Filer: Inprise Corporation
Pursuant to Rule 425 under the Securities Act
of 1933 Commission File No. 0-16096
On February 7, 2000, at 10:00 a.m. and at 11:30 a.m. Inprise
Corporation hosted the following teleconferences:
NEW YORK, NEW YORK
TELECONFERENCE WITH DR. COWPLAND AND MR. FULLER
"COREL - INPRISE/BORLAND MERGER TO CREATE LINUX POWERHOUSE"
- -------------------------------------------------------------------------------
MS HUGHES: Thank you very much. Good morning everyone and welcome to the
Investment Community and Industry Analysts conference call to discuss
today's announced merger between Corel Corporation and Inprise/Borland
Corporation.
We are very pleased that you are able to join us this morning. My
name is Catherine Hughes, I am with Corporate Communications at Corel,
speaking to you today from New York City.
By now you should have received a detailed press release entitled
"Corel - Inprise/Borland Merger to Create Linux Powerhouse". This press
release was distributed over Canadian corporate news and business wire.
If you have not yet received this release, please visit Corel's Web
site at www.corel.com or Inprise's site at www.inprise.com. There you can
also link to our Webcast and get additional background material on today's
announcement.
Hosting today's teleconference are Dr. Michael Cowpland, President and
Chief Executive Officer and Director of Corel Corporation; and Mr. Dale Fuller,
Interim President and Chief Executive Office at Inprise/Borland Corporation.
With the completion of this merger, Mr. Fuller will be appointed as
Chairman of Corel's Board of Directors. Also on hand to answer your
questions following the opening remarks are Mr. Michael O'Reilly, former
CFO, now independent consultant for Corel Corporation, and Mr. Derek
Burney, Executive Vice President of Engineering and Chief Technology
Officer at Corel.
Before we begin, I would like to remind you that during this
teleconference there may be statements that are forward looking as that
term is defined by the U.S. Private Securities Litigation Reform Act of
1995. These statements are based on current expectations that are subject
to risks and uncertainties. Actual results will or may differ due to
factors such as: shift in consumer demand, products shipment schedules,
product mix, competitive products and pricing, technological shifts and
other variables which are discussed in the company's report on Form 10K,
and other reports filed with the Securities and Exchange Commission.
With that I would now like to turn the call over to Michael Cowpland.
Mike.
DR. COWPLAND: Thank you.
I would like to go over a few of the highlights and then Dale will
talk and then we will be able to have a question and answer session.
The key points, we think, of this arrangement is the fact that
Corel has the leading position in the Desktop Linux OS. We also have the
leading position in the application area and on the Inprise/Borland side
they have the leading position in terms of tools and back-end solutions.
So putting the two together gives us a total end to end solution
for Linux. Both companies have also positioned ourselves as being fully
compatible with the Windows market. We think that is essential because we
don't see that Windows is going to go away over the next 10 years, but we
see a huge opportunity in Linux growth and by dividing not just the
applications in the OS, but also the tools, we will be able to facilitate
and accelerate their migration and offer other companies a choice of the
best operating systems for their applications.
Now over to you, Dale.
MR. FULLER: Thanks, Mike.
As you have heard, we have a long list of reasons to bringing the
two companies together, but what about the vision, where are we going to
take this software powerhouse?
Our shared vision is pretty straightforward: It is to lead the
development of Linux and other open software technologies that will bridge
and accelerate the value of the Internet to the world. Let me be very clear
about this. We are already bridged to the future. You see what we have done
with the Windows marketplace and applications to the solutions to the
development marketplace.
The fastest way to get to Linux and leveraging the future of this
world called the Internet is taking and using our products today. It is a
clear choice, it is the only choice. It is open and we have been delivering
this future and we are going to continue to deliver this future in
applications and they are being delivered on Linux today.
So Mike, back to you.
DR. COWPLAND: I think other key points are that the combined
company will have very strong cash reserves of over $200 million and we
have proven management teams on both sides: strengths in technology,
strength in management, and strength in execution. We think we are ideally
positioned to be the dominant Linux company and Linux has already shown
itself to be the hottest technology on the planet, so it is a great place
to be.
MS HUGHES: I think with that, with the conclusion of the opening
remarks -- we wanted to keep it brief so that we could allow as much time
for questions and answers -- so operator if you would like to open the call
for questions, that would be great.
MODERATOR: Certainly. Ladies and gentlemen, if you would like to
ask a question, please press the 1 on your touchtone phone.
You may also remove yourself from queue at any time by depressing
the # key, and if you are using a speakerphone please pick up your handset
before pressing the number 1.
One moment for our first question.
Our first question comes from Brent Williams of McDonald
Investment. Please go ahead.
Q. Hi, guys. I wanted to look at -- you know I can certainly
understand how you can line up the product categories of what you both have
to offer here.
Can you talk about what your preliminary thoughts on distribution
channel strategies and changes, given the indirect distribution
capabilities of Corel as well as the direct sales capabilities of Inprise?
DR. COWPLAND: Well, there is a really good fit there too because
roughly 50 per cent of Inprise/Borland part is sold through the channel, it
also has really strong resources and can add more intensity to that. At the
same time, Inprise/ Borland's very strong with enterprise and will enable
us to get many more of those enterprise customers for the emerging
products.
MR. FULLER: Yes, Brent, I think we get to really leverage what
Corel has already set up worldwide in its distribution. We can leverage
there and in areas where they don't have leverage we can leverage in those
areas, you know, as we combine the two companies.
I think from the enterprise level, we have the people, the manpower
from our professional service organizations ,to our systems engineers, to
our sales people that are working with those major accounts, that are using
enterprise level development tools that we can walk back and deal with the
operations now of having all these applications for productivity. That fits
very, very well and right in sync with where we have been going.
DR. COWPLAND: And if you look at those enterprises now evaluating
Linux as a serious platform for the future, we have the Office Suite on
Linux as well as Windows.
Now it is tough to persuade people to switch from Microsoft Suite
if they are only going to stay in Windows, but if they are now going
multi-platform, we have the ideal solution and then Inprise has those
enterprise contacts to help deliver that solution.
Q. And you mention talking about service and support capabilities.
I am not familiar, Mike, with the service and support organization, you
know, the professional services that you have available at Corel.
Could you talk about that a little bit?
DR. COWPLAND: Well, we have worldwide technical support in place
servicing our 50 million users and actually Inprise has got a very strong
group too.
Q. No, I am talking about specifically consultants to help with
Linux implementations, I mean, I am not talking the call-in support
organization.
DR. COWPLAND: Okay. Well, we have an affiliate called Linux Force
which specializes in the professional services and they are growing very
rapidly and we could be looking at making more investments in that area to
beef up that Linux support area.
MR. FULLER: And how we see it, you know, the merger would really
help in how we see the activities there, Brent, is that our professional
services organization that we have today, they are working with very large
scale applications and development of integration into databases, Legacy
Data, leveraging as they move out to application server technologies and
needing for deployment, that is where really that the Linux Force really
comes into play for us. We can really leverage off that. Our PSO
organization teams up with them that can deliver a one-two punch full
services into large scale customers, regardless of whether it is on Linux,
Solaris, whatever platform.
So we have that skill set.
Q. Okay. Thanks.
MODERATOR: Thank you. Our next question comes from Alex Beluda of
Merryl Lynch. Please go ahead.
Q. Thanks very much.
Guys, just a quick question on positioning desktop versus back-end.
Mike, you have been doing all your efforts in terms of trying to bring
Linux to the desktop. This seems to be a step towards the server end.
Are you going to drop focus on the distribution side of Linux
altogether, ie. OS distribution and just focus on the applications, be they
productivity or application development, or how are you going -- or does
this mean that you are now going to move sort of more in the -
DR. COWPLAND: No, we certainly aren't going to drop any focus on the
distribution when we have been so successful.
If you look at our shipments last quarter we were at the same level
already as Red Hat. So we have kind of developed the desktop OS as the
market from scratch and we see that accelerating as people see the
benefits. In fact, we found people were really thrilled with the fact that
it is virtually zero learning curve to move on to our Linux desktop from
Windows. Now we will be able to have the same kind of connectivity on the
back-end and server side and enterprise tools through the Inprise/Borland
side.
MR. FULLER: If you look at the partnering aspects of what we are
doing, is that we do own right now the desktop that the Red Hats, the VA
Linuxs, the Turbo Linuxs, the Calderas, and S.u.S.Es own pretty much the
server technology. We are partnering with them because we have the
applications that run on top of those servers, whether it is the Office
Suite productivity tools or the development tools. When you look at that,
we are the number one largest application vendor from Linux marketplace in
the world. There is no one that comes in close to us. We are the only
development tool house and we are the only Office Suite productivity house
in the world that does that.
So it makes only pure sense for us who work with those guys and
partner with them and leverage that.
As for the desktop, they are not focused on the desktop, that is
where we happen to be focused. We are not focused on the server, that is
where they are focused. We are only focused on the server form the
application standpoint.
Q. Thanks.
MODERATOR: Thank you.
Our next question comes from Dale Benson of Benson and
Associations. Please go ahead.
Q. Thank you.
Could you address for just a moment what kind of synergies you
expect? Dale, in particular, you might address the issue of R&D
expenditures, which I know you had an alliance with Corel, but since
Inprise spends such a tremendous amount of money on R&D and Corel as well,
what your plans there are and what other synergies can be achieved via
sales force, et cetera.
I am kind of trying to get at what kind of model could be built for
going forward.
MR. FULLER: Well, I think one of the first things is that if is
really early for me to roll out, you know, all the synergies and the plans
that we are doing, but let me put it this way.
Over the next couple of months, we are going to be working very
closely with the consulting firm of McCaul McKenzie*, which every one knows
- -- they are kind of the leaders in the industry -- to help us really put
together a plan, really dig through all the different synergies and cost
savings and all the benefits we can get out of that.
However, at the top level if you take the plus 1,000 developers
that the combined company now has, and better than 50 per cent of those
people are working on Linux today, are leveraging Linux, I mean that gives
us a lot of just intellectual power that we get to leverage in that to get
products out there faster to the marketplace.
I think that some of the cost savings we will get will be primarily
on the SG&A side of lowering our costs in that aspect because there is
duplication of efforts, but the engineering aspect we can really be focused
a lot more in a lot more areas and move a lot faster because now we have a
really big team going forward.
DR. COWPLAND: And some examples on the engine side is that Corel
has already brought high quality printing to Linux for the first time, and
those printing engines -- also our graphics engine and UI engines and test
engines can all be shared with the Inprise/Borland team.
