Mystery benefactor brings Corel back to the surface

An anonymous benefactor has handed a lifeline to Corel to help the software vendor survive its current financial crisis.

An anonymous benefactor has handed a lifeline to Corel to help the software vendor survive its current financial crisis.

The unnamed institutional investor has agreed to buy 14.7 million shares - 20 per cent of Corel stock, estimated at $50m (£35.5m) - over the next two years to help the company complete its turnaround.

The buyer will receive the stock at 95 per cent of the average prices during the two years. But Corel has secured a get-out clause if the deal is not working to its advantage.

The company already has cash reserves of more than $7m, but the deal has been described as a "safety net" by industry analysts.

The vendor has suffered financially since a proposed merger with Inprise/Borland - a company with $240m in cash reserves - fell through. The company has also lost more than one-third of its workforce since May, the most recent job cuts being 139 staff from its Dublin office.

Derek Burney, chief executive of Corel, who took the helm when founder Michael Cowpland left in mid-August, has described the financing as the second of a three-part plan to regenerate the company.

The third part of the plan is expected to be announced at the end of the month.

Burney claimed in a statement posted on the Corel website: "We are committed to serving our customers across the globe, and we feel that these steps will help us to better focus on our strategic priorities.

"Our ultimate goal is to ensure that we do what is necessary as a company to consistently earn customers' confidence and continued commitment."

The software vendor posted an operating loss of $23.6m in the second quarter ended 31 May. Its turnover of $36.6m was down 48 per cent compared with the second quarter of 1999. The company's latest quarterly results are expected on 27 September.

Corel resellers in the UK seemed unimpressed and none made any comment.