Michael Cowpland, the brash, publicityseeking CEO of Ottawa-based Corel Corp., was pushing his luck. On the very morning last January that Microsoft mogul Bill Gates was unveiling the latest version of his bestselling Office 97 software package in New York City, Cowpland had organized a rival news conference across town to promote his own offering, WordPerfect Suite 7. But from the beginning, things went terribly wrong. Driving rain delayed the arrival of his executive jet, and en route to the Grand Hyatt hotel for the event, his limo was waylaid by the city’s legendary gridlock. He arrived 40 minutes late to find that almost half the invited analysts and reporters had neglected to attend. For those less brazen than Cowpland, there might have been a lesson: nobody steals the show from Bill Gates. The head of Canada’s largest software company, however, is nothing if not a fighter.
Since buying WordPerfect last year from Novell Inc. of Provo, Utah, for $210 million, Cowpland has served notice that he wants to do what no one in the $145-billion-a-year software industry has ever done—beat Gates cold in Microsoft’s most lucrative product niche, business software packages. ‘We’re really turning this into a mega-contest,” says Cowpland. ‘When we acquired WordPerfect, people were saying it was beaten. Nobody’s saying that any more, because we’re fighting back.”
Cowpland is poised to throw another punch this month when Corel launches its latest and most sophisticated version of WordPerfect. Over the next 18 months, Cowpland vows, WordPerfect Suite 8 will steal more than half the market from Microsoft Office, measured by the number of units shipped to retailers. Further down the road, he hopes to overtake his gargantuan rival by leading the way towards computing’s brave new world: a programming language called Java that is designed to run on any kind of computer. Cowpland and an impressive list of allies—including IBM and Netscape Communications Corp., the leading maker of Internet software—believe that Java will end Microsoft’s software dominance once and for all.
In any other business, Cowpland would be laughed out of town. But in the computer game, giants have been humbled before by sudden shifts in technology: witness IBM’s sudden fall when mainframe systems gave way to desktop PCs in the late 1980s. Still, Cowpland—at 54, the grand old man of Canadian high-technology—is staring down one incontrovertible fact: compared with Microsoft, Corel is a bit player. “He’s running uphill, and it’s a pretty steep hill,” says David Wright, a high-tech analyst with Marleau Lemire Securities Inc. in Toronto.
The numbers tell a daunting tale. Microsoft is sitting atop a $ 13.6billion war chest, and spent more than $2.5 billion in 1996 alone on research and development. Corel has, by Cowpland’s own estimate, less than $30 million in the bank, and spent $90 million on R and D last year. In their most recent fiscal years, Corel posted revenues of $450 million, compared with Microsoft’s $11.8 billion. In Microsoft’s case, more than half of that amount was generated by office software packages, or “suites.”
In Canada, Microsoft Office accounts for 85 per cent of office suite revenues, according to A. C. Nielsen, a market research firm. “Microsoft Office has earned, and continues to earn, undisputed market leadership,” boasts Jeff Dossett, general manager of Microsoft Canada in Mississauga, Ont.
Cowpland is not only up against the industry’s largest player, but the most aggressive, as well. In its relentless drive to install the Windows operating system in every personal computer on every desk in the world, Microsoft has crushed some competitors and merely infuriated the rest. Now, Corel is in its sights. Along with its “Get Netscape” group of crack software developers, Microsoft is rumored to have formed a “Get Corel” hit squad. “The office suite market is probably the most impregnable market that you’ll find anywhere,” says Ann Stephens, president of Reston, Va.-based PC Data, a market research firm that tracks software sales. “I would hate to be competing against Microsoft in that category.”
Cowpland, however, is not about to blink. “People think you can’t compete with Microsoft successfully, but I think we’re showing you can,” he says. ‘We’re becoming a major thorn in the side of Microsoft, and that’s going to eventually pay off big time.” Former Ontario premier Bill Davis, a member of Corel’s board since it went public in 1989, says it would be a mistake to underestimate Cowpland. “He’s quite prepared to compete with any of the major players in the business.”
In fact, Cowpland has turned competition into a lifestyle choice. His passion for sports almost rivals his lust for business. His father, Ronald, now 82 and still living in the village of Bexhill in southwestern England where Cowpland grew up, made his career as a gamesman, teaching bridge and coaching tennis. His mother, Marjorie, who died in 1971, ran a successful catering business. “My father’s still active in bridge, golf and snooker, and I’m pleased to say he can still whomp me in all three,” says the admiring son.
