Vector Capital announced on Monday that it has purchased WinZip Computing Inc., maker of the ubiquitous file compression download that ranks near the top of the list of most popular downloads and that even predates the Internet itself.
Chris Nicholson, a partner at San Francisco-based Vector Capital, said WinZip gets downloaded some 500,000 times a week. It has been downloaded a total of about 149 million times, and its customer base is estimated to number more than 100 million worldwide.
But WinZip, while profitable, has a lamentable amount of customers who abide by the companys honor system and shell out $29 after the 30-day free trial, Nicholson said. "Not many people as a percentage of users actually pay," he said.
A major part of the equity firms strategy to turn WinZip into a more profitable company is to strongly emphasize that the software is not free and that, if users like it, they should pay. "Its one of those ubiquitous things, one of these things everybodys got on their desktops. But its not free. I have to shout from the rooftops, its not free," Nicholson said.
The other part of the firms two-pronged strategy is to add functionality to upcoming versions so that customers feel it will be worthwhile to pay for more features.
Vector is a private equity boutique that specializes in buying up companies that have established customer bases and then improving their performance. An example of its past work is its investment in Corel Corp., maker of WordPerfect, CorelDraw and Paint Shop software. Vector turned Corel from a company that had been leaking money into a profitable shop by doing things like adding other acquired technology to its mix, such as the formerly shareware program Paint Shop Pro, from Jasc.
Likewise, Vector has already been working to enhance WinZip. Vector purchased WinZip in January and since then has quietly been improving basic compression functionality to make files smaller. Vector has also added automation and scripting to make repetitive actions faster. A major upgrade is expected "real soon now," Nicholson said.
Nicholson said that the purchase agreement with WinZips previous owners stipulated that Vector had to keep things quiet to ensure a smooth transition with the user base, the management team and employees of the small company. Based in Mansfield, Conn., WinZip was founded in 1991. It has fewer than 50 employees.
The equity firm has also released a new product called WinZip Companion for Outlook 1.0. It automatically compresses attachments to Outlook e-mail, saving users "bandwidth and time and annoyed messages from IT saying your in-box is too full," Nicholson said. Outlook Companion is a "simple idea, but if everybody used it, the world would be a better place," he said.
Vector has also inked a co-marketing deal with Google Inc. to enhance both companies distribution. The agreement calls for WinZip to distribute Googles toolbar and desktop search.
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