InterVideo buy may herald Corel’s HD video success

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Corel Corp.’s purchase of a high-profile U.S.-based video editing software firm may pay off in spades for the Canadian graphics software vendor, an analyst says.

The buy positions Ottawa-based Corel to benefit from the growing popularity of high definition (HD) video, says Carmi Levy, senior analyst at Info-Tech Research Group Inc. in London, Ont.

He said the acquisition of InterVideo Inc., based in Fremont, Calif., also opens doors for Corel within the hugely lucrative Asian market, where InterVideo products are popular.

The move, he added, heralds strategy shift which, if handled well, can only bode well for Corel. “This is a new and a more mature approach.”

Corel too emphasizes the strategic aspect of the acquisition, and the expected impact on the company’s bottomline.

It’s part of Corel’s drive to “return to profitability,” according to Shawn Cadeau, the company’s vice-president, worldwide marketing.

He said InterVideo products complement Corel’s, and would help the Canadian firm make inroads into the digital video space. “Corel is strong in the photo and image editing market,” Cadeau noted. With InterVideo, he predicted the company would enjoy the same popularity in video and HD space.

Corel’s current offerings include its illustration program, CorelDraw; its office suite product, WordPerfect; and its graphics and photo editor, Paint Shop Pro Photo.

Among InterVideo’s popular digital multi-media authoring and editing products are: WinDVD, WinDVD Creator, Ulead VideoStudio and Ulead DVD MovieFactory.

Prior to being acquired by Corel, InterVideo snapped up Taipei, Taiwan-based Ulead Systems Inc., a maker of video imaging and DVD authoring software – with a strong presence in Asia Pacific, Japan and China.

Making forays into Asian markets is now a formal part of Corel’s game plan. Cadeau said his company looked forward to extending its presence “in the fast-growing markets of Asia such as Japan, China and Taiwan.”

Corel products access to leading PC and laptops brands such as Toshiba, Fujitsu and NEC which are among the eight computer makers that have InterVideo software pre-installed in their units.

The InterVideo buy has other significant advantages for Corel.

It gives the Ottawa-based firm access to InterVideo’s research and development work on Blu-ray disc technology. Blu-ray is a relatively new optical disc high-definition video format that competes with the HD-DVD format.

“Corel will deliver HD-DVD and Blu-ray disc solutions to the market, just as the worldwide demand for high-definition video gains significant momentum,” said David Dobson, Corel CEO in a recent open letter to customers and partners.

Levy said while the InterVideo acquisition has definitely opened up opportunities for Corel in the HD video space, the company needs to create a niche for itself in this area.

“[If it doesn’t], Corel will become very vulnerable, since it has already lost its lead in the graphic and desktop markets.”

In the past, said Levy, Corel’s “big mistake was to hang on a product even when the battle had been lost.”

For instance, he noted that the company stuck with its Corel Office Suite long after it had lost the market lead to rival Microsoft Office.

Bay Street appears to have endorsed this latest Corel purchase. The company’s shares began a slow climb from $13.49 per since Corel announced the $232 million deal last summer. Shares in the company recently closed at $15.53 per unit at the Toronto Stock Exchange.

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