Canada's software king takes a run at Microsoft
Cowpland Sr. would have a harder time keeping up with his son’s jet-set lifestyle, which at times almost outshines his exploits in business. He divorced his first wife, Darlene, in 1991; his two daughters from that marriage, Paula, 28, and Christine, 25, are studying medicine. A year later, he married Marlen Therien, a platinum blonde from northern Quebec who is 15 years his junior. In their 1992 wedding photos, she stretches languorously on the top of Cowpland’s white Lamborghini Diablo, and two years ago, she posed provocatively for the couple’s Christmas cards in a red spandex Santa suit. That same year, she helped design the couple’s 1,800-square-metre, glittering, gold-tinted glass palace in the city’s tony Rockcliffe district. The
$14-million house, trimmed with Roman columns and arches, drew thousands of curious onlookers and provoked outrage among the neighborhood’s blue-blooded denizens. “It was just a big tourist trap,” says Margo Roston, a Rockcliffe resident and former society columnist for the Ottawa Citizen. The Cowplands’ names regularly appear in the pages of Frank magazine, the Ottawabased scandal sheet. “They’re as close as you get to show business in Ottawa,” says Frank editor Michael Bate.
Cowpland, whose net worth exceeds $100 million, says his taste for the finer things is simÏ ply a “byproduct” of Corel’s £ success. The sprawling residence—home to Cowpland, his wife, her 12-year-old son, Roman, by a previous marriage and four dogs, Blondie, Bunny, Chanel and Java—is “handy for sports,” he says, with his-and-hers squash courts and an outdoor tennis court. The underground garage also offers plenty of space for his collection of five sports cars, including two Porsches and a Jaguar.
At work and at play, Cowpland puts a premium on speed. Barrelchested and balding, he moves with the confident, ramrod posture of a drill sergeant. Every year, he and his older brother, Geoffrey, who still lives near Bexhill, compete in the over-45 doubles category at Wimbledon. “I’m continually astounded by his energy level,” says Paul LaBarge, an Ottawa lawyer who sits on Corel’s board and serves as its legal counsel. “If you watch him, he’s constantly in motion. And when he moves, he does it very quickly.”
He moved swiftly in 1989, when Corel became one of the first companies to produce software for Microsoft’s then-new Windows operating system. On the strength of its low price and easy-to-use features, CorelDraw soon became the number 1 PC graphics program, and rocketed Corel—an acronym for Cowpland Research Labs—into the upper ranks of the North American software industry. Even now, with many more competitors, CorelDraw has about five million users, or 75 per cent of the PC graphics market.
Cowpland was content to ride that wave until two years ago, when Microsoft’s much-ballyhooed Windows 95 got off to a slow start and a version of Draw designed to run on that operating system floundered. The company lost $1.3 million in the fourth quarter of 1995, and lost money again in the first quarter of 1996. Suddenly, analysts were snorting their disapproval. Corel was putting too many bytes in one basket, some said. It was time for the company to go shopping.
Cowpland zeroed in on WordPerfect. Once the uncontested king of word processing with about 80 per cent of the market, the brand stumbled badly in the late 1980s by taking too long to introduce a Windows-compatible version. It lost more ground to Microsoft when it failed to anticipate the huge demand for office suites, which combine a word processor with an accounting program and other popular software products.
With 25 million users, Cowpland says, WordPerfect was just too good to pass up. “It’s a huge global brand name, and we thought that was a fantastic opportunity.” The price was attractive, too: Corel wound up paying $210 million, almost $1.6 billion less than Novell had forked over in 1994. But there was work to be done. “Morale there had deteriorated so significantly that people were just punching the clock nine to five,” recalls Arien Bartsch,
Corel’s former executive director of worldwide sales and marketing. “So we went in and did a lot of rah-rah. We pulled everybody together and nurtured an internal culture of We can do it.’ ”
Those motivational mantras were put to the test a year ago when the company introduced WordPerfect Suite 7.
