The following discussion and analysis should be read together with our audited consolidated financial statements for the years ended November 30, 2007, 2006 and 2005 and accompanying notes set forth elsewhere in this report. All financial information is presented in U.S. dollars.

Some of the statements set forth in this section are forward-looking statements relating to our future results of operations. Our actual results may vary from the results anticipated by these statements. Please see "Information Regarding Forward-Looking Statements".

OVERVIEW

We are a leading global packaged software company with an estimated installed base of over 100 million current users in over 75 countries. We provide high quality, affordable and easy-to-use Graphics and Productivity and Digital Media software. Our products enjoy a favorable market position among value-conscious consumers and small businesses benefiting from the widespread, global adoption of personal computers, or PCs, and digital capture devices. The functional departments within large companies and governmental organizations are also attracted to the industry-specific features and technical capabilities of our software. Our products are sold through a scalable distribution platform comprised of OEMs, our global e-Stores, and our international network of resellers and retail vendors. We have broad geographic representation with dedicated sales and marketing teams based in the Americas, EMEA/ANSEAK and Japan. Our product portfolio includes well-established, globally recognized brands.

An important element of our business strategy is to grow revenues through acquisitions of companies or product lines. We intend to focus our acquisition activities on companies or product lines with proven and complementary products and established user bases that we believe can be accretive to our earnings shortly after completion of the acquisition. While we review acquisition opportunities on an ongoing basis, we currently have no binding obligations with respect to any particular acquisition.

Graphics and Productivity

Our primary Graphics and Productivity products include: CorelDRAW Graphics Suite, Corel Painter, Corel DESIGNER, WinZip, iGrafx and WordPerfect Office Suite. CorelDRAW Graphics Suite is a leading vector illustration, page layout, digital image editing and bitmap conversion software suite used by design professionals and small businesses. Corel Painter is a Natural-Mediaฎ painting and illustration software featuring digital brushes, art materials and textures that mirror the look and feel of their traditional counter parts. Corel DESIGNER Technical Suite offers users a graphics application for creating or updating complex technical illustrations. WinZip is a compression utility developed in 1991, and purchased by us in May 2006 is the most widely used aftermarket compression utility, with more than 40 million licenses sold to date. Our iGrafx products allow enterprises to analyze, streamline and optimize their business processes. WordPerfect Office Suite was first developed in 1982 and marketed by Corel since 1996, is the leading Microsoft-alternative productivity software and includes Microsoft-compatible word processing, spreadsheet and presentation functionality

Digital Media

Our primary Digital Media products include: Corel Paint Shop Pro, Corel Media One and various products acquired in December 2006 as part of the purchase of InterVideo. These products include WinDVD, VideoStudio, DVD Movie Factory, DVD Copy and PhotoImpact. Corel Paint Shop Pro digital image editing and management applications are used by novice and professional photographers and photo editors. Corel Media One is a multimedia software program for organizing and enhancing photos and video clips. WinDVD, is the world's leading DVD player software for use on PCs. VideoStudio is our video editing and DVD authoring software for users who want to produce professional-looking videos, slideshows and DVDs. DVD Movie Factory is a consumer DVD authoring software. DVD Copy is an application that copies and backs up DVDs and CDs in multiple device formats. Photo Impact is an image editing software.

Corporate History

Corel was founded in 1985. In January 1989, we released our flagship product, CorelDRAW, a market-leading full-featured graphics software suite. In November 1989, we completed an initial public offering of our common shares. In January 1996, we acquired the WordPerfect family of software products. In August 2003, we were acquired by Vector Capital and became a private company. We divested certain underperforming product lines, discontinued speculative research and development activities and refocused our business on our core products and customers. At the same time we reviewed all of our business functions and implemented company-wide cost reduction measures. Between August 2003 and May 2004, we reduced our staff from 708 to 480. The staff reduction contributed to reducing our annual operating expenses from $113.2 million in the year ended November 30, 2003 to $71.5 million in our fiscal year ended November 30, 2004.

