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Corel says cash is running low

The desktop software maker is warning investors that it is running low on cash and is examining its cost structure.

Desktop software maker Corel is warning investors that it is running low on cash.

In a filing with the Securities and Exchange Commission on Friday, Corel repeated warnings first issued a month ago that losses in the last quarter will likely be repeated over the next six months, and the company is examining its cost structure.

For the first time, Corel outlined the potential consequences of its problems. "If the proposed merger does not occur, other sources of financing are not secured and/or Corel's operating results do not improve, a cash deficiency may occur within the next three months," the company stated in the filing.

The company said it is currently exploring other sources of financing, but it is not clear whether changes to the cost structure or obtaining other sources are feasible or would be sufficient to avoid the cash deficit.

"This is all part of our normal financial disclosure process, and should not be taken out of that context," a Corel spokesperson said today.

In afternoon trading today, Corel stock was down $1, or 12.6 percent, from Friday's close of $6.94. The 52-week high for Corel stock is $44.50.

The Ottawa, Ontario-based company is struggling to boost sales of its traditional products while trying to find a market for its new Linux-based product family.

In addition, the company's proposed merger with Inprise, which could bring Corel close to $200 million in Inprise cash, has run up against strong resistance from investors. Corel announced the merger in February.

Last week, a former Inprise director and major shareholder asked a U.S. court to halt the pending deal. A final vote on the merger is expected in the summer.

The value of the Corel-Inprise deal now stands at less than 40 percent of the original price of $1.1 billion because of the plunge in Corel stock in the last two months. Inprise stock has also dropped dramatically.

The Canadian software CNET's Linux Centercompany appeared to have reemerged in the development of several Linux-based products, which allowed the company to ride the wave of excitement over the open-source operating system.

However, Corel faces significant troubles in traditional markets. New versions of Corel Draw and WordPerfect for the Windows operating system, released a year ago, have rapidly lost momentum in the market.

From a high of $71.3 million in sales last fall, Corel revenues plunged 38 percent to $44.1 million over six months. In addition to continuing operational losses over the next six months, Corel has agreed to pay $5.19 million to settle shareholder lawsuits over a big share price drop in 1997.

In addition, Corel chief executive Michael Cowpland faces three counts of violating securities law, and his holding company, MCJC Holdings, faces another charge in connection with a $13.9 million stock sale he made in August 1997.