Corel slipped its promotional machine into overdrive, and the results were undeniably
impressive. From a meagre 15 per cent of the retail market—sales to individual computer users—WordPerfect shot up to 51 per cent last summer, prompting Cowpland to proclaim victory over Microsoft. Corel’s market share dropped to 40 per cent after Gates released Office 97 in January. Cowpland hopes to regain lost ground in June when WordPerfect Suite 8 hits the stores. Still, the company’s performance to date is nothing to be ashamed of, says Stephens. “I don’t think anyone ever thought that Corel was going to continue to have a 40 per-cent share of the retail market, but they carved out a slice, and it’s a good slice.”
Cowpland has followed a simple strategy: cut prices and offer customers more standard features than the competition. Corel sells the basic WordPerfect suite for $530, compared with Microsoft Office 97’s suggested price of $689. (The recommended “upgrade” prices for users of earlier versions are $175 and $294 respectively.) Dossett of Microsoft belittles Corel’s approach as “more bits in the box,” adding: “It’s a strategy of more is better, regardless of whether it’s valuable to the user.” Cowpland, though, is unfazed.
‘Whatever it is, people like it. We’re paying close attention to what consumers want and we’re giving it to them.”
Unfortunately for Cowpland, Corel’s guerrilla pricing has met with far less success in the corporate market, which accounts for 88 per cent of office software sales.
Rather than focusing on price or cutting-edge technology, corporate buyers put a premium on standardized
software that keeps information flowing smoothly. Using one family of software makes it easier to train employees, says Victor Riga, an information systems manager with Vancouver-based MacMillan Bloedel Ltd. Buying from Microsoft also represents long-term stability. “It’s like the old expression, ‘Nobody ever got fired for choosing IBM,’ ” says Riga, whose employer began using Microsoft Office on its more than 2,000 PCs in 1992. ‘The new expression is, ‘Nobody ever got fired for choosing Microsoft.’ ”
Cowpland maintains that WordPerfect’s corporate market share is expanding and insists that low prices will eventually win the day. But in his own backyard, he has struggled to win converts. Last June, he complained loudly when the department of national defence passed over the local company and instead agreed to buy $ 12-million worth of software from Microsoft. Around the same time, Corel offered to give software away to municipalities and nonprofit organizations. Although the City of Ottawa made the switch, nearby Kanata, Ont.—the heartland of Canada’s high-tech industry and site of the
Corel Centre, home to the Ottawa Senators hockey club— decided to stick with Microsoft, which had matched Cowpland’s free offer.
Winning over large companies may prove even harder. “In the corporate market, it’s a matter of who’s first in,” says Riga. To break Microsoft’s stranglehold, he adds: “I think there’d have to be some dramatic change in the evolution of technology.”
As Cowpland sees it, Java is that dramatic change. Developed by Canadian James Gosling at Sun Microsystems Inc. in Mountain View, Calif., Java is a revolutionary programming language that can run on virtually any computer. Because Java is “platform independent,” it represents a threat to the two companies that now rule the PC world, Microsoft and Intel Corp., the largest maker of microprocessors. If Java lives up to its billing, there would no longer be much need for expensive desktop computers with their complex operating systems and stores of software. Instead, manufacturers would sell cheap, no-frills “network computers” that only include the most commonly used programs. When a user needed more specialized software, he would simply download a compact Java application, or “applet,” from the Internet or a local computer network, vastly reducing both the cost and the complexity of computing.
With the introduction of a test version of Office for Java in April, Corel became the first company to offer a complete office software package written in the universal programming language. “Corel is really the leader now in delivering Java-based desktop applications,” says Ian Knight, strategic account manager for Netscape in Mountain View, Calif. Netscape, IBM and Sun Microsystems are spending millions of dollars to create Java software. “It’s a gangup mentality,” says Stephens of PC Data. Microsoft’s Dossett dismisses the Java threat as a lot of “fluff and hype.”
NO. OF EMPLOYEES:.........1,600
1994 ................$221 million
1995 ................$265 million
1996 ................$451 million
NET INCOME (LOSS):
1994 ...............$43.9 million
1995 ...............$19.6 million
1996 ............. ($3.71 million)
It will never replace Windows, he argues. Neverthe less, Microsoft is taking the threat seriously. Together with Intel, Mi crosoft has developed technical standards that will allow manufacturers to build Windows-based network computers. There are also rumors that Microsoft is developing its own office software for Java. “But Microsoft isn’t going to want to put a lot into it because it’s almost like shooting themselves in the foot,” says Cowpland. “If you’ve got a nice cash-cow monopoly, you don’t want to encourage the competition too much.”