In October 2004, we acquired Jasc, a leading Digital Media packaged software company, for total consideration of $36.7 million, consisting of $34.3 million in cash and 379,677 of our common shares valued at $2.4 million. Through the Jasc

acquisition, we added Corel Paint Shop Pro and Corel Photo Album to our Digital Media offerings. As a result of synergies realized through the integration of Jasc, we eliminated 38 full-time positions and substantially reduced staffing and distribution costs in our fiscal year ended November 30, 2005.

In May 2006, concurrent with the completion of our initial public offering, we purchased WinZip from Vector Capital. As consideration for the acquisition, we issued to Vector Capital 4,322,587 of our common shares and repaid all of WinZip's outstanding indebtedness. Vector Capital acquired WinZip in January 2005. Through this acquisition, we added the WinZip file compression utility to our Graphics and Productivity software offerings. On December 12, 2006, we completed the acquisition of InterVideo and on December 28, 2006 we completed the acquisition of the remaining interest in Ulead, in transactions totaling approximately $220.4 million. This acquisition expanded our position in the fast growing Digital Media market with the addition of authoring and video playback software focused on high-definition and DVD technologies.

In November 2007, management initiated a restructuring plan to centralize much of our Digital Media operations in Greater China and Fremont, California. Additionally, further changes have been made to our staff to align and balance our global teams. This has resulted in the planned closure of our Minneapolis location in fiscal 2008 as well as the termination of certain individuals. We incurred restructuring charges of $1.4 million in the current period as a result of this plan. Additional charges of $0.8 million are expected to be incurred in fiscal 2008.

An important element of our business strategy is to grow revenues through acquisitions of companies or product lines. We intend to focus our acquisition activities on companies or product lines with proven and complementary products and established user bases that we believe can be accretive to our earnings shortly after completion of the acquisition. While we review acquisition opportunities on an ongoing basis, we have no binding obligations with respect to any particular acquisition.

Our functional currency is the U.S. dollar and our financial statements are prepared in accordance with generally accepted accounting principles in the United States, and have been consistently applied for our fiscal years ended November 30, 2007, 2006 and 2005.

Industry and Business Trends

Our largest competitors, Microsoft Corporation and Adobe Systems Incorporated, hold the majority of the markets in both Productivity and Graphics and in Digital Media. Microsoft Corporation's Microsoft Office and Adobe Systems hold most of the North American and global market for packaged Graphics and Productivity software. Adobe Systems holds much of the Digital Media software market. Growth rates of packaged software sales in emerging economies are expected to be higher than for the global packaged software market as a whole resulting from more rapidly increasing PC adoption rates in these markets. Additionally, higher growth rates are expected within the Digital Media software market thanks to the proliferation of capturing devices, the introduction of high definition formats, and finally the expansion of Digital Media content creation and sharing through social networking websites and email. Because the prices we charge for our packaged software are generally substantially less than those charged by Microsoft and Adobe for products with similar functionality, we believe we are well positioned to take advantage of the emerging market for lower cost software. However, if any of our more established competitors decide to compete with us based on price in this market, we may be unable to successfully compete with the more widely accepted software applications these competitors sell. Similarly, the markets for low-cost personal computers and Digital Media software are only newly emerging. If these markets do not develop as we expect, our business could be adversely affected.

We believe there is a significant market opportunity for us in countries where the markets for PCs are newly emerging, both because our software is more attractively priced than that of our larger competitors and because we believe first time users in these markets do not have established brand loyalties.

The packaged software industry continues to change with new revenue sharing models and types of business relationships. We will seek to continue to develop relationships with industry leading companies to establish new sources of revenues for our existing and future products. If we are unsuccessful in establishing such relationships, our operating results could be materially and adversely affected.

Acquisition of InterVideo

On December 12, 2006, we completed the acquisition of InterVideo, a provider of Digital Media authoring and video playback software with a focus on high-definition and DVD technologies. In 2005, InterVideo acquired a majority interest in Ulead, a leading developer of video imaging and DVD authoring software for desktop, server, mobile and Internet platforms. On December 28, 2006 we completed the acquisition of the remaining interest in Ulead. The acquisitions of InterVideo and Ulead ("InterVideo") were completed in cash transactions totaling approximately $220.4 million. We purchased InterVideo for $13.00 per share of InterVideo common stock. We financed the acquisitions through a combination of our cash reserves, InterVideo's cash reserves and debt financing which included an amendment to our existing credit agreement to increase available term borrowings by $70.0 million. In addition, outstanding stock options held by InterVideo employees were converted into options to purchase our common shares and we assumed pension obligations under benefit plans for various InterVideo employees.

