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11/14/2006
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Borland Creates Subsidiary For Development Tools Business, Ends Search For Buyer

The new subsidiary, CodeGear will provide JBuilder, Borland Developer Studio, and the Turbo product line. The main company, Borland, will focus on application lifecycle management.

Borland Software is separating its development tools group into a subsidiary, CodeGear.

The move marks the end of Borland's search for a buyer for its remaining tool product lines.

It's the end of an era for Borland, which enjoyed a meteoric rise as a tool supplier, launching Turbo Pascal in 1983 at the dawn of the personal computer era. Turbo Pascal was a leader in desktop development for its speed of compilation and its $49.99 price tag. It's not been offered by Borland since the mid-1990s, but Borland's other tools, such as JBuilder and Delphi, became popular with Java and Windows developers. As Sun and Microsoft feuded over Java, Borland was one of the few independent suppliers to offer tools to both camps.

Borland is keeping its tools division, rather than selling it, because it is still garnering revenues from the product lines. CEO Tod Neilson said Borland looked for a buyer but concluded a subsidiary was more likely to continue development of the tools and maintenance of existing products for customers.

"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," said CEO Tod Neilson in a prepared statement.

"CodeGear has a strong product portfolio and a loyal developer base," said Ben Smith, newly appointed CEO of CodeGear, who has been working with the tools group as a Borland consultant for the past 12 months. CodeGear will have separate management, R&D, and sales and marketing.

Borland decided to create a subsidiary as a branding issue. The company will provide development tools under the CodeGear brand. The tools that will be turned over to CodeGear include the popular Java integrated development environment JBuilder; Developer Studio, which includes C++Builder, C#Builder and Delphi, a Windows rapid development environment; and its Turbo product line, which includes Turbo C#, Turbo C++, Turbo Delphi and Turbo Delphi .Net.

The Borland brand will concentrate on producing application lifecycle management tools and it has been moving into that focus for two years. Application lifecycle management is at a higher level than development tools and concentrates on rigorous architecture policies and change management as code moves through development and into production. Borland acquired testing software maker Segue Software early this year to fill out an application lifecycle management product line.

In results for its third quarter ended Sept. 30, Borland reported that it had garnered $54.7 million in revenue on its application lifecycle management portfolio, up 91% from the same quarter a year ago. As evidence of sales picking up in that sector, Nielson said license revenue was $29.7 million, up 115% over a year ago. Software revenues are often broken down into new licenses sold versus annual maintenance revenues.

Total revenues for the quarter, including tools sales, were $82.4 million, up 21% from a year earlier. But Borland, which has been experiencing a string of losses, still lost $12.2 million in the quarter. The loss includes restructuring, severance and divestiture expenses.

The results indicate that Borland may be close to turning the corner. It has pared down its staff in previous losing quarters.

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