Having got costs under control last year, Corel now says it has resources and ideas for a new, smarter company. There will be products for everybody, but 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: use 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 that Corel thinks can change how big companies manage documents and information. Corel also has multiple output devices in mind, and its ambition is to compete -- at least on some level -- with Microsoft's .Net.
Q: 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?
A: 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 got very high. Also, we were not really clear on the strategy and who the customer was, and 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 $50m on the bottom line, purely from cost control. Your new strategy is based on three elements. Can you explain them?
Once we have the costs under control, then we had to look on 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 with 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, with different products like KPT that are very successful. For example, the artist that created the uniform of Spider-Man in the movie used Procreate. Then we announced the strategy of deepwhite for the enterprise, a new segment for us. The three line of products will be based on XML, and we want to grow on all of them. Now we have stabilised the cost and invested for growth, next year should be profitable. What is your vision for Linux since abandoning Corel Linux for Desktop, and the new version of MacOS X, which has a Unix core?
We created a desktop version of Linux because we thought that Linux was very powerful but difficult to use. It was a technological success, but the market wasn't interested at that time. So we stopped developing the operating system, but we do have applications for Linux. Now Linux is an operating system just like Mac or Windows, so if there is a business case to justify creating an application, then we will do it. We are interested in Mac OS X primarily because of what Apple did on top of it, for example with the new iMac: it is very easy to use. For connecting to the Internet, using digital cameras, and so on, it is very attractive for new users. All the operating systems are interesting for us as development platforms, but we do not develop the platform anymore. There is a strong competition in the consumer application space. Not only Microsoft Office and Sun's StarOffice, but also a lot of smaller software houses. How will you address the consumer space?
There is no doubt that the consumer space is very busy. We do not see major growth in this area. That's why we created Procreate as the premium brand of graphic applications for the professional. We'll continue to have consumer products as an entry point, but we want to move into the Procreate line as quick as we can. For the office, there is Sun with StarOffice but it seems that every year they have a new announcement about the same product. Sun and software don't mix very well. Corel has spent a lot of time and effort in making WordPerfect suite compatible with Microsoft Office, and it's not something that you can do very 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 version of a cross-media publishing solution, but its solution is 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 then everybody can connect to it, and it can also be more interactive. I believe XML is a better technology for cross-media publishing. So on the theme of deepwhite, what is your strategy for the enterprise?
In the enterprise you need to create content once, and deploy it on any platform and any device. People create content to show to others, so if you can show it to more people, in different forms and devices, it is 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 that you want to interact with that content. The problem here is that enterprises have multiple departments, and the content created by one department should be able to connect to that created by others. So for example if you are designing a product and the artist wants to make a change, it should be all in the same world. To that extent it 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 the content that people have, and making it smart, fully dynamic and interactive. How will you face the challenge of dealing with all the legacy content and formats that already exists in corporations?
Right now, corporations have a big investment in content, and they surely will not throw it away and start over. The solution is to have a transformation layer that converts the existing content into an XML format, so you can manage it in the cross-media publishing environment. That's really great, because if companies transform their existing Word and PowerPoint documents in XML, they can see the value of having the content in a cross-media system. And later on we can explain that if the content is created in XML in its first place, it can be even smarter. It's a kind of two-phase approach. From the experience we have 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.