Cowpland Steps Down
It was during a conference call with his board of directors last May when Michael Cowpland, the larger-than-life head of Corel Corp., first dropped his bombshell. He was, he said, thinking about resigning from the software company he had created 15 years before. The conference call was about a financing deal the company desperately needed, and Cowpland's statement came out of the blue. "It was not related to the topic," says board member Jean-Louis Malouin, a University of Ottawa business professor. "Nobody questioned it. We just essentially continued the discussion. It was one-half second in an hour-and-a-half conference call."
Last week, Cowpland made it official - abruptly once again. Near the beginning of a scheduled board meeting, Cowpland informed Corel's directors his mind was made up: it was time for him to leave. This time, though, the subject of his resignation, which was not on the pre-set agenda, dominated the meeting, effectively sweeping 20-odd other items off the table.
It was a stunning move by a man so closely identified with his company that its name was originally short for Cowpland Research Labs. Ottawa-based Corel, which in the mid-1990s was Canada's leading software company, had made Cowpland a millionaire many times over and given him a lifestyle few ever attain. To many Canadians, Cowpland and his platinum-blond wife, Marlen, were the over-the-top nouveau riche duo, with their ostentatious home, garages full of exotic cars, and Marlen's cable TV show about pets. Yet, despite his excesses, Cowpland helped put Canada on the high-tech map, first with telephone equipment maker Mitel Corp., which he co-founded in 1973, and then with Corel.
To Bay Street analysts, Cowpland's departure raised more questions than it answered. By board members' accounts, the decision was Cowpland's - but the reason for his timing remained murky. Nor was it clear what Cowpland, who remains a Corel director but stepped down as chairman, president and CEO, will do next. He told reporters he intended to "get my hands very dirty" with new technology and advising Corel. "Today's as good a time as any to pass the baton on to a new team," he said.
Cowpland leaves Corel at a time when its flagship products are, for the most part, facing problems. It offers a version of the Linux computer operating system - an open standard that is a direct challenge to Microsoft's highly popular Windows system - but while popular with users, it has been slow to take off. And sales of Corel's WordPerfect office products are stagnating. Losses have mounted for three quarters, and last week, it was revealed that sales of CorelDraw and WordPerfect in key United States retail markets have fallen dramatically in the past two months.
Hovering over Cowpland - and by extension Corel - are insider trading charges brought against him by the Ontario Securities Commission concerning $20.4 million worth of shares he sold in 1997 shortly before the value plummeted. And in February, Corel entered a deal that was to be its largest acquisition ever, the $1.6-billion, all-stock takeover of Scotts Valley, Calif.-based software firm Inprise/Borland Corp. The deal fell apart in May, after Inprise shareholders rebelled due to Corel's troubled financial picture. In June, the company introduced a stiff cost-cutting program, laying off 21 per cent of its staff.
Not surprisingly, Corel's share price has been as mercurial as its founder: from $6.65 a year ago, it soared as high as $64.65 amid Linux fever in December, then steadily declined to last week's close at $5.05. "I don't think the investment community and consumers were willing to wait any longer for the projected promise of their Linux strategy," says analyst Kevin Restivo of IDC Canada, a market research firm. "Cowpland and Corel have always overpromised and underdelivered."
The pressure was undoubtedly on Cowpland. Publicly, he was the picture of confidence. He has long maintained he did nothing wrong in the insider-trading case. When the Inprise deal crashed, he maintained: "We're in perfect shape." But coincidentally or not, it was around that time that he gave his first hint to the board about resigning.
The subject came up once or twice more at board level. Directors focused on Derek J. Burney, Corel's chief technology officer and a seven-year veteran of the company, as interim CEO. Burney, 37, says Cowpland asked him about two months ago if he'd like to take over. How long did he think about it? "A half a second," says Burney, whose father, Derek H. Burney, was Canada's ambassador in Washington from 1989 to 1993 and is now chief executive officer of CAE Inc. of Toronto. James Baillie, a prominent Bay Street lawyer, took over from Cowpland as Corel's non-executive chairman. "He felt the time had come to go to a more traditional administrative structure," Baillie says.
According to Burney, Cowpland's departure will mean a change in leadership and style, but not in Corel's business. "The company continues to focus on the core products, creative products, business applications, Linux," Burney says. "That doesn't change." Like his former boss, Burney is optimistic. A new CorelDraw for Windows is set for release in the fall, he says, and the company is making "good progress" on costs. Analyst Restivo feels Cowpland's exit will be positive for Corel, as long as it results in stable management and a return to profitability. "Cowpland," he says, "should stay out of the company's affairs."
To his friends, Cowpland seems content with his decision. Businessman Larry O'Brien, who joined the Corel board last week, spent time with Cowpland the evening after his resignation. "Mike was as upbeat last night as I've ever seen him in my life," O'Brien told Maclean's. Chris Troughton, who regularly plays tennis and squash with Cowpland, says the Corel chief has seemed more relaxed lately. "He's just been very much more at ease and not quite as preoccupied," Troughton says, "like he's more at peace with himself."
Friends expect him to resurface shortly in a new role, likely at a start-up linked with Linux. "He is one of the smartest, hardworking, energetic people in this whole country," says John Kelly, the former chief executive of Ottawa-based JetForm Corp., who has known Cowpland for a quarter-century. "I can't picture the high-tech industry in Canada without him." Nor, many feel, can Cowpland.
The Life and Times of Michael Cowpland
1943: Cowpland is born in Bexhill, England. Trained as an engineer, he immigrates to Canada in 1964.
1973: Cowpland founds telecommunications company Mitel Corp. in his Ottawa basement together with Terry Matthews, another immigrant from Britain. The two met while working at Bell Northern Research, an arm of what is now Nortel Networks.
1985: After several years of rapid growth - matched by mounting debts and management problems - Cowpland and Matthews sell a controlling interest in Mitel to British Telecom. Cowpland launches Corel Corp., which scores with the graphics program CorelDraw. By the mid-1990s, Ottawa-based Corel has become the country's largest software developer.
1995: Cowpland annoys neighbours in Ottawa's tony Rockcliffe Park district by building a flashy, 1,800-square-metre glass and marble mansion for $10 million.
1996: Corel buys the WordPerfect product line from Novell Corp. Cowpland declares he is taking on Microsoft Corp. in the office software market.
1997: Wife Marlen Cowpland makes a splash by appearing at a Corel gala in a skin-tight cutaway gown with a transparent backside. She follows up two years later with a $1-million stunner featuring a 15-carat diamond on a 24-karat gold breastplate.
1999: Cowpland is charged with insider trading after the Ontario Securities Commission investigates his 1997 sale of $20.4 million in Corel stock six weeks before company losses send the shares into a tailspin.
2000: With sales of its core products slipping and its reputation as a cutting-edge software developer in decline, Corel enters a February agreement to buy Scotts Valley, Calif.-based software company Inprise/Borland Corp. But in May, Inprise scuttles the deal over concerns about Corel's mounting losses. By June, Corel is announcing steep cost-cutting measures. In August, Cowpland resigns as chairman and CEO.
Maclean's August 28, 2000