Q. You know, the research alliance that you guys struck up a month
ago, how is that working today?
MR. FULLER: That was the initial conversation we had about bringing
the companies together. It was working so well between our engineering
organizations, because what Corel was developing on their side through the
different drivers, we didn't have to develop that and we could leverage
that within Kylix and our JBuilder products and other development tools
that allow for developers to get to this platform a lot faster.
As we kept working closer and closer together, it just made a lot
of sense.
DR. COWPLAND: Also we have links going back a long time because the
Quattro Pro and Paradox database components of our Office Suite originated
from the Borland team.
Q. Okay. Thank you. Congratulations. I think it is a good marriage.
DR. COWPLAND: Thank you.
MR. FULLER: Thanks, Dale.
MODERATOR: Thank you.
Next, we have a question from Paul Lessum of CIBC World Markets.
Please go ahead.
Q. Thank you. Can you just elaborate a little bit more on how the
two product lines are synergistic, how a single client might use both of
them, and what people would use both of the product lines for?
DR. COWPLAND: Well, on the desktop we see people using our Office
Suite in exactly the same way they use an Office Suite on Windows and being
able to go back and forth easily to files and other applications on
Windows. And then on the tool side, we see people using the Kylix tool to
develop products that will play both on Windows and Linux with no extra
effort required.
Then in communicating with the enterprise databases, we see using
the Inprise/Borland middle wear as a total solution.
MR. FULLER: Of the $60 billion market out there of development
today that is going on of small to medium-size development, what we see is
that now you can take developers that have developed code on Windows and
need to move to the new world order which is growing very fast, this thing
called the Internet. They can take their code directly from that and bring
it straight to the Linux platform, which opens the doors for them into the
Internet space. But better than that, with the combination of both
companies, that developer can now take that code that he has created -- it
might be a very vertical application for business -- he can integrate it
now with the Office Suite and the Office Productivity Tools and tightly
couple them and provide a much greater tool and solution to his end user.
So you can see from a developer's standpoint this becomes very,
very big. It expands his market into the future as opposed to staying in
the past.
DR. COWPLAND: The Office Suite becomes almost a new platform the
way Microsoft Office has used that in the Windows area, but with the open Web
connectivity instead of being closed into a proprietary system.
Q. Okay. And how do you plan to sell or cross-sell the two product
lines? Are you looking to bring both sales teams up to speed on the other's
product?
DR. COWPLAND: I think there will be a lot of opportunity there for
sure. As I mentioned earlier, our channel team is second to none in terms
of getting channel space worldwide and Inprise/Borland has got a
terrifically powerful enterprise team which is stronger than our presence,
so both sides will help each other.
Q. Okay. Thank you.
MODERATOR: Thank you.
Our next question comes from David Wright of Nesbitt Burns. Please
go ahead.
Q. Thank you very much. Good morning. You have talked about some of
the changes operationally. What about the Board of Directors? You have
mentioned one change. Are there any other changes to the Board of Directors
at this time?
DR. COWPLAND: We are going to have four from Corel, two from Inprise.
They will be decided later on once we get closer to finalizing the arrangement.
Q. Okay. So the facilities now they have what, R&D headquarters and
headquarters in Silicon Valley and your operations in Ottawa. Are there
other facilities that the two organizations have?
MR. FULLER: Yes. In fact, we have R&D operations in Singapore, in
Sydney, Australia, in Tokyo, and in Amsterdam.
Q. Okay. And Corel's strategy has been to keep operations in, sort
of, one global office. That seems to be a different strategy than what you
have used. Where do you see your combined organization going on that?
DR. COWPLAND: Actually, we got used to working with engineering
teams right across the world. Derek, you mentioned some of the teams you are
working with in Egypt and India?
MR. DEREK BURNEY: Yes, we still have quite a few teams around the
world so we have developed expertise at working with and there is
absolutely no reason why we can't leverage that expertise to use under the
current situation.
Q. Great. Do you see any cost savings then from putting the two
organizations together? Are there R&D facilities that you can merge here?
DR. COWPLAND: We have done some top-down studies and found we can
identify about $30 million in annual cost savings at least by going
forward, but mainly in the administration and SG&A areas.
Q. Okay. What would be the head count when we are done combining
the organizations?
DR. COWPLAND: We haven't actually drilled down to that level. We have
a lot of time over the next two months to go into detail on that.
Q. How about the head count today in both organizations?
DR. COWPLAND: For today? About 2,200.
Q. Overall combined right now?
DR. COWPLAND: Yes, about 2,200.
Q. Okay. Thank you very much.
MODERATOR: Thank you. Our next question comes from John McTeek* of
Prudential Securities. \ Q. Thank you. I would like to get a better sense
in the middle wear space, how you guys plan to go forward with the
Visigenics* products and what you see as the strategy in that area?
MR. FULLER: Well, I think the strategy is continuing as we go
forward. We launched last week at LinuxWorld both our application server
technologies for Linux and our Orb* technology for Linux. We have one of
the very few application servers out there today that are on the Linux
platform. So we will continue to drive that. That was basically our
ABserver* 4.0. So the fourth evolution of the product goes forward. We
still have a very focused dedicated team in the enterprise space.
As you know, we are very, very strong in OEM relationships with our
Orb* technology -- Oracle, Cisco, HP, Sun, Netscape, you can go down the
list -- all currently integrate our Orb* technology into their core server
products, even their application server products.
So in a lot of aspects, we are going to continue to drive that
because that is very, very important in this space.
As we move to this thing called the Internet, as it grows bigger
and bigger, application server technology only gets larger and more
important. And the cost and scalability is humongously more important. That
is why Linux is filling a void that is Solarus and Windows NT could not do
both on price and scalability.
So that is why we are pushing down that path. You take then the
applications, being the development tools that you can develop with or the
applications that we have now in the Office Suite, put those on the
application server, you really have a turnkey package for the Internet
today that businesses can use to do business on the Web.
Q. So who do you see as our toughest competitor in the app server
space? I know it is an area for strong growth, so there is not a lot of
head-to-head, but who would you see as -
MR. FULLER: I would say our primary competitor in the application
server space was Oracle, but they use our Orb* technology in their product;
Sun, but their use our Orb* technology in their product as well -- they are
our customers. So BEA would be the other one. Now we are still trying to
get them to use our Orb* technology in their product and they will come
around some day.
Q. Do you see any resistance from Sun to Linux from the perspective
of, you know, it is a UNIX running on relatively inexpensive hardware from
an alliance perspective here?
MR. FULLER: Well, we actually are aligned with Sun on developing
the Java tools for the Linux platform. They are fully committed to that. It
is a little bit of a paradox for them is that they have a very large piece
of hardware they are trying to sell that currently does not run the Linux
platform. I think that they will come around and open their architecture
more and more as time goes on and they will continue to deliver to their
customers a very, very nice tool.
I think that the advantages that we have today in the space is that
Linux is open and free and we have people like Red Hat and VA Linux and
Caldera and TurboLinux and S.u.S.E that we are partnering with that are
helping us bring our products to life out to the marketplace.
Q. Well, congratulations. It sounds interesting.
MR. FULLER: Thank you very much.
MODERATOR: Thank you. Our next question comes from Alex
Rozensweig of Equifax. Please go ahead.
Q. Well, first of all, congratulations. Then I do want to go back
to the question of the synergies in terms of Inprise and the way it is
being focusing on being the Switzerland of tools and middlewear.
Now you did say that you are partnering with Red Hat and VA linux,
and so on, on the enterprise side, but isn't it a logical concern on their
part maybe that since Corel does have its own Linux that at some point it
is going to go from just consumer to also the enterprise side and you are
sort of undoing the Switzerland effect?
MR. MILLER: Well, I think that you want to look at the
leveragibility as we move forward. This new world order is really one of
partnering and competition as we go forward, and that is what we are doing
with those guys. They understand that and we understand that as we move out
there.
I am not excluding that we will go down that path, but I will tell
you that our attention and our focus is really on the desktop when it comes
to the OS. Our attention and focus on the application and development tools
are on all platforms -- desktops, server, Solarus, Windows -- as we move
forward and our driving force behind it and our energy behind in, where we
are little fanatical about it is that we are focused on open architectures.
Q. If I could add a different question just on the financial side.
Who is going to be the CFO of the combined entities?
MR. BURNEY: Right now we are recruiting for a CFO. We have a
selection committee and we have many candidates lined up, and we expect to
get that taken care over the next few weeks.
MODERATOR: Our next question comes from Greg McAskall of Lord
Abbott. Please go ahead.
Q. Yes, thank you. Could you talk a little bit about the alliance
with Microsoft and how it might be affected by the merger?
MR. FULLER: Well, again, from our standpoint, from the
Inprise/Borland standpoint, our alliance with Microsoft is very, very
strong. We still are their largest developer on their platform of
development tools.
So we are going to continue down that path. It is very, very
important, very, very strong.
DR. COWPLAND: Also we use the Visual Basic currently in our
scripting, so we have an excellent relationship with Microsoft too.
Q. So that the Office Suite has no effect on -- will have no real
effect on Windows and pose a greater competition at this point?
DR. COWPLAND: I think what we are offering is unique in the fact
that we can offer people the same Suite running on Windows or running on
Linux and that Suite has the capability of interacting with Microsoft
software too. So we are providing the connectivity that enables people to
enjoy having a dual platform world.
MR. FULLER: And we help Microsoft's customers, their developers out
there. We ensure the longevity of their efforts by taking their code off
the Windows platform to the Linux platform in a one-step process. So you
can use our Delphi product, taking Visual Basic to Delphi today and you can
actually move Delphi to Kylix instantaneously. So it gives you that
well-rounded approach.
DR. COWPLAND: And we give people the starting point with the
application they need the most and then with the Kylix lab tool, then the
clients can just fill in all the gaps themselves.
MR. FULLER: So we really see this as our total empowerment to the
users of the Microsoft and the world.
Q. Does this impact the HP of licensing or does it enhance it in
any way?
MR. FULLER: HP licensing in which product?
Q. The busy broker, middle wear that you have announced recently.
MR. FULLER: Oh, it enhances that. It actually makes a better
relationship with HP from the aspect now they can get a total application
Suite, development Suite, the Orb* technology for the server technology. So
this is a great opportunity for all our OEMs as we move forward. We see the
OEM market actually becoming bigger and larger for us and partnering with
lots of other partners out there.
Q. Do you have any time frame for when you expect to announce the
synergies, cost savings, the sort of the model going forward? Is there a
time frame at which you are now scheduled for?
