For the most part, it's been difficult for tech companies to go public. It's really been standout companies -- like Salesforce.com (NYSE:CRM) and Google (NASDAQ:GOOG) -- that have enjoyed IPO success.
So, that's why this week's IPO of Corel (NASDAQ:CREL) is such an aberration. No doubt, Corel is not a standout company; rather, it is a provider of cheap, commodity software. Corel has an Office-type suite, with a word processor, spreadsheet, and database. Its main competitor, of course, is the mighty Microsoft (NASDAQ:MSFT), which has 97% of the North American market.
As for investors, they were underwhelmed by the offering. The stock, which was offered at $16, is now selling for $15.75. In fact, the original price range was $18 to $20.
Corel also has a variety of drawing tools. The main competitor: Adobe (NASDAQ:ADBE), which has 70% of the global market.
True, during the past year, Corel's revenues increased by 47% to $164 million. Then again, this was mostly the result of several acquisitions, such as WinZip and Jasc Software.
Actually, Corel has been a perennial money-loser. In the past year, the net loss was $8.75 million.
Corel believes that its growth opportunity is to sell cheap software to developing countries. But Microsoft and Adobe have strong distribution in these markets already, and can no doubt compete (after all, these companies generate huge cash flows to support more marginal markets).
Also, it appears that Google will launch its own Office suite. The company recently purchased Writely, which is an online word processor.
The big winner is actually Corel's private equity investor, Vector Capital. The firm took Corel private for $98 million and still owns 72% of the company. Vector has also paid itself $130 million in dividends.
While Corel has a large installed base -- which has remained fairly loyal over the years -- it's hard to see where the growth will come from. In fact, even the company's recent acquisitions have been commodity products. So don't expect much pricing power from Corel's stock.
Fool contributor Tom Taulli does not own shares mentioned in this article.
