Corel retrenching on Linux, office software

Embattled software vendor Corel Corp. Tuesday announced that it will focus on graphics tools as its main source of future revenue growth, as part of a restructuring plan that also includes an envisioned spin-off of the company’s Linux distribution business.

In addition, Ottawa-based Corel said sales of its flagship WordPerfect suite of office software will now be targeted mainly at “untapped opportunities” within companies that are already using that package. Corel added that it will continue to invest primarily in English-language versions of WordPerfect, “for which there is a demonstrated customer demand.”

During a press conference that was broadcast via the Web, Derek Burney, Corel’s president and CEO, said the company has accepted that most users have chosen Microsoft Corp.’s Office software as a de facto standard. “And we’re choosing not to go into a head-to-head battle [with Microsoft],” said Burney, who took over as Corel’s CEO last summer.

The change in strategy regarding WordPerfect comes three months after Corel disclosed that Microsoft had agreed to invest $135 million in the struggling company as part of a deal that also includes joint software development related to Microsoft’s Internet-based .Net computing initiative (see story). At the time, executives from Corel and Microsoft said the agreement signalled the start of increased collaboration between the one-time bitter rivals.

Corel had been indicating since late last fall that an overhaul of its business strategy was in the works (see story). The company has already gone through a series of management changes and layoffs in its effort to recover from a string of quarterly losses that started early last year. Burney said the changes announced today should result in a return to profitability by the third quarter of Corel’s current fiscal year, which started last month.

On the Linux front, Corel said, it’s “actively pursuing opportunities” to spin off the unit that distributes its version of the open-source operating system. The company said it still hopes to retain an interest in any new company that results from a spin-off, and it will continue to develop Linux versions of WordPerfect and CorelDraw graphics software.

CorelDraw and other graphics tools are now expected to provide Corel’s “primary engine for revenue growth,” according to today’s announcement. During the next 12 months, the company said, it plans to focus on shipping several new graphics packages and convincing users to upgrade to its CorelDraw 10 software.

Corel plans to transform its graphics suite within the next two years to add support for users who work primarily on the Web. And during the next three years, Corel said, the company will start delivering .Net-compliant graphics software and investigate possible acquisitions and entries into new markets.

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