Change in Focus Helps Corel Regain Footing

Under new ownership, software vendor downsizes, zeroes in on small businesses and consumers, and embraces digital photography boom.

Only three years ago, Canadian-based software company Corel Corp. looked to be circling down the drain. Despite such software offerings as the venerable WordPerfect and CorelDRAW, Corels stock was hovering at about 70 cents per share. The company had already gone through at least seven rounds of layoffs and was losing millions of dollars annually.

In August 2003, Vector Capital, a San Francisco-based software investment firm with $500 million in equity capital at its disposal, bought the struggling Corel for about $125 million. After Vector Capital took Corel private that October, Amish Mehta, a Vector Capital partner, took over as interim CEO.

Over the next 20 months, Mehta, who is now chairman of Corel, led Corel to what appears to be a stunning turnaround for the formerly moribund company. While private companies are not required to make their sales figures available to the public, the strategies Corel has implemented during this short time would seem to support Mehtas assertion that Corel had, within six months of going private, one of the top five profitability rates in the software industry.

According to Mehta, Corels new strategy was to refocus on its core products, most notably WordPerfect and CorelDRAW, and pay attention once again to neglected customers of these applications. To start, the company quickly divested itself of a whole bunch of businesses that were acquired willy-nilly over the several years before the takeover and to scale back misguided initiatives siphoning money away from its core software business.

In addition, Mehta said that Corel cut its expense structure in half. According to Mehta, the company went from about 1,000 employees to 420 and that as CEO, he renegotiated everything down to the companys phone service.

Next, Mehta decided that Corels previous strategy of chasing after business in the enterprise sector was quixotic, given that Microsoft already had a virtual monopoly in that space. Instead, he decided to focus on small businesses and consumers, leveraging its 75-country distribution channel to do so.

"I believe were one of the most channel-friendly software companies in the industry," Mehta said, noting that many of the 75,000-to-100,000 new customers Corel says it has gained per month come from partnership with companies like Dell, and Best Buy.

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