This acquisition substantially expanded our presence in the Digital Media software market by creating a broad portfolio of Digital Media and DVD video products. The main products acquired from InterVideo are WinDVD, the world's leading DVD player software for use on PC's, VideoStudio, a video editing and DVD authoring software DVD Movie Factory, a consumer DVD authoring software, Photo Impact, an image editing software, and DVD Copy, an application that copies and backs up DVD's and CDs in multiple device formats.. These products contributed $73.0 million of revenue in fiscal 2007. With the combination of our Digital Imaging software and InterVideo's Digital Media products, we now deliver an expanded portfolio of easy-to-use, multi-purpose high-definition video, imaging, and DVD creation products to consumers and enterprises worldwide. In addition, the acquisition has enabled us to further extend our presence in emerging markets.

The acquisition combined our key strengths - business model innovation, understanding of end user requirements and established distribution in the Americas and Europe - with InterVideo's core assets, which include video technology innovation, established partnerships with the world's leading PC OEM partners, such as Hewlett Packard, Toshiba and Lenovo and strong market presence in the Asia Pacific region. We now have significant development offices in Fremont, California, Taipei and Shanghai and a sales and marketing office in Yokohama, Japan.

Cost synergies were realized from this acquisition, which have resulted in a reduction of the combined Company's sales and marketing, research and development and general and administrative expenses as compared to what those expenses would have been if the companies had continued to operate as stand-alone entities. We have completed the process of executing our integration and restructuring actions to achieve these cost reductions in the current and future fiscal years. This included the integration of financial systems, information technology and human resource processes.

We were unable to recognize certain revenue from many InterVideo OEM customers due to acquisition accounting. This impacted our first quarter revenues in that we did not recognize revenue of approximately $11.0 million on any InterVideo or Ulead products that were physically sold to OEM partners and distributed by them prior to December 12, 2006, for which the related sell through reports were received subsequent to the date of acquisition. We would normally recognize such revenues when we receive a sell through report from our partners.

Operating Performance

Results for the year ended November 30, 2007 include the results from our acquisition of InterVideo as of December 12, 2006.

Revenue for fiscal 2007 was $250.5 million, up 41.4% from fiscal 2006. Excluding InterVideo revenue of $73.0 million during the year, revenue from the Corel business was $177.5 million, an increase of 0.2% year over year. Gains from several products in our Corel portfolio including Corel Draw, Painter, WinZip, and iGrafx, were offset by a decrease in revenue from our WordPerfect and Digital Imaging products, including Paint Shop Pro Photo and Photo Album. WordPerfect and the Digital Imaging products declined by $12.0 million and $3.6 million, respectively in fiscal 2007, and the rest of the Corel portfolio, excluding InterVideo products, grew by $16.0 million or by 15.5% year over year

Our net loss for 2007 was $13.1 million, or a loss of $0.52 per basic common share, compared to a net income of $9.3 million, or $0.41 per basic common share in 2006. Cash provided by operations was $26.5 million in the year. The fiscal 2007 results were impacted by a number of items resulting from the acquisition of InterVideo, primarily related to the inability to recognize certain revenues, as discussed above, and acquisition charges, including the write-off of $7.8 million in acquired in-process research and development.

OPERATIONS

Revenues

We derive revenues principally from the sale of our software, and associated maintenance and support services. Maintenance and services revenues have historically constituted between 8.0% and 11.0% of our total revenues. We distribute our software through OEMs, the Internet, retailers and resellers around the world. Our products are focused on two primary software markets - the Graphics and Productivity market and the Digital Media market. Our primary Graphics and Productivity products are CorelDRAW Graphics Suite, Corel Painter, Corel Designer Technical Suite, WinZip, iGrafx Flow Charter and WordPerfect Office Suite. Our primary Digital Media products consist of Paint Shop Pro, Media One and the InterVideo family of products we acquired, including WinDVD, VideoStudio, DVD Movie Factory, DVD Copy and PhotoImpact. In our fiscal year ended November 30, 2007, approximately 50.3% of our revenues came from the Americas, 29.1% came from Europe, the Middle East and Africa and 20.6% came from the Asia Pacific region. During fiscal 2007, there has been a significant increase in our Asia Pacific sales due to the acquisition of InterVideo, and our positioning in this market.