DR. COWPLAND: I guess we are looking at concluding this deal before
May, but in between now and then we haven't got any other dates we have
announced yet.
MR. FULLER: As I said earlier, we have actually recruited the
MacKenzie firm to help us. We have a dedicated team that is focusing on the
synergies, going through the disentanglements and creating the whole
process. We will be able to give you a report as time goes on and give you
updates. So we are just not flippantly throwing something out here to you.
We are going to do this very cautiously, carefully, planned out, thoughtful
so that we can deliver on it every day, every step of the way.
DR. COWPLAND: The other thing is that product wise, if you look at
the product, there is no overlap and there is tremendous synergy.
Q. And finally, is Fred Ball on -- will he be included in the
search?
MR. FULLER: Absolutely, Fred is.
Q. Thank you.
MODERATOR: Thank you. Our next question comes from Audrey Snell.
Please go ahead.
Q. Hi. I don't know where to begin.
- --- laughter
Lots of questions. I will try to make it brief.
Number one, I walked in this morning and there were literally five
mergers or acquisitions of companies that I follow happening simultaneously
either in -- somehow connected with the Internet space. I don't think it is
a coincidence.
Could you elaborate on how the big have to get bigger, middle-size
companies have to get big real fast, ie. the acceleration that I perceive
in the market and what that means.
DR. COWPLAND: That is a good point because there is no doubt that
mind shift is very important in this area because it is moving so rapidly
and we are very happy with the amount of momentum we have achieved, where
we got the number one selling download for distribution with Corel Links
and the number two spot in downloads is held by our application WordPerfect
and there are other suites coming out very shortly.
So we already have tremendous mind share and it can it can only get
better with this merger.
Q. Okay. What about current customer base? Have you discussed it
with them and how do they feel about it?
DR. COWPLAND: Well, here again there is greater synergies because
we are strongest in the channel and Inprise is strongest in the enterprise.
So we are going to help each other on both sides.
Q. How about development projects being done independently by
either company before this merger? Will they be continued? Will they be
discarded? What?
DR. COWPLAND: Well, we actually had an initial engineering meeting
and we found that both teams have a very similar methodology and they are
both very high-powered. So we expect that the cooperation will be very good
and also lots of sharing of engines such as graphics, printing, UI and text
engines that we can share between the two.
MR. FULLER: Let me just add to that by saying that the individual
product lines will continue, but they will actually accelerate and benefit
from this merger because we can share the technology from one side to the
other. Corel's main focus has been on the consumer sort of desktop market
and with Inprise's focus on the enterprise there is a lot of technology
that each side can bring to the table to enhance our individual offering.
And Audrey, from our standpoint we look at what Corel has been
doing in the development of Linux already and a lot of the print routines,
the print server technologies, and leveraging the graphics engine that they
have, we can actually realize getting some of our products that you know
about, that we have talked about out to market sooner.
Q. How much sooner do you imagine?
MR. FULLER: Oh, maybe five or ten minutes. That is as far as I'll
commit. ' --- laughter
Q. Can you give us some sense of what the financial impact will be?
DR. COWPLAND: We have announced a $30 million estimated top down
savings, but we will be able to go into a lot more detail on that in the
next two months.
Q. Will it definitely be creative?
DR. COWPLAND: Yes.
Q. How much cash will be on the proforma balance sheet?
DR. COWPLAND: There will be over $200 million.
Q. How much debt is that?
DR. COWPLAND: About $30 million combined.
Q. And what happens to the Scotts Valley headquarters and where
will be the combined headquarters be?
DR. COWPLAND: The headquarters is Ottawa, but we see obviously
keeping the Scotts entity thriving.
Q. Okay. Thanks a lot.
DR. COWPLAND: Thank you.
MODERATOR: Thank you. Ladies and gentlemen again if you do have a
question please press the 1 on your touch tone phone.
Our next question comes from Deng Nueng* of Burrows. Please go
ahead.
Q. Hi. The .747 ratio, is that a fixed ratio or is there a collar
in this transaction? And my second question is, other than Hard Scott
Rodino following and the SEC approval for the proxy, what other regulatory
approvals do we need to complete this transaction?
MR. FULLER: We have the shareholder vote that has to happen on both
sides to approve the merger. That is probably the main thing that is the
other that you have to get out there and, yes, it is fixed and there is no
collar.
Q. Okay. Thank you.
MODERATOR: Next we have a question from Bob Hetchisling of Lord
Abbott. Please go ahead.
Q. Good morning, I am not that familiar with Corel. Can you give us
some idea as to the kind of expected sales and income growth you had hoped
for this year?
DR. COWPLAND: Well, overall we are the number two seller of Office
Suites on Microsoft and we are one of the top graphics providers of
applications. We have 50 million current users of our product worldwide and
growth wise we have been sustaining around a 10-15 per cent growth rate in
our products.
Q. Okay. And as far as Inprise, I think Dale you had indicated
again this little bit of a transition year from the older products to the
new. Is the 5 to 10 per cent top line still applicable?
MR. FULLER: I don't think I ever committed to a number so I don't
want to get caught in that. But you can just, you know, as we talked about
before, we are anticipating and expecting our plan -- our business plan is
to get to a profitable quarter by Q3. That is our business plan and that is
what we are marching to as we go forward.
We are seeing, as you see, in the last two quarters in a row, we
have exceeded the industry's expectation in revenue. We have done that. We
have actually delivered, you know, Q3, we delivered basically a cash burn
neutral and in Q4 we deliver cash positive.
So we are doing a lot of the right things. We are moving along in
the right directions. And the good new that we have with the synergies with
Corel, it only drives us to getting to profitability, you know, and
assuring that even sooner.
Q. I now you were hoping for Delfi to show some nice growth this
year. I think it was about sixty million last year. Does ninety still look
realistic?
MR. FULLER: I think you are going to see Delfi grow because of the
fact the quickest way to Linux for Visual Basic users out there today is to
go to Delfi today. Then they can actually straight port over into Kylix
product for Linux, and that is where we are expecting to see some revenue
growth there in that marketplace. So, to give you a fixed number, I don't
want to do that.
Q. As far JBuilder you introduced that in December and you talked
about the significant number of downloads you got on the first day. Can you
give us some feel for what has happened over the last month or so?
MR. FULLER: Yes, we have had a few hundred thousand downloads of
JBuilder foundation class off our web site, and that is the free download
of Jbuilder.
A couple of interesting facts, there is about fifty percent of
those downloads have been Linux. Also, because you are required to fill out
a survey in that, only six percent of the people that filled out surveys
said they were JBuilder users. So we have gotten 95 or 94% of the people
who have downloaded that product have not been our customers in the past.
This is a great thing. Now we know who they are. We know where they
live. We know their phone numbers and we are not going to mail bomb or
anything like that or spam them, but we are going to give them incentives
to actually acquire or purchase Jay Builder for Linux and Jay Builder new
development RAD tools as we go forward.
So it is a great opportunity for us as we move forward.
Q. I know you had some thoughts in terms of how you were hoping to
build revenue from the product. Have they become somewhat more visible that
you can comment on?
MR. FULLER: Well, we, again, we are moving very, very quick down
the path of delivering where I believe we will own the Java IDE
marketplace, market sharewise. I think we already do. I think, you know,
from the fact that we have a great product, we have a great team working on
it, but on top of that you have seen faulters and missteps by our
competitors, both Microsoft and Symantec.
So we can keep moving forward and keep grabbing that marketplace
out there. We were just awarded last week the number one Java development
tool in the world. So there are some awards that we have gotten. I think
the market is seeing it. We are seeing growth there. So that is some of the
great things there.
On the same front, last week we were showing just a little bit of
Kylix in the back room to a few people and they were very, very impressed.
We were showing some the Visual Basic luminaries and some of our own Delfi
luminaries out there in the world.
Q. Okay. Have the employees all been directly apprised of the
situation?
MR. FULLER: The employees have been communicated both this morning
and some of them might be listening in right now.
Q. Okay. So nothing specific was said in terms of how the merger
benefits them?
MR. FULLER: It was the first phase for -- this is the first call
that we have had.
DR. COWPLAND: We are having employee meetings today and the rest of
this week.
Q. And I know as far as Inprise was concerned it was in the process
of being turned around and you felt that risk* was probably the largest
thing you had to contend with there. How does this integration now affect
the dynamics of that whole process?
MR. FULLER: I think on a couple of fronts. I am always paranoid
about execution. We will always be challenged by execution, no matter who
you are or what company you are out there in the world today. It is all
about execution. I think that with the merger of the two companies, with
Michael and his team, with us, it really helps solidify the management
depth that we have. They have some very great skill sets in the engineering
rank and in their administrative ranks that we can leverage and vice versa
that they can leverage off ours.
So if anything, the merger actually really combines and helps us
assure that we can get the executions and move for it.
DR. COWPLAND: An Corel has got the history of coming through with
w* on time including our latest releases of Linux products, so we are very
confident about the execution side.
Q. Okay. Thank you.
MONITOR: Thank you. We do have a follow up question from Dale
Benson of Benson and Associates.
Please go ahead,sir?
Q. Earlier somebody mentioned about the headquarters, the relative
headquarters, and I know at one time, this is for you Dale, the building
was being leased and there was a potential sale. Has anything happened on
that front that would result in some additional resources.
MR. FULLER: Yeah, Dale, just to kind of give you the heads up on
this is that we can't and we are not announcing anything yet except what
still our plan is. We are researching the fact of whether, you know, it is
a sale lease back or we are actively leasing out the building today to
actually add some bottom line for us. However, if there was a sale of the
building it would definitely be adding cash back into the company.
Q. Thank you.
MONITOR: The next question comes from Tony Brunt of the Hillsdale
Group. Please go ahead.
Q. Congratulations on an exciting and very promising merger. A
couple questions. First, with respect to the issue of equations to
earnings, can one assume, then, that in the third quarter that this merger
actually were to take place we could expect some equation and, secondly,
with respect to the development tools, looks like a great fit on the Linux
side. Would there also bee some benefits in terms of the existing Windows
Corel products such as Drawer and WordPerfect and, then, finally, the third
question, if I many, just give me some colour in terms of what proportion
of total revenues could one anticipate coming from services side such as
training and support and so on.
MR. RILEY: Maybe if I could take the first part of your question.
We previously indicated that our initial review shows us about thirty
million dollars we can expect in synergy cost savings when we put that into
our formula is looking forward, although, you know, it is still
preliminary, as Dale indicated. It is definitely a creative on cash EPS.
