications. Corel claimed that X4 is the first office suite to let users import, edit and export PDF documents -- including scanned ones -- without the need for third-party software.
To sidestep Adobe and Microsoft and boost its presence outside of the US, Corel has acquired a number of smaller vendors with popular niche products. For example, over the past two years, it bought archiving software maker WinZip Computing and multimedia software maker InterVideo, the developer of the WinDVD media player. InterVideo itself had just acquired the Taiwan-based graphics software vendor named Ulead Systems.
Partly as a result of those deals, Corel reported earlier this month that revenue for its fiscal first quarter grew 25 per cent year over year, to $65.5 million. The company also reduced its net loss for the quarter to $30,000, down from $11.9 million in the first quarter a year ago.
Corel predicts that it will reap a profit in its second quarter. And for the full fiscal year that ends November 30, the company forecasts revenue of $263 million to $275 million, with net income of $9.5 million to $15 million. As a result, some shareholders are unhappy with Vector's offer, which would provide only a 3% premium over Corel's stock price on the day that the buyout proposal was announced.
Vector, which manages a total of about $2 billion in investments, priced Corel's stock at $16 per share when it held a public offering in April 2006. But the stock price had fallen to a low of $6.94 in January before recovering to about $10.50 at the time when Vector made its $11-per-share buyout offer.
The proposed deal values Corel at about $280 million. By comparison, Adobe has a market capitalization of $19 billion, while Microsoft's market cap is $279 billion, or 1,000 times more than Corel's.