Corel sells off NetWinder unit, posts profit

Corel Corp. has announced it is selling its Corel Computer NetWinder division, which makes Linux-based thin client/thin server computers, to Hardware Canada Computing (HCC) in exchange for a 25 percent equity stake in HCC. Corel also announced its first profitable quarter since the fourth quarter of 1996 and the first profitable year since fiscal 1995.

Corel Corp. has announced it is selling its Corel Computer NetWinder division, which makes Linux-based thin client/thin server computers, to Hardware Canada Computing (HCC) in exchange for a 25 percent equity stake in HCC.

Corel also announced its first profitable quarter since the fourth quarter of 1996 and the first profitable year since fiscal 1995. Corel's earnings for the fourth quarter, which ended Nov. 30, were US$6.8 million, or 10 cents per share, on revenue of $67.2 million. That revenue is 54 percent higher than the $43.6 million in revenue posted for the quarter a year ago. In the previous year, the company posted a loss of $66.9 million, or $1.10 per share for the fourth quarter.

The earnings figure was much higher than the 2 cents per share loss analysts polled by First Call Corp. had expected.

For the fiscal 1998 year, the company posted a loss of $30.4 million , or 51 cents per share, on revenue of $246.8 million , compared to a loss of $231.7 million , or $3.84 per share, on revenue of $260.6 million , for fiscal year 1997.

The agreement to sell the NetWinder division of Corel Computer to HCC is expected to close before the end of February on the condition of necessary regulatory approvals. No further details were released. Meanwhile, the videoconferencing unit of Corel Computer will remain with Corel, a spokeswoman said.

Corel has considered spinning off its Corel Computer NetWinder unit on several occasions but was waiting until the right time when it would yield the most value to shareholders, Michael Cowpland, Corel president and chief executive officer, said in a statement.

"The development of the NetWinder is essentially complete and we have seen extremely positive acceptance from our initial sales," Cowpland said in a statement.

The move will allow Corel to benefit from its stake in HCC, one of Canada's largest value-added resellers, particularly in the Sparc/Unix market, while at the same time focusing on its core software business and flagship brands, WordPerfect and CorelDraw, "including the delivery of those applications and more on the Linux platform," Cowpland said.

For HCC, acquiring Corel Computer's NetWinder division is key to the company's entry into the Linux corporate operating system environment, said HCC President Michael Mansfield.

"Linux and open source code is the future," he said in the statement. "This acquisition has vaulted us into a world-class opportunity which will let us move forward with an initial public offering later this year."

HCC, based in Ottawa, Canada, has nearly $60 million a year in sales. The company is a leading manufacturer and supplier of Unix, Windows NT and Sparc systems, according to the statement.

Corel announced the release of its NetWinder Development Machine system running Linux and the StrongARM chip in June 1998.

The company achieved its financial target set a year ago by streamlining its business practices, according to Cowpland. "We are confident we can increase our substantial user base with our new Web initiatives and compelling upgrades," he said.

Corel stock was unchanged today at $4.75.

Corel, in Ottawa, Canada, can be reached at +1-613-788-6000 or on the Web at http://www.corel.com/.

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