Q. Thank you.
MR. BURNEY: It is Derek Burney. I will take the second part of the
question, which was the synergies on the Windows side.
Everyone can see the benefits on the Linux side, but the beauty is
because both companies have a strong presence on the Windows market a lot
of that applies to Windows as well.
You mentioned Corel Draw and even in the productivity suites we can
take a look at moving Delphi into those areas as a scripting language, for
example. There are a lot of areas that the technology can go back and forth
between the two companies' product lines and that applies to both Windows
and Linux. That is actually the real power house message is that we are
compatible both between Linux and Windows and then we offer the total
end-to-end solution, go right from the consumer all the way up to the
enterprise leaving no stone unturned.
Q. And then the final question. Just on the sort of services side,
I was wondering particularly since one is looking at other companies such
as Red Hat and VA Linux I am just trying to get just sort of the Corel
model vis-a-vis these.
DR. COWPLAND: At this point it is early to say because we have upon
us such as Linux force which will be coming into the equation and we can
certainly respond to the demand of services as they arise. We do have a
world wide team already in place -- we will be partners in many countries,
so we have got the infrastructure in place to meet the increasing demand
for the services.
MR. FULLER: And we have a very focused professional services team
and organization, very active and we have a very proactive drilled down
attack force out there that is focusing on the enterprise level. We expect
that somewhere right now our plan is about twenty to twenty five percent of
our revenues is going to be coming from services as we go forward and that
is consistent with the model that you are seeing from the Red Hats and
other people out there where they are more service oriented. We have a lot
a products we can sell as well. So, you know, we don't ever see services
taking over the revenue that we see from products, but we see it moving up
there pretty quick.
Q. That's helpful. Thank you.
THE MODERATOR: Our next question comes Matt (inaudible) of
Chesapeake Partners. Please go ahead.
Q. Yes. Congratulations. A couple of questions for you. First of
all, can you tell me who the investment bankers were for the transaction?
MR. FULLER: Absolutely. It was CIBC Alpenhiemer* and Broadview
associates for -- the represented us at Inprise.
Q. Can you give us a little bit of history of the merger? How you
guys came together here.
DR. COWPLAND: We have come together very rapidly. We have been
working together for a long time, but I think we seriously started talking
less than three days.
MR. FULLER: That's right.
DR. COWPLAND: It has gone very smoothly because once we identified
the opportunity it was just too good not to do it.
Q. And on the details have been done?
DR. COWPLAND: Yes.
Q. Okay. And you don't need any Canadian approvals for the
transaction?
DR. COWPLAND: Shareholder's approval. We need those.
Q. But you don't need the Competition Bureau?
DR. COWPLAND: No.
Q. Okay. And are there any break up fees?
DR. COWPLAND: Yes, there are break up fees?
Q. Can you tell me what they are?
DR. COWPLAND: No, we can't say what they are at this point.
Q. Okay. Thanks guys. Congratulations
DR. COWPLAND: Thank you.
THE MODERATOR: And we do have a follow up question from David
Right, Nesbitt Burns. Please go ahead.
Q. Thank you. I missed part of the call. Could you comment on Linux
revenues from the combined organization -- what sort of run rate you are
currently at or however you would like to packages it with Linux products
revenue?
DR. COWPLAND: Well, at this point we announce three point one
million in revenues from the next last quarter, which was very close to the
amount Red Hat was actually shipping in products.
Q. Right. ' DR. COWPLAND: So we have already got very substantial
revenue and we have -- Office Suite which is due to come out next quarter,
so we have spent some very good ramping up and in the case of Borland I
guess the first part will be Kylix which is coming out in the fall.
MR. FULLER: That's right. Exactly. And we have not traditionally
broken out our revenues by operating system. Needless to say we do have
revenues into the Linux platform because we are shipping products already
on it, our Applications server technology, our Aura*, our JBuilder
products, Interbase the database product that is out there today.
Q. And the shareholder concentration on the Borland on the Inprise
what percent do management own and are there other blocks around?
MR. FULLER: Yes. The percent that management own is roughly ten
percent of the company.
Q. Ninety percent is institutionally owned?
MR. FULLER: Yes. We have, I believe institution is roughly twenty
percent.
Q. Thank you.
THE MODERATOR: We do have question from Bell Claybrook, of
Aberdeen Group.
Q. Could you just give a rundown very quickly of what products the
two combined companies now have that will be truly open sourced and what
are considered to be still proprietary?
MR. FULLER: As far a the open source concept is concerned we think
the key thing is the operating system itself, because that is the common
denominator across everything and as far as sophisticated applications are
concerned, they don't necessarily fit the open source model. We can use
some of the techniques such as free downloads and we have been very
successful with WordPerfect 8, for example, but there are some many other
technologies that are included from other companies that it becomes very
unworkable to make those pure open source and not that much advantage,
either, you don't get so much of a benefit from the global Linux team
working on them because they are of a narrow interest group.
So we see the key thing about open source being the OS itself and
that is going at a great speed and we are contributing some to that and we
have our own open source site contributing to the -- the WM project the KDE
project and the Linux project as well as such things like an API for the
printing area and many other areas of open source work.
MR. FULLER: The open source community the key and the open source
community as Mike was talking about is not necessarily the application but
the derivative of those applications or the concentrate of those
applications being the development tool.
So what we are doing is we announced a couple of weeks ago, we
announced that we were going to take Interbase, the only SQL database that
is commercially viable and tested out there and we open sourcing version
6.0. We are spinning that off as a separate company and they are going to
managing that process as we go out there. We are going to have a minority
interest in that, but you are going to see more of a development tools type
products actually come open source because that gives way for more
applications to be developed. So, again, it just promotes that kind of
growth and really what is the solution in the space today it really is the
application.
Q. Thanks a lot. Good luck guys.
THE OPERATOR: Thank you. Our next question comes from Dave
Sutherland, of Benchmark Enterprises. Please go ahead.
Q. Good day, gentlemen. I am a shareholder in both companies I
logged the merger. I am also a borrower and distributor educational
distributor and I was interested in your approach since Corel has generally
in the past taken a very strong marketing approach. How will you proceed as
far as marketing into the education market.
MR. FULLER: Well, certainly in the area we are going to continue to
push for and I think open source techniques such as free downloads as very
powerful in that kind of market. So I think the experience we have gained
to date is going to be very useful in extending our range there with the
new perks that we will get from Inprise/Borland.
Q. Thank you.
THE OPERATOR: Thank you. We have no further questions. Please
continue.
MS HUGHES: Thanks very much. I wanted to thank everyone once again
for joining us this morning, and again I encourage you to visit our web
site at www.corel.com or www.inprise.com. There will be audio replay
available approximately 30 minutes from now. And if you do require
additional information or any further interview opportunities, if you would
like to make any requests in that regard, please refer to the press
releases for the appropriate contacts and we will do our best to
accommodate you today. Thanks very much for joining us.
***
NEW YORK, NEW YORK
TELECONFERENCE WITH DR. COWPLAND AND MR. FULLER
"COREL - INPRISE/BORLAND MERGER TO CREATE LINUX POWERHOUSE"
MODERATOR: Thanks for standing by. Welcome to the Corel-Inprise/Borland
merger conference call.
At this time, all participants are to be in the listen-only mode.
Later we will conduct a question and answer session. Instructions
will be given out at that time.
If you should require assistance, please depress star zero and, as
a reminder, this conference is being recorded.
I would now like to turn the console over to our host, Ms Katherine
Hughes.
Please go ahead, madam.
MS. KATHERINE HUGHES: Thanks very much, Chris.
Good morning, everyone, and thanks for joining us today to discuss
our announced merged between Corel Corporation and Inprise/Borland
Corporation.
We are pleased that you are all able to join us this morning.
My name is Katherine Hughes. I am with Corporate Communications at
Corel Corporation, speaking to you today from New York City.
By now you should have received a detailed press release entitled
Corel- Inprise/Borland Merger to Create Linux Powerhouse. This press
release was distributed over Canadian Corporate News and Business Wire.
If you have not yet received this release, please visit Corel's web
site at www.corel.com or at Inprise at www.inprise.com.
There you can link to our web cast and get additional background
materials on today's announcement.
Hosting today's teleconference are Dr. Michael Cowpland, President,
Chief Executive Officer and Director of Corel Corporation; and Mr. Dale
Fuller, Interim President and Chief Executive Officer at Inprise/Borland
Corporation.
With the completion of this merger, Mr. Fuller will be appointed as
Chairman of Corel's Board of Directors.
Also on hand to answer your questions following the opening remarks
are Mr. Michael O'Reilly, former CFO, now independent consultant, for Corel
Corporation, and Mr. Derek Burney, Executive Vice-President Engineering and
Chief Technology Officer at Corel.
Before we begin, I would like to remind you that during this
conference call there maybe statements that are Forward Looking, as that
term is defined by the US Private Securities Litigation Reform Act of 1995.
These statements are based on current expectations that are subject
to risk and uncertainties. Actual results may defer you to factors such as
shipper and consumer demand, product shipment schedules, product mix,
competitive products and pricing, technological shifts and other variables
which are discussed in the company's report on Form 10Q and other reports
filed with the Securities and Exchange Commission.
With that, I would now like to turn the call over to Michael
Cowpland.
DR. COWPLAND: Thanks, Kathy. I would like to give a few highlights
of the transaction and then we can go over to Dale Fuller and then
questions and answers.
At this point, the most exciting thing about this deal is the fact
that it provides a single source solution for Linux and all other major
platforms from one vendor.
At Corel, we have already established ourselves as the leading
player in the Desktop Linux West market and have achieved the number one
spot in downloads on Znet.
In the application space, we have already achieved the number two
spot with WordPerfect and have now launched our full other Suite called
Linux with the Beta route as we speak.
On the Inprise/Borland side, they have the developed tools and the
enterprise middleware. Put the combination together and we have an
incredibly strong Linux lineup that is second-to-none in the world.
As far as the install base, we have over 50 million users of Corel
parts world- wide. Inprise has an install base of five million developers.
So put the two together and you have 55 million users who are
currently and mainly in the winners market. With these tools and
applications, we are able to offer a very smooth transition for users to
move into the rapidly developing Linux market.
Market evaluations have shown that Linux is the hottest technology
around anywhere right now and is perceived as being the ideal operating
system for the web going forward, with the strongest growth rate over the
next 10 years.
If you look at what people want to do right now, they want to take
advantage of Linux as soon as they can, and wiggle the tools and
applications we got, we can facilitate doing that.
