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Q&A: Borland exec explains reversal on tools division sale

It's spinning off the division into a wholly owned subsidiary, says Rick Jackson

By Heather Havenstein
November 15, 2006 12:00 PM ET

Computerworld - In an about-face, Borland Software Corp. yesterday announced that it would spin off its developer tools division into a wholly owned subsidiary called CodeGear rather than sell off the group, as it had announced it would in February. Rick Jackson, chief marketing officer at Borland, spoke to Computerworld today about the rationale behind the decision to keep the tools division.

Excerpts from that interview follow:

Why did Borland decide not to sell the developer tools group, and how much interest was generated among potential buyers? We ended up with quite a few interested parties. In the end, it came down to about five bidding parties. Since the developer tools group has historically been so intertwined with Borland, operationally it became very difficult for us to break out specific revenue [for potential buyers, such as] how much revenue to attribute to developer tools and application life-cycle management [ALM]. At the end of the day, we did not feel we were going to receive the appropriate value for [the division]. To maintain the value for our shareholders and still take care of our customers ... we made the decision to drop it down to a wholly owned subsidiary.

Borland CEO Tod Nielsen said in February when Borland put the tools division up for sale that it was draining resources and focus from the core ALM effort. If that is the situation, why would the company want to keep the group under its corporate umbrella? The move is to separate it as a stand-alone subsidiary. [CodeGear] has its own management team, its own brand, its own sales and marketing organization. Effectively, once we are able to create this stand-alone subsidiary, there will be no employees shared. It will be operated as a stand-alone business.

In the past, when you have announced quarterly losses -- as was the case with yesterday's third-quarter results -- you have announced layoffs. Additional cost-cutting measures were mentioned yesterday. What are those? At this time, we are not commenting. The executive team is working on a second pass at the operational plan ... with a strong focus on profitability. We anticipate discussing that more during our fourth-quarter call, which will happen in February. We are really focused on making sure we can continue to drive growth this year.

Borland's IDE tools often were seen as an alternative to IBM or Microsoft tools. The ALM market is much tougher with IBM and Microsoft, as well as companies like Mercury Interactive and Serena. How will Borland differentiate itself in ALM? Our top competitor is really IBM. Microsoft has a very strong developer following. They haven't done as well in the ALM space. On the Microsoft side, they are really only able to support Microsoft-specific projects. We are taking market share. We have replaced IBM in several large accounts -- at Kaiser Permanente and EDS.

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