Inprise Merger Off - 'Things Change,' Corel CEO Says

Corel Corp. said today it is calling off a proposed merger with California-based programming tools maker Inprise Corp., but offered few details on its plans to recover from the failure of an engagement that just recently was seen as critical to the company's financial health.

When the deal was announced in early February, Corel's stock was trading at more than US$20 a share and the transaction - 0.747 Corel shares for every Inprise share - would have been worth some $2.4 billion to Inprise shareholders. But Inprise investors soured on the deal as excitement waned over Corel's entry into the open- source Linux market and the Canadian company's stock tobogganed.

Corel shares were trading at just under $6 on the NASDAQ exchange at noon today.

Recently, Corel painted a worst-case scenario for the US Securities and Exchange Commission, suggesting that the failure of the Inprise merger and any inability to secure new financing could see the company run out of operating cash in 90 days.

At a press conference today, newly appointed Chief Financial Officer John Blaine would only say that the company is evaluating "offers of alternative financing it has recently received."

"We have many offers and are evaluating each of those on their own merit," Blain said. "As we analyze that and determine which is best, we'll make appropriate announcements."

Blaine said he could not reveal whether the company was currently looking to borrow money, sell equity, or is pondering mergers with other companies.

Corel executives were also tight-lipped about their reasons for supporting what they called an "amicable" end to the near-marriage even though the original deal called for Inprise, known for its Borland development tools, to pay Corel more than $29 million if it backed out.

"Things change," Corel President and Chief Executive Officer Michael Cowpland said when asked why his company didn't press for the penalty and why it was no longer interested in an outfit it was willing to pay some $2.4 billion to acquire in February.

"The particular integration with Inprise/Borland was initially looking very desirable, but it hasn't exactly clicked the way we originally planned, and that's why we decided to part amicably," Cowpland said. "And that's because the industry (can) change rapidly in three months."

If Corel had waited until Inprise shareholders voted against the deal - which was growing increasingly likely - the $29.5-million walk-away fee would not have been in effect. But Cowpland said that, with the Inprise proposal behind them, Corel executives are now free to act on other potential deals.

Since the announcement of Corel's plan to buy the US company, two lawsuits have been launched by Inprise shareholders in attempts to scuttle the deal, and Inprise itself asked its own financial advisors to reexamine it. Earlier, Inprise board member Robert Coates said resigned to protest of the deal he said undervalued Inprise.

Blaine said Corel is currently drafting plans to "re-align its cost structure" to shave some $40 million in expenses on an annualized basis. But he said he could not say whether the streamlining would lead to job losses.

Inprise, known for Borland product lines that includes C++ programming tools and its Delphi application development suite, was touted a "perfect fit" for Corel's new focus on the Linux operating system - for which it has already ported versions of its WordPerfect office suite and CorelDraw graphics software.

Cowpland said the company remains committed to Linux and to Web- enabling its applications, adding that he is confident the company can execute its Internet-related strategies working with Inprise as a partner, rather than owning it.

Corel can be found on the Web at http://www.corel.com/

Inprise is at http://www.inprise.com/.

Reported by Newsbytes.com, http://www.newsbytes.com.