Over to you, Bill.
MR. FULLER: Thanks, Mike.
As you have heard from Mike, we have a long list of reasons for
bringing our two companies together.
Our shared vision is pretty straightforward. It is to lead the
development of Linux and other open software technologies that will bridge
and accelerate the value of the Internet to the world.
The bottom line is what we are delivering is the future. What we
deliver today is giving you that bridge from the Windows environment or
from a Solarus environment to Linux which is the choice of the next
generation of the Internet generation, who wants freedom of choice.
Let me give it back to Mike.
DR. COWPLAND: Okay. At this point we probably can go to questions.
MS KATHERINE HUGHES: I think what we would like to do is we have
received a press release. We have had some opening remarks, but we would
really like to allow as much time as possible for your questions.
So, Chris, if you would like to open the call for questions at this
time.
MODERATOR: Yes, madam. Ladies and gentlemen, if you would like to
ask a questions, please press the one on your touchtone phone. You will
hear a tone indicating you have been placed on queue and you may remove
yourself from that at any time by depressing the pound key.
If you are using a speakerphone, please pickup a handset prior to
depressing the number.
Our first question is from Julian Biltran, from Wall Street
Journal. Please go ahead.
Q. Mr. Cowpland, this new deal, does this put your company squarely
on the footing towards moving into a Linux-based company and are you moving
away from Windows?
DR. COWPLAND: No. We see Windows as being the cash cow that is
funding all of this development and we see Windows continuing to be strong
in the decade ahead.
However, we also see a tremendous interest in Linux moving up as an
equal competitor to Linux -- sorry, to Windows over the next 5 years, and
we have the ideal company to help people accelerate and facilitate that.
MODERATOR: We have a question from Stephen Sincland, from ZNet.
Please go ahead.
Q. Good morning, gentlemen. I was wondering about a couple of
things regarding Corel's move of its software to Linux.
You guys have been working both at Signus* Solutions and the Wine
Project in the past. I was wondering if those agreements will continue --
at Signus, obviously, it seems you might be going in the future will
Borland when it comes to importing applications over from Windows to Linux
- -- especially since Signus* is part of Red Hat now.
MR. BURNEY: For sure we will be evaluating the development tools,
but our work on Wine will continue. In fact, both companies will continue
the normal course of action in terms of the products that we are
developing.
Just as is always the case, we are in a perpetual state of
evaluating the tools to use the ones that best our need.
Under the merger, it goes without saying, I think, that the
developer tools that we would have access to on the Inprise/Borland side,
would, obviously, be the number one choice.
Q. So could you perhaps describe which software packages you expect
to make available to Linux through Wine and which ones through a complete
port to Linux?
MR. BURNEY: All of our current products that you see on Windows, we
will be using, to some degree, the Wine technology to get to Linux. And,
then, all the native development we will be using a variety of tools in
terms of anything new that is coming down the pipe. But all the
applications that you are familiar with from Corel, like CorelDraw, Corel
PhotoPaint, Corel Ventura, Corel WordPerfect, and so on and so forth, they
will all be released in the next coming months using the Wine technology.
MR. FULLER: I think if you look at the product that Signus has out
there today, which is a low-level C compiler.
What we provide is we provide the higher level rad tools for
business programmers, which is 10X the low-levelled right devise
driver-type of things that Signus can provide.
We really actually add a lot of synergies with what Signus is doing
out there in the market today. We really don't see it competing at all in
that business segment, as we go through the marketplace.
MODERATOR: Our next question is from Geovardy from the National Post.
Q. Thank you very much. I actually have a couple of questions.
Maybe I will ask them all now and you guys can tackle them.
Can you give us a little bit of background of how this merger came
about, who approached whom and when?
Second, is Inprise/Borland reporting any Linux revenues yet and, if
not, when can we see some?
Third, will this merger, as it percolates over the next couple of
months, delay introduction of any of Corel's planned Linux products?
DR. COWPLAND: We had a close relationship with Borland going back
many years. In fact, two of the products in our Suite came from Borland.
That is the Quattro Pro spreadsheet and the Paradox Database.
We got into serious discussions on this deal less than 30 days ago.
It has gone extremely quickly, because once we identified the opportunity,
it looked so good we wanted to execute as quickly as possible.
Q. Did you approach Borland, like?
DR. COWPLAND: I think we kind of came to the idea -- we met at one of
the trade shows and it just clicked.
MR. FULLER: Our teams have been working so closely together from a
development standpoint because of the products that we do and we leverage
what Corel is doing, and Corel leverages what we have been doing at
Inprise, that it was just a constant percolation of, hey, why don't we get
together, why don't we move closer together.
As our policy at Inprise Corporation, we do not break out revenues
by operating system line at this point. But, needless to say, we do have
products that we are shipping today that run on a Linux: our application
server technology that we have, our Inprise application server, our
Busy-broker for Linux, our Innerbase Product for Linux, and our J-Builder
Product for Linux.
So we have products that are shipping today that people can
purchase for Linux.
Q. How long have they been shipping?
MR. FULLER: The Inner-base Product for Linux has been shipping for
two years. Busy-broker has been shipping now for a year and a half. We have
had it on Linux.
The application server, we just started shipping. We just announced
it last week.
J-Builder has been shipping since December, when we launched the
Free- foundation Class Library with Sun.
DR. COWPLAND: Also, is the other party aware that we shipped three
million of Linux on the Desktop OS last quarter, which was pretty well the
same level that Red Hat shipping.
Q. Mike or Derek, can you give me a rundown of whether or not any
of the Linux products that Corel are planning will be delayed by the
merger?
MR. FULLER: No, not one of them will be delayed.
In fact, just the other day in New York, we showed the office
product in Beta form. That is still on target to be released in April.
If anything, the applications that are coming after that could
potentially be accelerated with the use of the new tool.
Q. Thank you very much.
MODERATOR: Our next question comes from Simon Tuck from the Globe
and Mail. Please go ahead.
Q. Hi. Just a couple of numbers questions.
First of all, can you tell me how you get the $2.4 billion on the
merger? Is that the market cap of the combined companies?
MR. O'REILLY: Simon, it is Michael O'Reilly.
Yes, that is taking, I think, our trading values when we closed on
Friday, the relative market caps taking into account the .747 exchange
ratio.
Q. So it is combined market cap, Michael?
MR. O'REILLY: That is correct.
Q. And, second, if you look at this new company, can you tell me
how much the Corel shareholders will own and how much the Inprise
shareholders will own? Looks like about 60/40?
MR. FULLER: Yes. This is Dale speaking. Actually, it works out to
be that it is a 56/44 split.
Q. Thank you.
MODERATOR: Our next question is from Dominique Marve from
Silicon.com. Please go ahead.
Q. This question is to Mike.
Mike, you have a certain amount of customers that exist into
Windows at the moment.
How many customers do you really think actually want to migrate to
Linux at this time?
DR. COWPLAND: If you look at the surveys, it has moved up rapidly
from, I think, 30 per cent last year of organizations towards 60 per cent.
So it is accelerating very rapidly.
The more that people realize the benefits, the more they want to
move, because it is scalable, it is reliable, it is open and it is the
lowest-cost system. Basically, it is the sooner the better.
Up until recently, people thought it might take awhile to be
user-friendly. But we have changed that lastly with the introduction with
the Royal Desktop Linux the West, which has virtually a zero running curve
to move over to it from Windows.
The same thing will apply with our application Suite. It is
virtually identical to the other Suite on Windows and interacts with all
the files of Windows, including Microsoft files.
So we are removing all the reasons people would not want to move
and, therefore, we are selling the process rapidly. With this transaction
we can make that even better, with the provision of tools and enterprise
connectivity.
MR. FULLER: From our standpoint from the developers, which is kind
of the leading edge of any new technology, we launched a Java tool that you
could download for free off of our web site.
You would fill out a survey. We have had hundreds of thousands of
downloads of that. Of those downloads, the surveyed questions of
respondents, 6 per cent of those said they were currently using our job of
products.
So we are seeing - and, two, of the total out there, 50 per cent of
those hundreds of thousands of downloads were Linux versions. So we are
seeing a big move to Linux.
MODERATOR: Our next question is from Natalie VandenBosh from CTV.
Please go ahead.
Q. Michael Cowpland, in the relief that has been handed out there
is some talk of some duplication.
Will there be job losses and where?
DR. COWPLAND: There will be some savings. We have identified many in
the administration and other areas.
But in terms of the main benefits, we see a lot of common engines,
the graphics of printing, the UI and the tax laws, sharing of technology on
the engineering side. So this is going to make both sides a lot stronger.
Q. So no job losses?
DR. COWPLAND: I would say there would be no job losses. We will be
able to identify that over the next two or three months.
Q. Will that happen in Ottawa, do you think?
DR. COWPLAND: Too early to identify, but we are looking more at the
upside of the growth opportunities than the job loss situation.
MR. FULLER: If you look at the job losses, I have lost my job as
presidency, yes, and been promoted to chairman and that is in the US. So
there is one job promotion and one job lost.
Q. You have called it a merger when the split is 56/44 which is the
figure, I believe, you gave.
Is this a take-over?
DR. COWPLAND: No, it is really a merger, because if you look at it we
don't have any overlapping technologies. We are not having to get rid of any
technology that doesn't fit. So it is kind of a merger of technologies.
Q. Thank you.
MODERATOR: Our next question is from Bob Ferguson from the Toronto
Star. Please go ahead.
Q. Hi, it is actually Rob. I will not stand on that.
This is for Mike. You were saying that you still see Windows as
being the cash cow. I am wondering what percentage of revenues now come
from Linux -- where you see that in one year and in, say, in five years?
DR. COWPLAND: Well, we are looking at Linux just at the starting
point and, in fact, we have just created the desktop market because people
said it didn't exist until recently. But we did do, as I mentioned, three
million in the Q4, which already has put us at the level of Red Hat, which
is the leader on the server.
So we are looking at kind of exponential growth. As far as
projections market, are there any projections for this coming year?
MR. FULLER: IDC said the market itself will grow at more than 25 per
cent.
DR. COWPLAND: I think we are looking around the twenty-plus revenues
as our target for Corel in the coming year.
Q. Twenty per cent?
DR. COWPLAND: Twenty million in Linux revenue.
Q. And that's for the next year?
DR. COWPLAND: Pardon?
