Late last week, Corel (NASDAQ:CREL) announced its fiscal Q3 results, showing a 46% increase in revenues to $60.4 million. Despite this boost in sales, however, Corel remains unprofitable.

Quarterly results showed higher sales for Corel's WinZip, CorelDRAW, iGrafx, Painter and DESIGNER. However, WordPerfect revenue fell by $4 million, and digital imaging software dropped $1.7 million.

Corel posted a net loss of $6.8 million, or $0.27 per share, in Q3. That compares to net income of $5.5 million, or $0.22 per share, in the year-ago period. Because of acquisitions and shareholder distributions, the company paid a hefty $4.2 million in interest costs for the quarter. There was also a $2.2 million integration expense for the InterVideo transaction.

Unfortunately, Corel's $198.6 million purchase of InterVideo is hitting some snags. Customers have been slow to adopt InterVideo's products, because they're uncertain about whether HD-DVD or Blu-ray will win the high-definition format war. Corel thinks a likely victor may not emerge until the second half of next year.

Meanwhile, Corel must deal with an onslaught of alternative word processors and other productivity applications, including offerings from megacompetitors Google (NASDAQ:GOOG) and IBM (NYSE:IBM). Google continues to push its on-demand suite, while IBM recently announced a word processor. There are also threats to Corel's graphics business, including Adobe's (NASDAQ:ADBE) development of limited versions of its Photoshop franchise. Interestingly enough, the company recently purchased Buzzword, an online word processor.

For a small company, Corel has a lot to deal with, and I suspect the competition will only get tougher. Given the drag on its InterVideo segment, its stock may continue to meander.

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