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Borland Tools: No Sale


Will spin-off of IDEs into CodeGear subsidiary have legs?

By Jennifer deJong
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December 1, 2006 —  (Page 1 of 2)
Nine months after it put its IDE business up for sale, Borland has done an about-face.

In its third-quarter earnings call last month, the company announced that it will retain ownership of its developer tools group, reversing its earlier decision to seek a buyer. The developer tools group, which includes the company’s Java, C++, C# and Delphi IDEs, will operate as a wholly owned subsidiary of Borland Software, under the name CodeGear.

“After much consideration, we made the decision to establish CodeGear as a separate subsidiary,” Borland president and CEO Tod Nielsen said in a statement. “We have always stated our intention to find the right buyer for this business….After a lengthy due diligence process with several serious bidders, we feel the CodeGear decision is in the best interests of our customers, shareholders and employees,” the statement said.

Asked why Borland reversed course, the company’s chief marketing officer, Rick Jackson, said in a phone interview with SD Times: “Valuation and price had something to do with it. This was not a fire sale.” According to Jackson, Borland had lined up five potential buyers, including “several private equity firms and a couple of strategic companies.” He declined to offer details about the interested parties but said it was difficult to establish an appropriate value for the tools business. “The financials of Borland’s ALM business were so intertwined with those of [the developer tools group] that operational expenses were hard to break out.”

Voke analyst Theresa Lanowitz said it’s difficult to know exactly what went down with potential buyers. “There may have been source code issues, revenue issues, intellectual property issues,” she said. “But the whole reporting of events would have been a lot cleaner if they had not announced [the plan to sell] in February, and then dragged out [the process] until November.”

Lanowitz, who worked for Borland earlier in her career, isn’t convinced the decision to spin off the IDE business will work. “The IDE business today is commoditized,” she said. “It comes down to Eclipse and Microsoft Visual Studio,” she said. “It doesn’t make sense to operate a wholly owned subsidiary in a commoditized market.”




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