Analysts such as Marleau Lemire’s David Wright acknowledge Java’s potential, but caution that it could be two years or more before it gains a significant toehold in the corporate market. In the meantime, Cowpland has to focus most of his efforts on competing with Microsoft’s existing software products. That makes many investors nervous. Corel’s stock closed the week at $7.85 a share, its lowest level since 1993, and a long way from its 1995 high of $25. For some
THE COREL COLLECTION
Key products (1996 sales):
WordPerfect and other office software:..................$240 million
CorelDraw and other graphics software:..................$191 million
Computer games, educational CDs
and other multimedia software:*.......................$18.4 million
and other communications applications:**...................$764,000
* On April 1, Corel sold ils CD Home line of multimedia products and games to I. Hoffmann + Associates of Toronto.
** On June I, the videoconferencing technology will be transferred to Corel Computer Corp., a wholly owned subsidiary.
analysts, the scenario is all too reminiscent of Cowpland’s days at the helm of Mitel Corp., an Ottawa-based manufacturer of telephone switches that rose to stratospheric heights before stumbling in the mid-1980s.
Cowpland co-founded Mitel in 1973 with Terry Matthews, who now heads Newbridge Networks Corp., an Ottawabased telecommunications company. The two expat Brits worked together at a subsidiary of Northern Telecom, and on lazy weekend afterI noons got together to indulge I a shared passion, tinkering 3 with cars. Eventually, they I worked up the courage to I quit their jobs and start Mi=> tel. After a fruitless flirtation ^ with hotel fire-alarm systems, the duo scored big by targeting the low end of the market for private telephone exchanges—complex switches that control phone lines within companies. Driven by Cowpland’s engineering genius and Matthews’s marketing flair, the company mushroomed to 5,000 employees and $250 million in sales by 1982.
It was during Mitel’s heyday that Cowpland first earned a reputation for high living. In 1981, he bought a sprawling home outside Ottawa from developer Robert Campeau and hired Montreal architect David Simmonds to turn it into a grandiose pleasure palace at which Cowpland entertained Mitel clients. The 2,000-square-metre mansion was fitted with 18-karat gold bathroom faucets, a $200,000 solarium and a $25,000 dance floor featuring a flashing Mitel logo.
Cowpland’s party did not last long. With the breakup in 1982 of U.S. phone giant AT&T, Mitel’s largest customer, sales plummeted by 25 per cent. Then there was the fiasco surrounding the SX-2000, a technologically advanced phone switch that was intended to snatch some of the market from communications kingpins such as AT&T, Hitachi and Northern Telecom. Developed in tandem with IBM, the SX-2000 was delayed by a year when Big Blue pulled out. Later, sales bogged down amid technical problems. The company rang up millions of dollars of debt, and Cowpland resigned in 1984.
Anthony Griffiths, a corporate turnaround expert who took the helm at Mitel in 1985, says the company’s misfortunes were partly caused by Cowpland’s and Matthews’s inexperience: ‘The company started growing so fast, and they didn’t have the management capacity at the time to control it. I used to play tennis with [Cowpland] quite often. He once told me he had learned a lot of lessons at Mitel.” Cowpland dismisses any suggestion that he mismanaged Mitel. “I think the success speaks for itself,” he says. “It’s still one of the largest firms of its kind in the world. Every company has a little hiccup now and then.”
This time out, Cowpland has been careful not to overextend himself. He recently announced plans to spin off Corel’s videoconferencing and network-computer operations into a subsidiary, Corel Computer Corp. And last month, he sold Corel’s line of educational and entertainment CD-ROMs to I. Hoffmann + Associates Inc. of Toronto for $1 million and a 22-per-cent stake in the company. The acquisition of WordPerfect, Cowpland says, “is a giant opportunity for us, and we want to focus all our energies on that.”
As if fearing another Mitel meltdown,
Cowpland immerses himself in every detail of the company’s operations. He directly hired most of its 1,600 employees—although he no longer conducts every interview—and until last year, he personally signed every cheque paid to suppliers. Even now, the company remains tightly centralized around its eight-storey, gold office tower overlooking the Queensway, the highway that bisects the nation’s capital. Besides the WordPerfect facility in Orem, Utah,
Corel’s only other office is a 150-employee outpost in Dublin. In its assault on the corporate market, Corel is only now opening foreign sales offices.