Our products generally have release cycles of between 12 and 24 months, and we typically earn the largest portion of revenues for a particular product during the first half of its release cycle. The fiscal quarter of the most recent release of each of our major products is set forth below:

                                                        Current         Quarter of           Quarter of
                                                        Version       Current Release       Prior Release

Product
Graphics and Productivity:
CorelDRAW Graphics Suite                                      14               Q1 2008             Q1 2006
Corel Painter                                                 10               Q1 2007             Q4 2004
Corel Designer Technical Suite                                12               Q2 2005             Q3 2003
WinZip                                                        11               Q4 2006             Q4 2005
iGrafx FlowCharter                                            12               Q2 2007             Q1 2006
WordPerfect Office Suite                                      13               Q1 2006             Q2 2004
Digital Media
Paint Shop Pro                                                12               Q4 2007             Q4 2006
MediaOne                                                       2               Q4 2007             Q4 2006
WinDVD                                                         8               Q4 2006             Q2 2005
VideoStudio                                                   11               Q2 2007             Q2 2006
DVD Movie Factory                                              6               Q1 2007             Q1 2006
DVD Copy                                                       5               Q3 2006             Q1 2006
PhotoImpact                                                   12               Q3 2006             Q4 2005

We have typically released new versions of our Digital Media products on an annual basis during the second half of our fiscal year in preparation for the December holiday shopping season. While we expect to do so in our fiscal year ending November 30, 2008 as well, it should be noted that release dates are subject to a number of uncertainties and variables, many of which are beyond our control. See "Item 1A - Risk Factors - Our quarterly operating results may fluctuate depending on the timing and success of product releases".

Cost of Revenues

Cost of product revenues primarily consists of:

• royalties paid and costs of licensing third party intellectual property;

• salaries, benefits, stock-based compensation and related costs of the manufacturing oversight staff;

• the cost of packaging and distribution of our packaged software products;

• the cost of related customer and technical support functions;

• credit card fees; and

• allocated facilities, depreciation and amortization and other related overhead.

Our cost of product revenues varies depending on the format in which our products are delivered. Products delivered in electronic format, such as through OEMs or our e-Store, involve minimal packaging cost, as compared to products delivered in fully packaged format, such as through retail outlets, which involve substantially higher packaging and distribution expense.

Cost of maintenance and services revenues consists of:

• salaries, benefits, stock-based compensation and related costs of customer and technical support functions; and

• allocated facilities, depreciation and amortization and other related overhead.

Amortization of intangible assets represents the amortization of intellectual property and other intangible assets arising from purchases of other companies such as Jasc and InterVideo is included in the calculation of our gross margin.

Sales and Marketing

Sales and marketing expenses consist primarily of:

• salaries, commissions, benefits and stock-based compensation related to sales and marketing personnel;

• travel and living expenses;

• marketing, such as co-marketing programs with our resellers and OEMs, trade shows and advertising; and

• allocated facilities, depreciation and amortization and other related overhead.

Research and Development

Research and development expenses consist primarily of:

• salaries, benefits and stock-based compensation related to research and development personnel;

• allocated facilities, depreciation and amortization and other related overhead; and

• localization and contract development expenses.

Our research and development investments are primarily focused on maintaining competitive functionality of our software products, responding to customer requirements and expanding the geographic reach of our products. We limit research and development spending to areas that we believe will provide an attractive return on investment and have eliminated spending on speculative or high risk projects. Our research and development costs are expensed as incurred since the cost and time between technical feasibility and release is insignificant.

General and Administrative

General and administrative expenses consist primarily of:

• salaries, benefits and stock-based compensation related to general and administrative personnel;

• accounting, legal and other professional fees;

• allocated facilities, depreciation and amortization and other related overhead; and

• insurance costs.

