WordPerfect, once king of the word-processing castle, appears to be the latest victim of the "Redmond effect."
Microsoft Corp., based in Redmond, Wash., has laid siege to sector after sector of the computer software industry. From Apple Computer's operating systems to Novell's vaunted networking software, Microsoft has either won or is playing for keeps with a strategy of persistence.
Witness what happened to WordPerfect: Until 1994, the company was the No. 1 word-processing software in the world. Microsoft's rival product, Word, gradually took over as WordPerfect failed to adapt quickly enough to the trend of selling work-productivity software in "suites," with word-processing, graphics, spreadsheet, and other software all in one package. Microsoft also adapted its products better to its own emerging Windows operating environment than WordPerfect did.
Analysts generally agree that sales of office-software suites are presently split this way: Microsoft 85 percent, WordPerfect 7.5 percent, and IBM's Lotus 7.5 percent.
Now, in a behind-the-curve effort, WordPerfect has launched the latest version of its product under a new owner, Corel Corp. of Ottawa, which until now had been known for its top-selling computer graphics program, Corel Draw. Corel bought the WordPerfect software brand from Novell Corp. of Orem, Utah, earlier this year, paying $115 million - a fraction of what Novell had paid not long before.
"It's a David versus Goliath type of battle," says Andrew Waitman, a technology analyst at the Toronto brokerage firm Eagle & Partners. He thinks Corel has its work cut out for it in any battle to win market share from Microsoft.
"This is a mature market. It's hard to see WordPerfect winning market share from Word," Mr. Waitman says. "Corel could make money selling upgrades to existing users of WordPerfect."
The key measure of investor confidence is the stock price. Corel hit a high of $26.63 (Canadian; US$19.44) on the Toronto Stock Exchange (it is also listed on New York's Nasdaq) last July, but dropped steadily as technology stocks lost some of their appeal last fall and, say analysts, on speculation that Corel might buy WordPerfect. In late January Corel's stock had stabilized near $15.63, but then dropped to a low of $12.63 in early April after the WordPerfect purchase. It has since bounced back to around $17 on news of the launch of WordPerfect 7.
Though Microsoft Word is the leading word-processor for personal computers, WordPerfect still has about 20 million users worldwide, versus about 35 million for word. But relatively few people buy word-processing software alone anymore. In the vital "suite war," it's Corel's WordPerfect Suite 7 against Microsoft Office and IBM's Lotus Smart Suite. Suite unit sales grew at a 12 percent rate in this year's first quarter, while stand-alone word-processor sales were falling 51 percent, says Darrel Ryce of the Markham, Ontario, office of research firm A.C Nielsen.
Corel is spending $136 million to promote its new product. The firm typically spends an aggressive 18 to 22 percent of its gross revenue on advertising and marketing, versus a 10 percent industry norm.