Corel to spin off Linux arm and promises profit by Q3

Corel has today announced a repositioning strategy that will see the spin off of its Linux distribution division and profitability by August this year.

Corel, assisted by management consulting firm McKinsey, has decided to spin off the Linux distribution element of its Linux division, although it declared it will retain an interest in the new company. Instead, the firm will focus on revenue generated from upgrades to WordPerfect Office 2002 and its CorelDraw and CorelPainter range of applications. Corel also hopes to develop applications for Microsoft's powerful new .NET framework, a market Corel expects to reach $2.9bn by 2003. The announcement is in line with the admissions by Derek J Burney, president and CEO of Corel, to silicon.com last November. Today he said in a webcast to shareholders: "We are committed to success and we believe that this plan, properly executed, will result in Corel's return to profitability by the third quarter of this fiscal year." Burney denied the spin off would inevitably lead to job losses, but admitted that it may be a possibility, should the new company be acquired by a third party. Burney added: "We have the opportunity to grow the company's revenues at a compounded annual growth rate of at least 20 per cent over the next three years, mainly through the creative products group." Corel recently sold a 25 per cent stake in the company to rival Microsoft for $135m. The purchase gave Microsoft 24 million non-voting preferred shares, and has since been working on developing products for its .Net platform, porting the company's CorelDraw and Linux products to Microsoft's new software framework. Last year was difficult for Corel. The company saw its stock plummet, a merger disintegrate only weeks after it was announced, and a 20 per cent cut in its workforce.