Corel’s 2006 profit rises to US$9.3M from $8.8M loss; projects big loss in Q1

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This article was published 18/01/2007 (7148 days ago), so information in it may no longer be current.

TORONTO (CP) – Corel Corp. (TSX:CRE) returned to profitability last year, but warned Thursday it expects to book big losses for the current first quarter and fiscal 2007 due to the impact of its recent acquisition of California-based InterVideo.

Corel, an Ottawa-based software developer that has been broadening its product lineup over that past two or three years, said late Thursday its 2006 profit rose to US$9.3 million or 40 cents a share from an US$8.8 million loss or 45 cents a year ago. Annual revenue increased to $177.2 million from $164 million.

For the fourth quarter ended Nov. 30, 2006, revenues rose four per cent to US$47.4 million, while profit was US$9.4 million, or 37 cents a share, reversing a $3.4 million loss the previous year.

The good results in the fourth quarter were due to a focus on emerging markets around the world, the extension of Corel’s distribution capability and the acquisition of WinZip in early in 2006, David Dobson, Corel’s president and chief executive, said in an interview.

“In a nutshell, we executed very well,” Dobson said.

He said the losses that Corel anticipates are part of the normal expenses of an acquisition and added InterVideo will start adding to profitability in the Corel’s second quarter.

“As result of the synergies we get and the restructuring we’ll take, we think we’ll be in a very strong position in the digital media business with the integration of InterVideo and Corel and be well-positioned to grow at a more rapid rate than prior to the acquisitions,” Dobson said.

InterVideo and its recently acquired Ulead Systems Inc. subsidiary bring strength in digital video and audio software, which will complement Corel’s products for managing digital photos.

“We now have the broadest portfolio of digital imaging products in the industry and we think that is an area that’s positioned for growth.”

But Corel, which reports in U.S. currency, warned it expects a net loss of $10.5 million to $13.5 million, or 40 cents to 55 a share, for the year ending Nov. 30, 2007, with revenue in the range of $245 million to $255 million.

For the current first quarter, the company expects revenue of between $51 million and $53 million and a net loss of $18 million to $20 million.

Dobson told analysts in a conference call that the company is doing a detailed review of its product lines and will discontinue those that are doing poorly.

Corel expects between $17 million and $18 million in cost savings on an annualized basis through integration and restructuring efforts.

The companies’ financial systems, information technology and human resource processes are among the areas where cost-savings are expected, he said.

“Based on our current time lines, we expect significant restructuring activity to be completed by the end of Corel’s first quarter,” Dobson added.

Corel has about 600 employees and InterVideo-Ulead have about 800 in total, he said in the interview. He said it was too soon to see where the job cuts will be made.

Corel’s revenue forecast reflects the timing of the acquisition of InterVideo in mid-December and changes in the way InterVideo’s revenues will be accounted for, said chief financial officer Douglas McCollam.

InterVideo had generated about US$100 million per year in revenue, or about US$25 million per quarter, prior to the takeover, he said.

However, that will be reduced by $20 million in the fiscal first quarter ending in February and by $35 million to $37 million for fiscal 2007.

The company will also take a one-time charge of $8.5 million to in-process research and development and a $2-million restructuring and transition charge in the first quarter.