Many of us did splutter into our morning coffee Tuesday when the news broke that Borland International Inc had swooped wholly unexpectedly on hot Open Database Connectivity cum Common Object Request Broker Architecture player Visigenic Software Inc in a stock swap worth around $149m. The news was unexpected at first glance, given the perception that […]
Many of us did splutter into our morning coffee Tuesday when the news broke that Borland International Inc had swooped wholly unexpectedly on hot Open Database Connectivity cum Common Object Request Broker Architecture player Visigenic Software Inc in a stock swap worth around $149m. The news was unexpected at first glance, given the perception that Borland was headed in the wrong direction and Visigenic in quite another. For a second was reminded of the wry old anti communist East German joke about the news that capitalist West Germany had gone Marxist: What a shame – all that lovely industry! But in fact the move is a shrewd one on both parts. Borland can convincingly argue the deal is a continuation of its moves into extension of both its middleware options, and the broadening of its appeal from the developer to enterprise software buy: and Visigenic, which was increasing sales and winning hearts and minds at a decent pace, but was a long, long ways from profitability. Plus, Borland may even have turned the corner on its own not inconsiderable fiscal woes of the past couple of years and be finally once again in growth mode.
By Gary Flood
The issue is whether the company has again chosen a company, as in the case of its April 1996 other intelligent middleware buy, Open Environment Corp, that has better technology than actual products, and whether history will repeat itself in presenting the absorption of the bought company as too difficult, and could cause yet more highly unwelcome red ink the next couple of quarters. (For the record, the deal is being presented as a pooling of interests, but clearly Borland is the dominant party in the Anschluss.) Borland chairman and CEO Del Yocam is characterizing the deal as being part of both Borland’s ongoing turnaround, citing the company’s recent second quarter of profitability, and as a means of further penetrating the enterprise customer base. The grand vision is of a so-called Borland Information Network, where legacy, client-server, object and internet applications can be merged under a single distributed application architecture. If so, the company could do with such an attractive product. At the end of April Borland’s fiscal 1997 showed losses of $108m, compared to net profit of $14.7m in 1996, on revenue down 38% year on year to $151.4m.
These figures made familiar reading to those of us who had been tracking the company ever since the glory days of former head Philippe Kahn. Few periods in Borland’s topsy-turvy 14 year history have been as hectic as the last eight or nine quarters. In February alone it had to lay off 30% (300) staffers and close the Boson office of Open Environment Corp (OEC), an acquisition closing in April 1996 for $65m in stock, but an acquisition too far it seemed, given the $12m it had to write off for the thing. But in July it secured backup in the shape of $25m equity financing, with options for the same amount again (CI No 3,193), joined by about $2.5m it raised by issuing more stock, and we noted that even then the company said the money was going to be earmarked for acquisitions. In the same month it was able to report its first profitable quarter in over a year, albeit by a whisper, $79,000; and last month the happy trend was repeated, with $1.5m net profit against losses of $14.3m the previous period, on sales up 8.1%, to $42.5m, a result which came in three cents ahead of the Street’s expectations. For its part, Visigenic wasn’t going to break into profit until the third quarter of 1998 according to most analysts. Its last full fiscal, closing at the end of April, showed losses of $20.3m, up from $4.4m in 1996, though the revenue jump – 205%, from $5.6m to $17m – showed the company was definitely headed the right way, north. But it lost more money than expected in its first quarter in July ($2.6m after a charge of $753,000), and in its second, reported last month, it showed the same pattern, with losses of $3.6m on sales up 26% to $5.6m, making losses for the halfway mark a hefty $6.2m on sales up 51% to $11.8m. Visigenic (CI No 3,129) was started in 1994 as an ODBC for Unix play by Roger Sippl, founder of both Visigenic and previously troubled database software supplier Informix Software Inc, (who of course becomes the combined company’s chief technology officer while Borland’s current CTO, Rick LeFaivre, steps up to head of R&D for the merged operation).
There is a parallel here between what Borland and Visigenic did to progress their fortunes. The parallel is intriguing: Visigenic was kind of going nowhere until it made its key acquisition, also in April of last year, of a 15 strong outfit called PostModern Computing Inc, a move which enabled Sippl to shift the company’s focus into ORBs with PostModern’s highly-admired Java-flavored Black Widow (the basis for VisiBroker), especially with the addition of a Corba Inter-Orb (IIOP) protocol. Since then, Visigenic has won many license agreements for its Visibroker Object Request Broker, including Borland itself (March), Microsoft Corp, Oracle Corp, Netscape Communications Corp, Forte Software Inc, Novell Inc and Sybase Inc, winning it the kudos of becoming the ORB company you have to partner with. Though that isn’t the same as the ORB you buy – according to IDC figures in September (CI No 3,238), the market leader in that emerging space is definitely Dublin, Ireland based Iona Technologies Ltd, with 30% of the estimated worldwide market, with Visigenic in fourth place with only 11%. Nonetheless the partner roster makes fairly kosher Borland’s description of Sippl’s company as a leader in object middleware. In product terms, Borland is talking of a combination of Borland’s Delphi and Visgenic’s Visibroker for both Java and C++, an environment, when combined with the old OEC Entera middleware, which would offer impressive middleware options, covering both Microsoft COM, DCOM/COM+, and ActiveX, the more database-centric Distributed Computing Environment, and now Corba.
But the thought which intrigues us most is wondering if Yocam hasn’t been incredibly canny and actually made nemesis Bill Gates pay for the opportunity for Borland to become reinvigorated through the Visigenic infusion. One refers of course to the mysterious settlement – presumably involving some amount of cash – that ended the spat between Redmond and Scotts Valley just recently. The suit was filed in May when Borland accused Big Green of snatching too many of its top development and executive talent (CI No 3,156). The case was handled with such PR flair by Borland, which leaked succulent details of Microsoft’s nastiness, including the stretch limos it used to sneak Borland eggheads away to fancy Scotts Valley lunches, that Gates clearly felt discretion was the better part of valor in this law case at least. Microsoft and Borland quietly buried the hatchet at the end of September, just eight weeks ago, with neither side revealing the nature of the settlement. Did Yocam put some kind of check in his drawer in his file marked ‘Visigenic Acquisition Project’? We may never know – but the thought is a happy one.