With costs finally under control, Corel now says it has resources and ideas for a new, smarter company. There will be products for everybody--with a clear focus on the enterprise.
ZDNet Italy met Derek Burney, president and chief executive of Corel, shortly before Microsoft made its recent announcement about Office 11. In the wake of Microsoft's announcement Burney's words sound particularly prescient--especially the concept of using XML to create a new level of interaction and ease of use in content and knowledge management. This is the idea behind "deepwhite," the cross-publishing platform with which Corel hopes to change how big companies manage documents and information. Corel also has multiple output devices in mind, and ambition is to compete--at least on some level--with Microsoft's .Net.
ZDNet: With the financial results of 2001, Corel has closed a long period of self-assessment. What was the reason for the difficulties encountered in the past?
Burney: Most of the difficulties we had came from a variety of investments in different technologies. We didn't have accurate cost controls, so essentially the costs became very high. Also, we weren't really clear on the strategy and who the customer was, so we had no match between the costs and the revenues.
In 2001 the first thing we did was to put the costs under control, and we immediately got back to profitability for three quarters in a row. Having done so, we had a positive balance of $50 million on the bottom line, purely from cost control.
ZDNet: Your new strategy is based on three elements. Can you explain them?
Burney: Once we had costs under control, we had to look towards building up revenues. We have three distinct groups of customers: Home and small business, professional creative artists, and the enterprise. We have different products, with different ways of selling them and different marketing messages. So we created three brands to address each one. For the home and small business there's Corel--everyone is familiar with CorelDRAW. For the professional creative artist graphic segment now we have Procreate, which includes different products like Kai's Power Tools that are very successful. For example, SpiderMan's uniform in the recent movie was created by an artist who used Procreate. Then we announced the strategy of deepwhite for the enterprise--a new segment for us. The three lines of products will be based on XML, and we want to expand all of them. Now that we have stabilized the cost and invested for growth, next year should be profitable.
ZDNet: Since you've abandoned Corel Linux for the desktop--and in light of Mac OS X, which has a Unix core--what is Corel's current vision for Linux?
Burney: We created a desktop version of Linux because we thought that Linux was very powerful but difficult to use. The product was a technological success, but the market wasn't interested at that time, so we stopped developing the operating system. But we do offer applications for Linux. Nowadays Linux is an operating system just like Mac or Windows, so if there is a business case to justify creating an application, then we'll do it.
We are interested in Mac OS X primarily because of what Apple did with the interface. For example, the new iMac is very easy to use. For connecting to the Internet, using digital cameras, and so on, it is very attractive to new users. All operating systems are interesting for us as development platforms. But we no longer develop platforms.
ZDNet: There's strong competition in the consumer application space--not only from Microsoft Office and Sun's StarOffice, but also from a lot of smaller software houses. How will you address the consumer space?
Burney: There's no doubt that the consumer space is very busy. We don't see major growth in this area. That's why we created Procreate as our premium brand of professional graphics applications. We'll continue to offer consumer products as an entry point, but we want to move into the Procreate line as quickly as we can.
For business users Sun offers StarOffice, but it seems that every year Sun makes a new announcement about the same product. Sun and software don't mix very well. Corel has spent a lot of time and effort making the WordPerfect suite compatible with Microsoft Office, and that's not something that can be done quickly. We're very excited because WordPerfect sales and revenues have gone up in the last two quarters, so it's a growing business for us. That was a little surprise.
In the deepwhite segment we have a competitor too. Adobe is pushing its own version of a cross-media publishing solution, but its solution is only for PDAs and is not based on XML. I think that an open standard is a better solution for the enterprise. If the standard is open everybody can connect to it and it can also be more interactive. I believe XML is a better technology for cross-media publishing.
ZDNet: So on the theme of deepwhite, what is your strategy for the enterprise?
Burney: In the enterprise you need to create content once, and deploy it on any platform or device. People create content to show to others, so if you can show it to more people in different forms and on different devices, all the better. You should be able to deploy the same content on the Web, cell phones, anywhere. So the first phase of the deepwhite vision is to be a cross-media publishing system.
Once the content is on the device, the next phase is interacting with that content. The problem is that enterprises have multiple departments, and the content created by one department should be able to connect to content from other departments. To that extent deepwhite mirrors exactly what Microsoft is doing with its .Net framework, in the sense of collaboration and bringing different departments closer together.
So the second phase of deepwhite strategy is actually connecting content and making it smart, fully dynamic and interactive.
ZDNet: How will you face the challenge of dealing with all the legacy content and formats that corporations are currently using?
Burney: Right now corporations have big investments in content, and they surely will not throw it all away and start from the beginning. The solution is a transformation layer that converts existing content into XML format, so you can manage it in a cross-media publishing environment. If companies transform their existing Word and PowerPoint documents in XML, they can see the value of having content in a cross-media system. And then we can show them that if content is created in XML in its first place, it can be even smarter. It's a kind of two-phase approach. From our experience with Corel and WordPerfect--which interact with a lot of different formats--we don't see a big issue in converting existing content. In fact, we are already working with customers on this.
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