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Can Corel make a comeback?

Following Corel's announcement that it expects a huge fourth-quarter loss, industry observers are beginning to wonder what the company can do to turn things around.

Following Corel's (COSFF) announcement today that it expects a huge fourth-quarter loss, industry observers are beginning to wonder what the Canada-based software maker can do to turn things around.

The company said it expects to report a loss of approximately $95 million for its fourth quarter, which ended November 30.

Corel has seen its revenues go into a free fall over the previous and year-ago quarters. Today's announcement, for example, marks Corel's third consecutive quarter of losses and comes after the company reported a loss of about $32 million for the third quarter in September.

At a press conference today Corel executives said that despite the company's recent slump, they expect to have a "stable" run in 1998 and are betting on strong market demand for new Java-based products as well as for its network computer offering, due next year.

"We're not counting on them completely for revenues. Any revenue we make on them will be extra to our plan," said Michael Cowpland, the company's president and CEO. "But we are confident the [Java applications and network computing] market will be a huge growth area for us in the coming years."

At today's press conference, Corel executives held back from laying out specific plans to bring in revenue during the coming year, saying that they prefer to hold off until the company's final fourth-quarter earnings report is released on January 13.

One product that undoubtedly figures into the company's plan, however, is its recently launched Corel Resero, a new online analytical processing (OLAP) tool for reporting and analysis of corporate data. Resero is designed for use on corporate intranets so that users can retrieve data instantly, then analyze it and extract valuable information. It's the first product in Corel's Enterprise line of software, aimed at boosting corporate productivity.

Enterprise software may be a better bet for the company than NC products. Although there is room for Corel to grow in the NC market--which is still wide open--analysts believe the company will have to make a strong effort in order to make NCs a pivot point for the company's turnaround.

"A relatively small company like Corel will have a difficult time in the network computer market," said Rob Enderle, an analyst with Giga Information Group. "The network computer depends so much on a strong back-end product. They need to partner with someone like Sun Microsystems, or do something to succeed against the big competitors in that market, like IBM, for example."

In October, Corel previewed its long-awaited Video Network Computer. Originally scheduled to ship in the first quarter of 1997, the computer is now scheduled to ship in the first quarter of next year. Corel's NC also will offer video capabilities.

Corel also has revived its Java-based products--after scrapping plans for a full-fledged Java applications suite--in order to make them NC-compatible. Code-named Remagen, the Java-application will allow Windows NT-based applications to run on any operating system with a Java Virtual Machine, including Network Computers.

"They really need to figure out how viable the network computer market will be for them," said Mary Wardley, an analyst with IDC. "They will have to get in and do it quickly."

Corel also has a Java-based business application suite code-named Alta. The package is a follow-up to the company's aborted first attempt at the pure Java version of its business applications suite.

Targeted toward workgroups (department-sized groups in the corporate environment), Alta is focused around Corel Central, the personal information manager and scheduler scheduled to ship at the end of next summer.

Beyond getting into the market and establishing itself as real player, though, Giga's Enderle said the Canadian company needs to change its focus. "They shouldn't make a direct competitive move against Microsoft," he said. "They need to build on their existing products and move from there."