Corel Corp. ended speculation about the future of WordPerfect Wednesday with the announcement that it will buy the company in a deal worth about $180 million.
The Canadian-based company will offer jobs to about 700 employees now involved in product development and related support staff in the business division, which includes WordPerfect and Quattro Pro. Approximately 500 current employees at the business applications division will likely lose their jobs.For now, Corel plans to leave the division in Utah. It will lease space at Novell's campus in Orem to house its new employees.
The product name will change to Corel WordPerfect to reflect the new ownership.
Novell will receive 9.5 million shares of Corel common stock, which translates to a 20 percent stock interest in the company worth $100 million. It also will receive $10.75 million in cash as well as royalties from licensing agreements over the next five years. Royalty fees will total about $80 million.
A Novell official will be appointed to Corel's board of directors as well. The sale will likely receive necessary SEC approval within 30 days and will be completed by April.
Corel, established in 1985, is best known for its CorelDraw graphics program. It has begun branching out into other software products with titles such as CorelVideo, a video conferencing application.
The acquisition of Novell's business applications division will triple Corel's sales and make it the second largest software company, behind giant Microsoft. There are about 20 million users of WordPerfect products; the division had sales of $400 million.
Corel Chairman Michael Cowpland said the acquisition will give his company a "best of breed" suite of applications that work seamlessly with the Internet. He said he was particularly excited about WordPerfect 7.0, to be released in April.
He said the product is a "huge leap forward in new technology." The new version of WordPerfect will incorporate a World Wide Web browser as well as Web page authoring tools, Cowpland said.
"The Internet . . . is not being controlled by MicroSoft and companies like ourselves are able to jump on that as far as anybody else," Cowpland said. "We have the potential to be the first suite out on it."
The news signals the end of the troubled marriage between Novell and WordPerfect, which was sealed in mid-1994 in a transaction worth about $850 million. Novell announced in November it would sack the business applications division by the end of its first quarter.
It kept that promise to the day.
In the interim Novell trimmed about 600 employees from the business division to prepare it for a sale.
Novell CEO Robert Frankenberg said his company began negotiations with Corel about six weeks ago; talks were hot and heavy for the past three weeks.
Although there were several other interested buyers, Frankenberg said Corel best met criteria established by Novell for the sale: commitment to the future well-being of customers, products and to WordPerfect's development and support team.
Novell's original investment in WordPerfect will be salvaged in large part by keeping GroupWise, a messaging system developed by WordPerfect. Frankenberg, who valued that technology at about $800 million, said Corel will be a licensee of the technology.
"I think we have a wonderful set of networking capabilities and a larger installed base than Lotus Notes," he said, noting IBM paid $3.5 billion for that product.
At the time Novell announced plans to dump WordPerfect, it blamed sagging financial performance on the business applications division, saying sales of the product hadn't met expectations.
Some industry watchers reacted favorably to Corel's decision to acquire WordPerfect.
"From its history it's not such a bad choice," said David Coursey, editor of PC Letter.
Corel understands how to make software as well as sell it, Coursey said.
That is exactly what Novell didn't understand, many observers say. Novell tried to merge the sales forces of the two companies. In addition to creating a clash of cultures, the results were abysmal.
Cowpland acknowledged that its advertising and sales focus is better suited for WordPerfect than was Novell's.
"I think I could make a very substantial case for why that's a great idea from Corel's point of view," said Amy Wohl of Wohl and Associates.
It gives Corel that ability to leverage its own products in WordPerfect's more established sales channels and broad customer base. WordPerfect also gains entree to new customers as well.