Corel Corp. (Nasdaq: CORL) is amazing -- for all the wrong reasons. The company fumbled yet another quarter, but still manages to string investors along with its liberal use of buzzwords.
Despite Corel's latest miscue, the company will find plenty of supporters even as shares fall. Why? Corel introduced a few more hot tech buzzwords -- WAP, ASP, B2B and XML -- last night on the earnings conference call. The theory goes like this: The more hot technologies CEO Michael Cowpland talks about, the greater the chance that some sucker will buy Corel shares.
Corel: Bomb or bargain?
The latest evidence is Corel's first quarter. The company missed estimates (is that news anymore?), and said its next two quarters would mirror the quarter just ended. For the record, Corel had a first quarter operating loss of 19 cents a share, missing First Call consensus by three pennies.
As for the outlook, expect similar losses in the next two quarters. It's a "transitional period" for Corel.
Unfortunately, analysts were hoping for a second quarter profit of 2 cents a share. In the third quarter, First Call consensus called for a loss of 6 cents a share.
Of course, financial projections never mattered much to Corel anyway (one analyst bothered publishing estimates). Just that new financial chief Mitch Desrochers took a shot at a projection is a bold step.
Perhaps sensing this Linux thing has played itself out on Wall Street, Cowpland felt obliged to talk about the next big thing for Corel. Nevermind that the most recent big thing hasn't paid off yet.
Enter the new buzzwords: WAP, ASP, B2B and XML. Corel management said the company is cooking up hot technologies for the day when Microsoft (Nasdaq: MSFT) won't rule the computing world. Think Linux spreadsheets on wireless phones.
Corel said it will enable wireless applications using the wireless application protocol (WAP) standard, cook up Extensible Markup Language (XML) versions of its software, and play in the application service provider (ASP) and business-to-business (B2B) markets. Most of these world-beating products are still in development.
Like clockwork, investors hit the message boards talking about Corel's WAP strategy and other big plans.
Will Corel deliver on any of those new high-tech initiatives? Doubtful. However, investors should note Corel's use of buzzwords. Corel is a great barometer for finding out what's hot in the tech sector.
Still working the Linux angle
Just in case the WAP thing doesn't work out, Corel still managed to work the Linux angle.
What was most interesting about Corel's first quarter earnings release is what the company didn't say. Corel didn't mention Linux sales. That's quite a change considering Corel couldn't stop babbling about Linux when shares were gaining along with VA Linux (Nasdaq: LNUX) and Red Hat (Nasdaq: RHAT).
It didn't take long to figure out why Corel didn't mention Linux sales. On a conference call, officials said Corel Linux, a version of the free open-source operating system, brought in $2.3 million in sales in the first quarter. Since Linux sales were down from $3.2 million in the fourth quarter, Corel figured it wouldn't mention that item in its press release.
To minimize the damage of the Linux sales dip and another disappointing quarter, Cowpland said Corel's WordPerfect Office 2000 for Linux is off to manufacturing. Corel's Linux office suite will sell for $159 for the deluxe version and $129 for the standard version.
Cowpland said investors should focus on the allegedly bright Linux-, WAP-, ASP-, B2B-, XML-based future of the company.
Those poor Inprise shareholders
So what do you do if you're an Inprise shareholder? Corel, which is merging with Inprise/Borland (Nasdaq: INPR), said the deal remains on track and the merged company will have $20 million in Linux revenue in fiscal 2000.
But Corel's latest quarter has to make Inprise shareholders squeamish. Corel is offering 53.7 million shares for Inprise, and the value of the deal is falling fast. On Feb. 7, Corel was paying $1.07 billion in stock for Inprise. At Corel's Monday closing price of 13 3/8, the deal is worth $718 million. Based on Corel's after-hours price of about 11, Inprise is now valued at $590 million.
And it gets worse. Inprise shareholders also inherit Cowpland, class action lawsuits and Corel's poor reputation.
Maybe more investors should follow the lead of C. Robert Coates, CEO of Management Insights, an investment firm. Shareholders vote on the merger in May. Coates resigned from the Inprise board in protest of the Corel/Inprise merger. Inprise was expected to be profitable in the third quarter. After Corel's latest debacle, all bets are off.
Cowpland said he is confident the Corel/Inprise merger will be approved. That may be a good sign for Inprise shareholders -- Cowpland usually overpromises and underdelivers.