The ax finally fell at Corel Thursday when the Canadian software developer announced it will lay off 320 employees, or roughly 21 percent of its workforce, as part of its cost-cutting plan to chop $40 million from its annual expenses.
Corel (Nasdaq: CORL) shares closed off 7/32 to 5 1/32 ahead of the announcement.
Investors probably saw this coming in late May, however, when Corel officials said it was looking for investors after its proposed merger with Inprise/Borland Corp. (Nasdaq: INPR) unraveled.
At the time, Corel said it would need to reduce about $40 million in annual expenses.
"I wouldn't say this is bad news because the bad news was already out," said Jean Orr, an analyst at BlueStone Capital Partners. "They're a software company. Where else are they going to cut costs other than through layoffs?"
Last month, Corel caught a break when Canaccord Capital Corp. agreed to invest about $10 million with an option for an additional $20 million to help keep the software developer afloat.
CEO Michael Cowpland said he plans to not take a salary this year to help cut costs.
"This was not an easy decision to make," Cowpland said in a prepared release. "After much careful deliberation, the company concluded that these steps were necessary."
Corel said that it is in a quiet period and cannot comment further on the cost-cutting plan.
Last quarter, Corel disappointed its investors when it posted a loss of $12.4 million, or 29 cents a share, on sales of $44.1 million.
"At the time, they told us that they didn't think the revenue outlook would improve in the second or third quarters," Orr said. "This has been a sword hanging over its employees' heads. At least now we know the numbers and what's going to happen."
Corel shares moved up to a 52-week high of 44 1/2 in December after hitting a low of 2 13/16 last June.
Both analysts following the stock rate it either a "hold" or a "sell." Corel competes with Microsoft (Nasdaq: MSFT) and Red Hat (Nasdaq: RHAT) among others.