Q. That's for a year from now?
DR. COWPLAND: That's during the current fiscal year. Because we are
already off to a good run rate, as I mentioned, with the introduction of
the O/S and we have our full other suite coming out next quarter, so --
even though it's kind of hard to project because we are in the exponential
take-off point, certainly, it's reasonable to do the 20 to 30 million this
year and --
Q. What percentage -- I'm just getting confused on percentages.
When we talk about percentages of revenues, what percentage of Corel
revenue would that be?
DR. COWPLAND: Well, at this point, that would be -- if we do
achieve the 30, that would be in the, I guess, 10 per cent range.
Q. Okay. So, now, where you are about? Two per cent or something?
DR. COWPLAND: Five per cent.
Q. Five per cent. Okay. Thank you.
DR. COWPLAND: Five per cent in Q4.
Q. Okay.
MODERATOR: We have a question from (inaudible), from Daily Deal.
Please go ahead.
Q. I have a question for Mr. Fuller.
I'm just trying to get an idea -- I'm trying to understand the
valuation involved in this transaction. And based on (inaudible) Friday's
closing price, the premium your company looks to be getting is about 15 per
cent. I want to know why you would accept that type of premium when other
types of transactions, comparable transactions, have received much higher
premiums, up in the 50-60 per cent range?
MR. FULLER: Sir, I mean you have to look at a couple of different
angles on this thing. This is a merger of equals. A merger of equals is
roughly equal to its market capital when you combine and that's the reality
of it. And we do have a fixed ratio that we go. So, as the market cap grows
with this, my shareholders and our shareholders together continue to win in
benefits of this as we go forward.
Also, we are in a marketplace that's just now beginning to explode
and, you know, you are just at the very beginning phase of this. So it's
tremendous upside potential.
So, in an acquisition where you lose control and you lose the
rights of a lot of that, you know, where you are less than 20 per cent or
30 per cent, yes, you get premiums. But when you are a merger of equals,
you are going to ride on the upside just as much as, you know, as the other
person.
Q. Got it. Okay. Great. Thank you very much.
MODERATOR: The next question is from Stewart Ziffer* from Client
Server News.
Please go ahead.
Q. You talk about keeping Inprise/Borland operations where they are
right now.
Is there going to be, however, (inaudible) and movement of
personnel between Ottawa and the Valley, any combined Linux centre set up
or any plan to reorganize, eventually, along those lines?
DR. COWPLAND: I think we will be seeing quite a bit of (inaudible)
back and forth but we are used to working with development teams around the
world, so we don't see any real problem in keeping people where they are,
and I don't think the California people would like the Ottawa climate that
much.
Q. Do you have a combined head count?
DR. COWPLAND: The combined head count would be 2,200 people.
Q. Okay. Thank you.
MODERATOR: The next question is from Matthew Islet* from
Informwork*.
Please go ahead.
Q. Hello, there. I have a couple of questions, actually.
First of all, I wanted to know how Inprise or Borland will operate
as part of Corel -- there's mention of it being a subsidiary -- and what it
will be known as; and then, also, how the deal will affect the deal that
Inprise did with Microsoft, in the middle of last year, in terms of
supporting Windows 2000 and Complus*; and then, also, on the application
server side, how the companies will work to compete with the popular
Apache* application server.
DR. COWPLAND: We are looking at keeping the Borland brand names,
which are very strong, and (inaudible) server side, you can mention what
you think.
MR. FULLER: Yes. In the application server technology world, you
have to realize that we currently own about 70 per cent of all application
servers in the world, today, through OEM arrangements with, like, Oracle,
HP, Cisco, Sun, Netscape and Novell. They are shipping our core products
into -- integrated into their core products, so we have a tremendous in
that market already, and we are now shipping our own product, called the
Enterprise application server, as well -- and we just launched that on
Linux. So we have products all over the place.
Q. Okay. But in terms of, actually, (inaudible) what will it be
known as, as part of Corel?
DR. COWPLAND: It will be part of Corel and I think the product names
will stay in place.
MR. FULLER: It will be called Corel and we will using the Borland name
because that is a good moniker.
Q. Sure. And what about the relationship with Microsoft?
MR. FULLER: That's a good, strong relationship we have Microsoft.
We are still the number one developer of application tools for the
Microsoft platform, for all Windows-based platforms, and Mike --
DR. COWPLAND: At Corel, we have a strong relationship, too. We
license Visual Basic and they license trip art* from us. So those
relationships continue strong.
MR. FULLER: Microsoft will continue to be a player in this
environment, in this world, for a few more years.
MODERATOR: We have a question from Karen Roland*, from Computer
Resale and News.
Please go ahead.
Q. I just want to know what the potential benefits of this deal
will be for your respective channels and especially the impact on the
in-price channel.
DR. COWPLAND: We certainly think, on the retail channel, that we
can add some more impetus behind the Borland products and I think
(inaudible) vice versa.
MR. FULLER: Yes. Exactly. Our channels definitely receive the
benefits, now, of being of a leverage where Corel has to offer to their
customers out there and, really, fulfilled the need for applications being
in the Linux platform. So, you know, teaming up with people like, you know,
Red Hat VA Linux and Turbo Linux and S.u.S.E. and even Caldera, I mean it
really plays very, very well. We are the number one large person out there
developing applications for Linux.
Q. And in terms of how you deal with your channel, I mean, will
that change at all? I assume personnel will change, et cetera.
DR. COWPLAND: There, obviously, will be some adjustments back and
forth but we definitely have gains both sides, in terms of the extra
activity we will be able to get.
Q. Okay. Thank you.
MODERATOR: The next question is from David Naylor*, from CBC.
Please go ahead.
Q. This is for Michael Cowpland.
Michael, what advantages or synergies do you see, now, from having
a large component of your business located in Silicon Valley?
DR. COWPLAND: Well, basically, that's a major advantage because of
the networking and the (inaudible) activity we have to the number one
technology spot in the world. And, on the other side, we see a lot of the
engines we have got for our consumer applications, the Graphics engine, the
fitting* engine, UI & Text engine, to be a big use in the (inaudible). So
we see a good two-way flow to NOGI*.
Q. Do you see this as a trend in the industry? We have seen a few
business partnerships this way over the last little while. Is this
something that's becoming necessary for Canadian companies?
DR. COWPLAND: I think it's very desirable. It may not be necessary
but it certainly is a very good move.
MR. FULLER: This is Dale Fuller speaking.
I think it's very necessary for Silicon Valley companies to have
relationships and trends in Canada.
Q. How come.
MR. FULLER: Because of talent pool, market opportunity, worldwide
domination of markets and access. Everything isn't invented in Silicon Valley,
though we like to believe that.
Q. Thank you.
MODERATOR: Our next question is from Jim Bagnall, from Ottawa
Citizen.
Please go ahead.
Q. I have a question for Dale Fuller.
You are no doubt familiar with Corel's history with WordPerfect and
how that whole operation wound up back in Ottawa.
Do you have any concerns on that front? Or do you have any, I
guess, expectations or deals in place that would prevent that sort of
thing?
MR. FULLER: Well, no, we don't have any deals in place to prevent
anything, because we don't want to restrict the business. We don't want to
confine the business just saying, "You have to do X," if it doesn't make
good business sense. I think that what you are seeing in the market today
is the evolution of this thing called the Internet. Businesses are reacting
to that; it's called speed. Efficiencies and speed is key. I think that us
having, you know, basically, engineering (inaudible) of excellence, not
only in Silicon Valley but in Ottawa, in Singapore, in Sydney, Australia,
Tokyo, Japan, over in Amsterdam, is very key for us to leverage all the
different assets, the intellectual assets that we have across this whole
big corporation.
DR. COWPLAND: The good thing is we are going to be located in the
two top talent pools, the Silicon Valley pool and Silicon Valley North, and
the other message of Linux is it's truly a global team effort and people
can actually work easily on the web because the technology is so modular.
So this will certainly facilitate keeping the strength of both teams in
place.
Q. Dale, will you be the only addition to the board of directors
under the combined company?
MR. FULLER: No. We are going -- actually, one more board member is
going to be brought on board from the current shareholders of Inprise.
Q. Okay. And has he or she been identified yet?
MR. FULLER: No. We are going to still -- we have about another 60-70
days to make that decision.
Q. Okay. And do you have any protection against the possible share
price decline of Corel in the event it's allowed to go a certain price?
MR. FULLER: No; there are no collars on this thing because this is
a merger of equals. If it was an acquisition, you would typically put a
collar around something. But this is a merger of equals.
Q. Okay. I wonder is someone could help me out with the math a
little bit. Judging by your fourth quarter, your fully diluted share
account was 59.3 million which, at 14.94 U.S., works out to 885 million,
and that 44 per cent, that works out to only 2 billion value of the
transaction.
Is the share count different somehow? Or what am I missing?
MR. O'REILLY: Jim, it's Michael O'Reilly.
I think the number you are referring to in the press release was
taken from Corel's Friday close and so the calculation is that market cap
and the application of the exchange ratio, at .747.
Q. That is this Friday's close price, though, isn't it, 14.94?
That's the number you have in the press release.
MR. O'REILLY: Corel's price was $20. So I think you will find, if
you do the math, it's about 1.3 billion and just over 900 million, and
that's where the 2.4 comes in.
Q. No; you have it right here, in the press release, that it's
based on a closing price of $20 at Corel. This represents a value of 14.94
per share increase. Right?
MR. O'REILLY: Right. Are you taking the fully diluted shares, Jim?
Q. I'm assuming that's what you have given us here, isn't it?
Yes, it is. That's what it says: a fully diluted basis.
Perhaps we could talk about this later --
MR. O'REILLY: Yes.
Q. -- and get that sorted out because there's $400 million missing
somewhere.
Okay. Those are the questions for now.
MODERATOR: We have a question from Susan Taylor from (inaudible).
Please go ahead.
Q. I was going to ask that same question about valuation, so I
don't know, maybe before this call concludes if somebody can grab a
calculator and start hammering out those numbers and let us all know, that
would be much appreciated.
A couple of other questions, though, if I could.
Will there be any reorganization within this new company that's
going to have a Linux division or a Linux operation within it that will --
DR. COWPLAND: We haven't nailed a lot of details, yet, Susan. We
will be working intensely on that in the next two or three months before
the deal closes.
MR. FULLER: But, Susan, just to give you a couple of numbers --
this is Dale Fuller speaking -- we have, combined, over 1,000 engineers,
developers, inside the two corporations, with better than 50 per cent of
those people working on Linux today, so, and Linux touches almost every
product we have in-house, so it's really, really key as we go forward. I
don't know if there will, like, be a specific Linux division, but we are
not ruling that out as we go forward. We are going to do whatever is right
for the business and for our customers.
