Corel layoffs won

Ottawa-based software company Corel Corp.’s decision to cut 20 per cent of its global workforce is the first restructuring move since going private last November, but one analyst said it won’t be the last of the bad news before the company finds its staffing level more closely matched with its in-market performance.

The layoffs, announced Thursday, will amount to 200 employees out of the overall 1,000. Approximately 20 of those laid off are from the Canadian office.  Last November, Corel announced it would be taken private by majority investor San Francisco-based Vector Capital, in an effort to quickly raise capital so it wouldn’t default on loans.

Carmi Levy, London, Ont.-based independent technology analyst, said that while he can’t foresee precisely what other restructuring moves Corel will undergo, additional layoffs may very well be the case. “Corel is still a very sick patient, and it’ll take far more than a one-time round of layoffs to restore the company to anything approaching decent health,” said Levy.

Once a quintessential Canadian success story, Corel has since lost its way as it tried to be too many things to too many people, and compete in markets it shouldn’t have, said Levy.

In a statement, Corel CEO Kris Hagerman said the reduction in staff will allow the company to allocate funds to new product development and marketing. “In building our operating plan for 2010, we are aligning our cost structure so that we have the financial flexibility to continue to innovate and deliver new products to the market, drive broad awareness of our products and global brand, and ensure we are making the best use of our global teams and resources,” said Hagerman.

Corel is known for a slew of productivity software including its word processing tool WordPerfect.

According to Nigel Wallis, research director with Toronto-based research firm IDC Canada Ltd., while the layoffs are a result of bad economic times, maintaining cash flow is especially important for privately held companies which Corel now is.

But Wallis said it’s also a market issue for Corel who has had difficulty competing with Microsoft Corp., which dominates the office productivity space and will launch Office 2010 this year. Moreover, users have many low-cost options with online productivity applications like Microsoft Web apps and Google Apps.

 

“In some ways it looks as though it’s coming to the end for the WordPerfect product line as users migrate to other productivity apps,” said Wallis.

Corel and Vector Capital’s history dates back to 2003 when the venture capital firm purchased the software company for $133 million and took it public three years later. Vector Capital had maintained majority ownership until it bought the remaining shares last November.

The company was founded by Michael Cowpland in 1985.Follow Kathleen Lau on Twitter: @KathleenLau



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