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Corel, Microsoft suite users wait it out

Corel is taking on Microsoft with unorthodox pricing plans for productivity suites, but users will have to wait till next year for both suite upgrades.

Corel (COSFF) has thrown down the gauntlet against productivity-suite rival Microsoft (MSFT) with an unconventional pricing scheme, but both companies are experiencing delays in getting their products into customers' hands.

Only a week after stating the company would undercut Microsoft on pricing for its application suites, Corel turned around yesterday and announced it couldn't fulfill third-quarter orders of Office Professional 7. Office Pro 7 is the high end of its suite lineup that Corel planned to begin shipping in late August.

Corel CEO Michael Cowpland blamed "a number of factors" for the delay, including too many unsquashed bugs and integration of recently acquired products.

Microsoft also revised delivery expectations yesterday and acknowledged that its upcoming Office 97 upgrade will be delayed until January of next year. (It turns out the company had the name right after all.)

Corel's Office Professional 7 will support Java and let users convert all documents to HTML for easier Web and intranet publishing. The upgrade is expected to capitalize on the company's recent success with the WordPerfect application suite, which it bought from Novell in January and outsold the Microsoft Office 95 suite in June and July, according to research firm PC Data.

Because of the delay, Corel now anticipates a $15-million loss in the third quarter and a loss of 5 to 7 cents per share. At midday trading today, Corel stock was down 7/32 of a point at 8-27/32 after dropping almost a full point yesterday.

"We weren't able to cover about $15 million in orders," said company spokeswoman Sandra Catana. "Our timelines were just off. There was nothing we could do at the end of the quarter to meet excess demand."

Nonetheless, Corel does have a plan for getting a piece of Microsoft's 90-percent-plus market share of the suite market, specifically to break form on pricing its application suites. Instead of charging a company for each copy of the suite, which is what Microsoft does--albeit with discounts for large orders-- Corel will charge a flat fee of $895 for each Windows NT server connected to an unlimited amount of desktop systems. That means $895 could conceivably pay for hundreds of users. The price does not include technical support.

"That IT market is really dominated by Microsoft right now, so to penetrate it, we wanted to go forward with the strategy to give us some type of 'in'," said Catana.

Although the Redmond, Washington, software maker is known for competing on pricing itself, Microsoft Group Product Manager Kirstin Larson said the Corel pricing announcement will not affect Microsoft's strategy. The company will announce prices for Office 97 in a couple of weeks, according to Larson.

"We know what our product is worth to our customers," Larson said.

Microsoft has recently been telling software retailers not to expect the Office 97 suite before the new year, even though, until today, the company had planned to release it in the fourth quarter of this year.

"We've had communications with our channel partners about when they can begin selling the product," said Dennis Tevlin, a group product manager for Office desktop applications. "We're a pretty big part of these guys' business, so we wanted to make it clear to them that it's better to shoot for January."

Tevlin still expects the master or "gold" copy of the software to be finished in the fourth quarter, although it won't make it out to retail stores or corporate desktops until early next year.