DR. COWPLAND: In general, we find, because of the tools available,
that the same team can work on a product that goes both Windows and Linux,
so there's a lot of benefit in actually not making them too different
because, that way, you get seamless compatibility between two products as
opposed to having two different groups working in different directions.
Q. One other question -- this is for Dale.
Did I hear you correctly? You mentioned earlier that the two
companies had been doing development work together previously?
MR. FULLER: Yes, we have. In fact, we, Borland, sold to Corel, a
few years back, Paradox, and, yes, Corel has actually taken some of our
products, in the past, and we have been working together. We made an
announcement, I believe, in November, that we were going to work together
on Linux, making sure our tools worked and integrated with Corel's Linux
platform, as we went forward, so we have been working very closely on that,
as we have been going forward.
Q. Sorry. That Paradox sale, that occurred when?
MR. FULLER: Way before my time.
DR. COWPLAND: Going back, before that, Quattro Pro was developed by
Borland, too. So there's a lot of history going back between the two groups.
UNIDENTIFIED SPEAKER: Do you remember when it was -- when you --
UNIDENTIFIED SPEAKER: About three years ago.
Q. Three years for Paradox and about four for Quattro Pro. Right?
UNIDENTIFIED SPEAKER: Right. But the other (inaudible), too, is
that the Paradox, the actual database engine residing inside Paradox is the
BDE* and we have been working with Borland all along, in conjunction with
that because it's also used by Delfi.
Q. Okay. And then, again, if I could leave that question on the
valuation to be clarified before the end of the call. That's it. Thank you.
UNIDENTIFIED SPEAKER: They are doing the calculations now, Susan.
MODERATOR: We have a question from Clint Henderson, from On 24.
Please go ahead.
Q. Hi, gentlemen. You discussed, earlier, some cost savings. If you
could go into a little bit more detail. I know you said there's probably no
immediate lay-offs, but what other cost savings you are anticipating. Thank
you.
MR. FULLER: This is Dale Fuller speaking.
I think it's a little too early to really drive down into the
numbers, but let me give you kind of an update -- and we will give you
regular updates, as we go forward. We have actually hired McKenzie to help
us with the disentanglement of the two companies; Michael (inaudible) is
actually going to help lead that team as we really start driving into the
companies' drive efficiencies across the organization to make sure that we
actually do it right. So it's not a totally internal-driven methodology
that we are going down the path of; we are using external experts and
everyone -- well, most people know who McKenzie is, and they are the best
in the world at helping do this for the high-tech companies.
Q. Great. Thank you.
MR. FULLER: We will give you -- probably in about 30 days, we will
give you a snapshot of exactly what's going on and do status checks and let
everyone know, you know, we are progressing down that path.
Q. Good.
MODERATOR: Once again, if there are any further questions, please
address one at this time.
Our next question is from Tom (inaudible) from V Computer Paper.
Please go ahead.
Q. Hi, Dale. Hi, Michael. How are you doing?
I'm just wondering, are you going to be encouraging parallel
development of Linux and Windows applications, since, I think, Dale, you
mentioned that you have what, five million developers, right now, using
your technologies?
MR. FULLER: We absolutely do.
DR. COWPLAND: I guess with Kylex* coming out, it will become very
easy to people to natively develop in Windows and Linux with virtually the same
methods and currently with Wine* moving along well, even current Windows code
can be largely reused on Linux.
MR. FULLER: If you take those millions and millions and billions of
lines of code that are written on the Windows environment right now, either
in Delfi or Visual Basic, you are going to be able to bring those over from
Delfi, on Windows, straight into the Linux platform. It extends the life
and the revenue that a potential programmer or developer can actually get
and extending his life down the line into this new technology for the
Internet. So that's a real plus. So the fastest way for a Visual Basic
person to get on Linux is to get Delfi today and basically port it straight
across, into Delfi, and then straight into Linux.
Q. Are you going to be creating any programs or anything to
encourage that kind of parallel development? Because one of the things that
always holds Linux back is that people complain there are no Windows
applications, or Windows- like applications, for the Linux platform.
MR. FULLER: And, you know, the great news is that's exactly what
this company, the combination in this merger, does for the environment: it
creates all the office suite products for Linux plus all the development
tools for business applications and business development as they go forward
out there. So, yes, absolutely, we are going to have a very aggressive
campaign for getting people getting ready, getting them ramped up, so they
don't have to wait until Kylex* comes out. I mean they can develop today,
get their products on today.
UNIDENTIFIED SPEAKER: I actually would like to just jump in. I'm
going to have Michael O'Reilly address the question that was raised
earlier, by Susan Taylor, I believe, at Reuters.
MR. O'REILLY: Just to clarify on the numbers cited in the press
release, that was derived as follows: Based on Corel's closing price, on
Friday, of $20 and the exchange ratio of .747, that would translate to a
price for Borland/Inprise shares of $14.94, times -- they are fully diluted
shares outstanding of 71.7 million yields one billion and 71 million.
Corel's fully diluted shares at 68.3 million, at a closing price of 20,
yields 1.366 billion. So, adding 1.366 billion to 1 billion and 71 million
comes out to 2.44 billion. That's the derivation of that number.
MODERATOR: Our next question is from (inaudible) from Belgium.
Please go ahead.
Q. Hi. Are there any non-core areas at either company that will
need to be divested? And, conversely, are there any holes to be filled? Are
there any plans for acquisitions? Any plans to bring any of the Corel
affiliates that are working with Linux into this new entity?
DR. COWPLAND: Well, we don't see any redundant technology, at all.
That's the good thing. There's no overlap at all. And the affiliates we
have also fit in nicely, in terms of (inaudible) and moving very rapidly to
push those forward, but utilizing the core technology that both Corel and
Inprise/Borland provides. So it's a real win-win situation. And we can see
investing in more of these start-up companies that are exploring all the
things that Linux can do, which is very versatile because it's so modular.
MR. FULLER: And, again, we are going to continue to encourage
entrepreneurship in this world and to deliver new creative solutions and
products out there. We are going to be leading in that. We have the
development tools. We have the intellectual assets that we are going to
leverage with the distribution channels that will help the small start-ups
get going and become big very, very quickly. On top of that, we are going
to continue to drive our partnerships and our relationships with Red Hat,
VA Linux, Turbo Linux, Caldera, S.u.S.E., and other OEM partners, like
Oracle, HP, Sun, Netscape, Novell, we are going to continue to drive those
and provide solutions on all the platforms out there and -- in this whole
new generation being Linux.
Q. A second question, if I may.
It looks like Corel's running at an operating profit after the last
quarter, while Inprise is running at a bit of an operating loss after the
last quarter.
Can you give an idea whether you plan to run this thing at an
operating profit or break even or some sort of indication about that?
DR. COWPLAND: Well, we are planning to keep the operating
profitability continuing going forward and every part of the savings we
will achieve through the savings in administration and SG&A* that we
anticipate -- although we haven't got enough detail, at that point, to
drill down (inaudible).
MR. FULLER: Let me respond to it from the Inprise standpoint. At
(inaudible), we made it very clear to our shareholders and to the analysts
that we were going to be profitable by Q3 of this year 2000. We have an
operational model and a plan to drive to that.
So, any additional efficiencies we can get from a merger only add
to that that we can get there faster.
Q. Thanks very much.
MODERATOR: Our next question is from Ellis Booker* from Internet.
Please go ahead.
Q. Hi, guys. There continues to be a perception of Linux, while
appealing to a kind of rogue developer community, still has yet to crack in
any significant way the Enterprise market.
What will this merger and your efforts going forward do to change
that?
DR. COWPLAND: I think the sheer strength of the company will
certainly accelerate adoption by the Enterprise and I think all the Dot.com
companies are already using Linux as their preferred O/S, and every, I
guess, evaluation of Linux seems to be getting more and more positive as we
go forward. We have already changed the landscape of its useability to
Desktop, with the introduction of our Desktop OS, and with the (inaudible)
of other suite now out (inaudible) identical product on Windows as on
Linux. So there's really no learning curve involved any more; people can
enjoy the benefits of scalability liability, openness and low cost of Linux
without any penalty.
Q. I just wanted to follow that up.
Do you have any reference customers, Enterprise reference
customers, who are, in fact, using the office suite in any, again,
significant way on Linux?
DR. COWPLAND: Well, (inaudible) to get those because we are just
introducing the other suite. We have had, now, 2 million downloads of
WordPerfect 8 already. So big Enterprise has obviously moved the slowest,
so the initial adoption is with smaller organizations. But because the
benefits are so strong, this definitely is going to break through to the
bigger organizations before long.
MR. FULLER: I think that, you know, your original comment is a
derivative of what I have heard from a lot of the players out there that
when it causes a kind of disinformation that Linux is a hobbyist's computer
operating system and it's made for very young enthusiasts in the world.
Let's face it, there are people that have the financial incentive to
actually encourage that and promote that. However, if you are a company
that wants to make money, in the future, you will seriously consider Linux.
I will give you a prime example firsthand -- and you can go look at
Media Metrics* or Relevant Knowledge* -- the ninth largest Web site in the
world is one that we created at another company of mine call Who Ware* that
got acquired by a company called Lycos. Angel Fire* is the ninth largest
Web site in the world. It was developed running on Linux from the very
beginning. The reason it was developed running on Linux is it was one-tenth
the cost of Solarus, which was the alternative. Because NT was never an
alternative.
So, you are seeing a tremendous benefit, just in cost savings in
that, and when you are talking about the scalability, it's gigantic.
So if you are not serious about running a profitable business or
making money in going forward, then you will not consider Linux.
MODERATOR: Our next question is from Barry Cowans*, from PC Probe*.
Please go ahead.
Q. Mr. Cowpland, are you gambling your company on Linux?
DR. COWPLAND: Pardon?
Q. Are you gambling the future of your company on Linux?
DR. COWPLAND: No, the nice thing is we are not having to gamble
anything because we are both strong in the Windows business and Linux'
incremental growth, and the good thing is it leverages the Windows
developers we have because most of them are working simultaneously on both
the Windows and the Linux versions and there's not that much extra work to
be done.
Q. Okay. Thank you.
MODERATOR: Our next question is from Jim Bagnall, from the Ottawa
Citizen.
Please go ahead.
Q. I just have a quick follow-up on the math that you provided us
with.
You said that the share count for Inprise was 71.7 million and the
accounts for the fourth quarter show a share count of 59.3. I was just
wondering what accounts for the discrepancy.
