Case Studies:

Corel Corporation


Corel develops some of the world's best known software including CorelDRAW Graphics Suite, Corel Painter, WinDVD, WinZip, Paint Shop Pro Photo and WordPerfect.

The Problem:

In early 2003, Corel was struggling as an unprofitable public company trading at a deep discount to its peers. In an effort to meet Wall Street’s growth expectations, management had prioritized several expensive new initiatives over investments in core product lines. Revenue was shrinking and the prospects for success with the new product lines seemed remote. To compound these challenges, a large strategic investor was seeking to sell off its 20% stake in the company, creating additional downward pressure on its stock price.

Vector Insight:

Based on public information, Vector concluded that Corel’s significant losses masked the growth and profit potential of its core product portfolio. We believed that Corel could generate significant profits and moderate growth if core products were given proper management focus and money-losing projects could be curtailed.

The Solution:

Vector acquired the 20% ownership block held by the strategic investor in a private transaction to relieve the immediate pressure faced by management and engaged in discussions with Corel’s Board of Directors to take the company private. After a thorough diligence period, Vector made an acquisition proposal that the board deemed to be the best alternative for Corel. We completed the acquisition in Fall 2003 and Corel became a private company. Even before the transaction closed, Vector worked closely with management to develop an aggressive plan to transform Corel.

Operational Changes:

Soon after closing, Corel implemented sweeping changes to refocus on its historical strengths as a packaged software company with an extensive global distribution channel. Speculative R&D projects were scrapped, and non-core businesses were divested. Growth and profitability improved dramatically. The newly-nimble and profitable Corel then sought to leverage its infrastructure by acquiring additional world-class product lines, buying Jasc Software, WinZip and InterVideo.

Corel Today:

Corel's revenues for the year ended November 30, 2008 were $268.2 million, an increase of 7 percent over revenues of $250.5 million for the year ended November 30, 2007. GAAP net income for the year ended November 30, 2008 was $3.7 million, or $0.14 per basic and diluted share, compared to a GAAP net loss of $13.1 million, or $0.52 per diluted share, for the year ended November 30, 2007.

Non-GAAP adjusted net income for the year ended November 30, 2008 was $37.8 million, or $1.44 per diluted share, compared to non-GAAP adjusted net income for the year ended November 30, 2007 of $34.0 million, or $1.32 per diluted share. Non-GAAP adjusted EBITDA for the year ended November 30, 2008 was $60.9 million, an increase of 6 percent over $57.3 million for the year ended November 30, 2007.

A reconciliation of GAAP net income to non-GAAP adjusted net income and non-GAAP adjusted EBITDA is provided in the notes to the financial information included with Corel's press releases and can be accessed by visiting the Company's Investor Relations website at investor.corel.com.

To learn more about Corel and its product portfolio, please visit www.corel.com.

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