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With spinning off its desktop-oriented Linux operating systems business high on the list, beleaguered Corel on Tuesday outlined an ambitious, multiphase strategy it hopes will bring the company back to profitability later this year.

Corel is not leaving Linux behind--it plans to keep a financial interest in the company that eventually buys the spun-off business. Corel will also hold on to its Linux applications business, planning to invest heavily in the existing desktop versions of WordPerfect and CorelDraw for Linux, as well as versions for the Windows and Apple Macintosh environments.

"The new Corel's future will be based not on radical choices but smart changes. We will concentrate on our strengths and make sure that every decision is consistent with the direction we have established, and that every action grows the business in a profitable direction," said Derek Burney, Corel's president and CEO, at a late-morning press conference Tuesday.

Three-Pronged Attack

The first phase of the company's three-phase plan stretches over the next 12 months. During this time, the vendor plans to deliver improved versions of CorelDraw Graphics Suite, launch CorelDraw Graphics Suite for the Macintosh, ship improved versions of its Knockout masking software and Corel Painter, and implement a series of sales and marketing programs for new vertical markets.

The second phase, which covers the next one to two years, will see Corel expand its suite of creative products through strategic investments in infrastructure and what Burney described as "new growth opportunities." Also during this phase, Corel will deliver versions of its graphics suite that will allow users to take better advantage of the Web.

In phase three, covering the next two to three years, Corel will investigate a variety of acquisition opportunities and focus heavily on delivering projects related to Microsoft's .Net development framework.

Strengthen Ties to WordPerfect Users

Through all of these phases the company will focus on strengthening its relationships with WordPerfect users, to better ensure that new features for desktop products in particular are being addressed. Approximately 70 percent of the features expected to appear in WordPerfect Office 2002 are based directly on user feedback, company officials said Tuesday.

"We are focusing on our core customers. By that I mean WordPerfect users who are not yet necessarily Corel customers. Of those 22 million WordPerfect users out there, some 18 million have not purchased a Corel product. We hope to give them a reason to upgrade, using things like Microsoft's .Net technology," Burney said.

Burney said the company will also be targeting more aggressively the small and mid-size markets with WordPerfect, in addition to redoubling its efforts to go after its core constituencies in the legal and government markets.

But the "the big gotcha" in the applications market is Microsoft Office, easily the standard in corporate America, Burney said. Instead of going head-to-head with Microsoft, it makes better financial sense to pursue more targeted opportunities that he believes only WordPerfect can capitalize on.

"We are choosing not to go into head-to-head battles with Microsoft. We recognize there is a 7-to-1 spending ratio associated with converting competitors' users, as opposed to upgrading our customers. We are going to create opportunities for WordPerfect users that only WordPerfect can execute on," Burney said.

Although Corel made some progress selling its version of Linux to desktop users, it became clear that users increasingly wanted bundled, end-to-end solutions, said Burney, who believes the best way to accomplish this is through a series of partnerships, acquisitions, and spin-offs.

"The desktop operating systems market is only 14 percent of the overall Linux world. Our plan is to pursue opportunities to allow us to spin off the Linux distribution (operating system) elements of our Linux division," Burney said.

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