MR. O'REILLY: Jim, it's Michael.
The 71.7 is the number I have as the properly measured, fully
diluted number. I'm not sure about the source you are looking at.
Q. Well, the source is the company Inprise, which released its
results just last week.
MR. O'REILLY: I don't have that information in front of me so I can't
reconcile it off the top of my head but --
MR. FULLER: Again, that would be fully diluted with the employee-
invested stocks; that would not be in a release that would be out there,
because you don't have to account for that when you release that. So, in a
merger, you are looking at the fully diluted amount that's incorporated in
there.
MR. O'REILLY: I think, Jim, some of the confusion may be the fact
that there's a difference in measuring fully diluted shares as between
Canadian and U.S. GAAPs. I believe the numbers I'm giving you have been
uniform under Canadian GAAPs; as Corel would be the parent company, it
reports under the Canadian GAAP.
Q. Okay. So the fully diluted share count provided by Inprise would
not correspond with the similar calculation under Canadian GAAP is what you
are saying?
MR. O'REILLY: The correct number to compare apples to apples, from
Corel (inaudible) is 71.7 for Inprise.
Q. Okay. And just to tie this off, what is the share count you are
using for Corel on a (inaudible)? Is it 6.3?
MR. O'REILLY: Sixty-eight point three.
Q. Sixty-eight point three.
MR. O'REILLY: Yes.
Q. Okay. That squares everything up.
Finally, the correct corporate name for Inprise is Inprise/Borland
Corp.?
MR. FULLER: Yes, the correct name for it is Inprise/Borland.
Q. That's the Canadian pronunciation.
MR. FULLER: Right.
Q. Thank you.
MR. FULLER: Inprise/Borland, eh?
Q. Thank you.
MODERATOR: Our next question is from Corey Goldman from CNN
Financial News.
Please go ahead.
Q. Hi, there. Sorry if I might have missed this because I joined a
bit late.
I'm just curious what may be your actual revenue projects of this
going forward, you know, there's a lot of these Linux products, especially
North America.
DR. COWPLAND: Well, we are basically saying that it's 20 to 30
million this year, from the Linux side. It's hard to believe right now
because it's (inaudible) but we have shipped three million in Q4, and we
are shipping other suites next quarter, so we have lots of reasons for
optimistic growth there.
Q. Okay. Thanks.
MODERATOR: Our next question is from Clint Henderson from On24.
Please go ahead.
Q. Actually, I am sorry I didn't get a line. Sorry about that guys.
MODERATOR: Our next question is from Kevin Bell from Ottawa Sun.
Q. Hi there. I just wanted to ask a question about your past
history and what you see going forward. The two companies do have some
history and part of that history is, I believe, you have both been bloodied
by Microsoft. I am just wondering, just out of curiosity who would you see
as your main competitor? Would it be Microsoft, VA, Linux, Red Hat?
DR. COWPLAND: I think we have managed to be successful in retaining
a market share in Windows even though it is tough competition as you point
out. And at this point, if you look at the Linux landscape, it is so huge
an opportunity, we don't see any competitors to what we are doing because
there is nobody else out there with this range of perks. In fact, as Dale
says we can partner with people like Red Hat and S.u.S.E. and TurboLinux
and so on.
MR. FULLER: And that being said, I would say that, you know, being
conservative and a pessimist and paranoid a lot of times because I'm a CEO
is that our major competitor is ourselves, of us not being able to execute
it. And we, Michael and I, are both very committed to making sure we are
keeping an eye on the ball the whole time and moving the ball forward and
executing and delivering what we say we are going to deliver.
MS HUGHES: At this point actually, Chris, I would like to interject
it is now 12:20. We can do a final polling for questions because we would
like to end this call on time at 12:30 p.m.
MODERATOR: Yes. If you wish to ask a question, please press one at
this time.
Our next question is from Susan Taylor from Reuters. Please go
ahead.
Q. Sorry. I just want to make sure that I have got this clear then
that the market capita's new combined entity is set at $2.44 billion U.S.,
whereas the value of this deal that we are talking about today is $1.07
billion. Is that right?
MR. O'REILLY: Susan, it is Michael O'Reilly. Where are you getting
the figure $1.07?
Q. I thought that was your number earlier.
MR. O'REILLY: Oh, with respect to the Inprise/Borland value?
Q. Yes.
MR. O'REILLY: Yes. Yes, that is the derivative value and Corel's
complementary value would be 1.366 adding to the 2.44.
Q. Right. So the purchase price though I mean, just the exchange of
Corel stock, et cetera, that can be set at $1.07 billion?
MR. FULLER: I was going to say the Inprise shareholders receive
$14.94 at that price, which works out to be, you know, a little bit more
than $1 billion, as a merger as opposed to a purchase.
MS HUGHES: Is that the last question, Chris? Can you do a final
polling?
MODERATOR: No. We have a question from Jill Varty from the National
Post.
Q. Hi. Again, a follow up. Mike, the projection of 20 to 30 in
Linux revenue, does that exclude any revenue that would be coming from
Inprise/Borland? Would that be Corel only?
DR. COWPLAND: Yes, that is right. As Dale mentioned, they don't
really break up the individual Linux revenues although they have lots of
products already and the big launch of Kylex* coming up later this year. So
there will be incremental growth there too.
Q. Will you be breaking out Linux revenue once the two companies
are merged?
DR. COWPLAND: Yes, we will be certainly identifying that because
there is obviously a huge interest in the market.
Q. It is. Thank you.
DR. COWPLAND: Thank you.
MODERATOR: We have a question from Simon Tuck from Globe and
Mail. Please go ahead.
Q. Hi, just a quick one for Mike Cowpland. If I remember correctly,
Mike, last time I heard you owned about, was it 11 per cent of Corel
shares?
DR. COWPLAND: Approximately, yes.
Q. So your ownership of the new company would be in the
neighbourhood of six or seven I guess. Right?
DR. COWPLAND: Right. Yes.
Q. Thank you.
MODERATOR: We have a question from Brian (inaudible) from EMT.
Please go ahead.
Q. Hi, gentleman. I was just curious, and this is probably a
question to Michael, of how seriously you guys look at Linux as an actual
client server platform instead of just an end to your platform which is in
wide use today in web servers --
DR. COWPLAND: Well, actually it is the very same platform as client
server with our affiliate Graphon*, which is doing really well. You can
actually run a Linux client and access applications anywhere on the web
running Windows, running Windows NT or Linux. So you have tremendous
versatility in having thin client solutions using Linux. And as you go to
an all Linux solution, a Linux client -- a Linux server, you end up with a
very low cost system without any Microsoft license fees required at all.
Q. Okay. And wouldn't you call possibly Oracle competitors since
they have the developmentals as well as an Internet platform? It might not
be Linux but it is an Internet platform --
MR. FULLER: Yes, in fact, I would classify Oracle as a competitor,
however, I put this caveat around it is that their development tools are
OEM from a little company called Borland.
Q. And one more question just for you, Dale.
There was a lot of speculation that your purpose for coming after
your job at Whoware* was to bring Borland to an acquisition. Now, that the
cat is out of the bag, was that the purpose?
MR. FULLER: No, that wasn't the purpose. In fact, my purpose was
pretty much to make the company, you know, clean it up, get it ready for a
new CEO to come in and run the company. And my contract expired on October
9th and I stuck around because I fell in love with what we were doing and
what we were doing was changing the world. And I think that we have been
rewarded by that from when I took over the company the stock was, you know,
roughly about $2 and you can see where the stock is now. So my shareholders
have gotten tremendous shareholder value, which was my primary goal when I
walked in the door is to provide increase to shareholder value.
Q. Okay. That is it. Thanks a lot.
MODERATOR: Our next question is from Derek Mellon from Ottawa
Business Journal. Please go ahead.
Q. Yes. This question is for Michael O'Reilly. Michael, early on in
the conference call I think there was a mention of what your role would be
in this merger. I'm just wondering what exactly that is and once you are
done with that will you still stay on as an independent consultant to the
company?
MR. O'REILLY: Yes, my role hasn't changed from what was previously
announced. I will be consulting and advising the company and working very
closely with company executives in bringing this transaction forward. For
the next little while it is going to preoccupy a lot of people's time.
Q. How much of that time do you think will it -- a couple of
months, two, three months?
MR. O'REILLY: Yes, I have agreed to stay on in this capacity to --
as late as the end of June.
Q. End of June. Okay. Thank you, Mike.
MODERATOR: Our next question is from Collin Trethaway from the new
RO TV.
Q. Yes, a question for Dr. Cowpland. How big is this deal relative
to previous deals, WordPerfect and that type of deal as far as the
evolution of Corel? Is this the biggest yet? Is this the most important
step you have taken?
DR. COWPLAND: Yes, this is definitely the biggest yet and I think
it really gives us a huge opportunity for the next platform going forward,
which we think is the future of computing.
Q. And a further question, what do you attribute the drop-off in
the so- called Linux fever in mid-December? Corel has come down from 60 to
30 range. Red Hat has come down. Why do you think the investors are cooling
off a bit?
DR. COWPLAND: Well, I think it is settling down, but if you look at
it, it is still running at about 300 times revenue which is 15 times more
than web. So we can't really complain about that type of enthusiasm.
MODERATOR: And that does conclude our question and answer period for
today. Please make your final comments.
MS HUGHES: Thank you very much, Chris. This concludes our
teleconference. I just wanted to remind you again though that there will be
an audio replay starting approximately 30 minutes from now on our web site
at www.corel.com and www.inprise.com. If you have further questions, please
do contact the individuals listed on the press release and they will do
their best to answer you or if we can accommodate additional interviews, we
can do that this afternoon as well. Thanks very much.
***
Investors and security holders are advised to read the joint proxy
statement/prospectus regarding the business combination transaction
referenced in the foregoing information, when it becomes available, because
it will contain important information. The joint proxy statement/prospectus
will be filed with the Securities and Exchange Commission by Inprise
Corporation and Corel Corporation. Investors and security holders may
obtain a free copy of the joint proxy statement/prospectus (when available)
and other documents filed by Inprise Corporation and Corel Corporation with
the Commission at the Commission's web site at www.sec.gov. The joint proxy
statement/prospectus and such other documents may also be obtained for free
from Inprise Corporation by directing such request to: Inprise Corporation,
100 Enterprise Way, Scotts Valley, California 95066-3249, Attention:
Investor Relations, telephone: (831) 431-1000, e-mail:
[email protected].