Cowpland’s iron grip on the company has proved frustrating for more ambitious managers. “He likes to guard the decision-making process so that he has a veto on all things,” says 37-year-old Bartsch, who left the company last year to start up I/US Corp., an Ottawa-based Internet content developer. “After eight and a half years, I realized he wasn’t going to relinquish additional control, and that was something I wanted.”
In interviews, Cowpland expounds enthusiastically on the importance of teamwork. “I like to call it a team sport,” he says in characteristically rapid-fire fashion, his accent still bearing traces of his Sussex upbringing. “We have a culture where the top people on the team tend to be the most expert, but at the same time they have to have the people skills to create the team atmosphere.” In a brutal, take-no-prisoners industry, civility and good sportsmanship are still important to Cowpland, associates say. He is a “perfect gentleman” who is quick to respond to e-mail and voice-mail, says Kim Dixon, vice-president of marketing. The door of his cramped, glass-walled office on Corel’s fourth floor, adds Kerry Williams, vice-president of manufacturing, is always open.
The door is closed, however, on the Corel CEO’s private life. “He’s very guarded about mixing business with his social life,” says Bartsch. “That’s just his philosophy. And at social events, he doesn’t stick around to network with other industry executives. He parachutes in and he parachutes out—he guards his time quite carefully
HOW THE SUITES STACK UP
Corel WordPerfect Suite 7
• price ($530)
• user-friendly formatting system for documents
• large assortment of useful software, fonts and clip-art
• requires unusually large amount of hard-drive space (200 to 400 megabytes)
• slow to start up
• programs do not work as well together as in other suites
Microsoft Office 97
• programs are well integrated, sharing a common look in menus and toolbars
• faster than WordPerfect Suite
• occupies less hard-drive space than the competition
• price ($689)
• help system criticized by some as intrusive
• files cannot be read by previous versions of the programs
in that regard.” Cowpland never allows reporters to interview him in his mansion. For all his exuberance, there is a hint of shyness. It may be his British reserve, or the engineer’s syndrome—a man who is more comfortable with machines than people.
His affinity for things mechanical was evident early in life. His brother Geoffrey, a chartered accountant, remembers his endless fascination with tinkering. A family row flared up one day when young Mike filled the kitchen with motorbike parts and, oblivious to the hour, forgot to clean it up by dinnertime. His friends nicknamed Cowpland, an accomplished student, “the boffin”—English slang for “wizard.” He went on to study at one of Britain’s top engineering schools, Imperial College in London, and took his master’s degree and doctorate in engineering from Carleton University. Cowpland’s closely guarded privacy seems incongruous against his famed I flamboyance, which has faded little since § his days at Mitel. Bartsch believes CowÊü pland’s flashy profile is a deliberate at! tempt to draw attention to the company. J In fact, the Corel CEO is widely regarded £ as a master of marketing. In February, his promotional talents were recognized when the 75-member Sales and Marketing Executives of Toronto named Cowpland their marketer of the year. Although Corel’s print and television ads—produced inhouse—are criticized by some as amateurish, few analysts argue with the success of his pricing and distribution tactics. Cowpland has even turned to service clubs such as Kiwanis International to flog his software. Under the terms of a recent deal, Kiwanis clubs will raise money by selling WordPerfect Suite 7, collecting a $40 commission for each copy. Last summer, he struck a deal with Packard Bell Electronics Inc., the world’s second-largest PC maker, to have WordPerfect Suite 7 installed on every new computer shipped by the company. Cowpland declines to say what the deal is worth, but calls it “huge in marketing value alone.”
Despite his competitive nature, Cowpland insists he bears no animosity towards Gates. He and the Microsoft CEO chatted last January at the World Economic Forum in Davos, Switzerland. “He’s obviously impressive,” Cowpland says. “We exchanged ideas and differences of opinion, but it’s a friendly competition. I think Microsoft has done great things for the industry.” But, referring to Java, he adds, “With a new playing field, there’s always a new leader, and we intend to be the leader.”
In the short history of high-technology, David has sometimes beaten Goliath. With its mastery of mass marketing and a prescient deal to supply operating systems for early IBM PCs, Microsoft itself emerged from relative obscurity in 1976 to dominate the world of software. Andrew Grove, president and CEO of Intel, captured the volatility of the industry last year in the title of his best-selling management book, Only the Paranoid Survive. In other words, no one is safe—not even Microsoft. Michael Cowpland is counting on it.