Taxes

We have tax loss carryforwards available to offset future taxable income of approximately $233.5 million as of November 30, 2007. As of November 30, 2007 we also had approximated $220.0 million of tax depreciation that would be available to offset taxable income in future years. Our tax loss carryforwards and our pools of various deductions against taxable income existed prior to our acquisition by Vector Capital in fiscal 2003. To the extent that we used pre-acquisition tax carryforwards to reduce taxes otherwise payable in fiscal 2004 through 2006, the benefit was applied first to reduce goodwill and then intangible assets recognized in connection with our acquisition by Vector Capital. As at November 30, 2006 the related goodwill and intangibles have been fully written off. Consequently, to the extent we use tax loss carryforwards subsequent to 2007, we expect to record the benefit as a reduction in income tax expense.

The remaining tax loss carryforwards expire between the tax years 2008 and 2027 and have not been fully audited by relevant authorities. We have not recorded a financial statement benefit for these attributes as we have limited history of profitability.

Due to the international scope of our business, our income tax expense includes the tax provisions calculated for the various tax jurisdictions in which we operate and foreign withholding tax on certain license income. As a result, income tax expense is affected by the profitability of our operations in all locations, as well as local tax rates.

RESULTS OF OPERATIONS

Comparison of Fiscal Year Ended November 30, 2007 to Fiscal Year Ended November 30, 2006

Our consolidated financial statements for our fiscal year ended November 30, 2007 have been prepared in accordance with U.S. generally accepted accounting principles.

On December 12, 2006, we acquired all of the outstanding shares of InterVideo. Accordingly, because the financial information for year ended November 30, 2006 does not include InterVideo operations, they are not directly comparable to the consolidated financial information presented for the year ended November 30, 2007. In the analysis, "Corel products" refers to the revenues and expenses related to the products which were owned by Corel prior to the acquisition of InterVideo.

The following table sets forth certain consolidated statements of operations data in dollars and expressed as a percentage of revenues for the periods indicated, as well as the percentage change on a year-over-year basis.

                                                                        November 30,                        Percentage
                                                         2006          2007         2006        2007          Change
                                                                            (Dollars in thousands)

Revenues
Product                                                $ 157,319     $ 228,274        88.8 %      91.1 %           45.1 %
Maintenance and services                                  19,872        22,206        11.2         8.9             11.7

Total revenues                                           177,191       250,480       100.0       100.0             41.4

Cost of revenues
Cost of product(1)                                        21,339        49,775        13.6        21.8            133.3
Cost of maintenance and services(1)                        1,142           796         5.7         3.6            (30.3 )
Amortization of intangible assets                         14,366        26,119         8.1        10.4             81.8

Total cost of revenues                                    36,847        76,690        20.8        30.6            108.1

Gross margin                                             140,344       173,790        79.2        69.4             23.8

Operating expenses
Sales and marketing                                       54,851        70,587        31.0        28.2             28.7
Research and development                                  25,883        44,712        14.6        17.9             72.7
General and administrative                                24,285        37,083        13.7        14.8             52.7
Acquired in-process research and development                   -         7,831         0.0         3.1              n/a
Integration expense                                          358         5,220         0.2         2.1           1358.1
Restructuring                                                810         1,447         0.5         0.6             78.6

Total operating expenses                                 106,187       166,880        59.9        66.6             57.2

Income from operations                                    34,157         6,910        19.3 %       2.8 %          (79.8 )%

Other expenses (income)
Loss on debt retirement                                    8,292             -             *           *                *
Interest expense, net                                     11,331        16,254             *           *                *
Amortization of deferred financing fees                    1,180         1,074             *           *                *
Other non-operating (income) expense                        (565 )        (799 )           *           *                *

Income (loss) before income tax expense (recovery)        13,919        (9,619 )           *           *                *
Income tax expense                                         4,668         3,443             *           *                *

Net income (loss)                                      $   9,251     $ (13,062 )           *           *                *

(1) Percentage reflects percentage of related revenues.

* Not Meaningful

. . .