More WinZip

A followup to my WinZip and Jasc post:

Reading more of the prospectus, I found the following.

• WinZip was purchased from its original owners by Vector Capital.  Corel is buying WinZip from Vector Capital.  Corel is paying Vector Capital the equivalent of $82 million in stock for WinZip (assuming Corel's $19 IPO price).  I could not find the amount Vector Capital paid for WinZip.

• Jasc was purchased by Corel for $38.2 million, of which $34 million was in cash.

• WinZip has $19 million in debt.  It appears to me that this debt was taken out after it was acquired by Vector Capital.  WinZip paid millions in dividends to Vector Capital.  Nice.  Now Corel has to pay the debt with funds from the IPO.

• Corel "loaned" its CEO $562,000 (Canadian dollars) to buy a house.  It does not say at what interest rate or whether the CEO has to pay back the loan.

• Corel will add "up to 38 employees" from WinZip.

• WinZip was an unbelievably profitable business.  Check out it's net profit margin.  In 2004, WinZip made a profit of $15.5 million on $24.9 million in revenue.  That's a 62.4% net profit margin.  In 2003, WinZip made a profit of $16.2 million on revenues of $25.3 million.  That's 64.2% profit!  By comparison, Jasc had profit margins of only 6.8% in 2002 and 10.3% in 2003.

Who says shareware doesn't make money?

Comments

[Keith Casey]

Does anyone legitimately use WinZip anymore? It seems that its functionality was greatly subsumed by WindowsXP.

To the best of my knowledge, WinXP can't create password-protected or executable zips but I would wager that only a small portion of the market ever did those things anyway...

[Kamen]

The more interesting thing is how did venture vultures - oops, capitalists! - manage to do _this_ to a formerly successful company.

I agree that WinZip was a great hit a while ago - and likely extremly profitable for its founder(s). But at no time did it warrant a workforce of 38+. What were these guys doing? Two devs, a QA, two tech support, a marketing guy and the owner/CEO... I can only count to 7.

That Corel bought WinZip for an obscene amount does not come as a surprise. They've done that before. To me, the real issue here is a dotcom-era-style swashbuckler VC fund putting, let's say, ten mil and bloating the workforce with pseudo-marketing, pseudo-sales (sales? for a $20-$40 a pop shareware??), pseudo-whatever-CEO's-relatives and blonde secreta... Oops, assistant managers!

It would be funny except for the fact that it's ultimately shareholders money that buy those VC's yachts, martinis and escorts.