Following yesterday’s announcement of Borland International Inc’s decision to launch a lawsuit against rival Microsoft Corp alleging unfair competition practices (CI No 3,156), more details have emerged about the substance of Borland’s complaint. Chairman and chief executive officer of Borland, Delbert Yocam, made a speech to his employees this week that includes the following allegations. […]
Following yesterday’s announcement of Borland International Inc’s decision to launch a lawsuit against rival Microsoft Corp alleging unfair competition practices (CI No 3,156), more details have emerged about the substance of Borland’s complaint. Chairman and chief executive officer of Borland, Delbert Yocam, made a speech to his employees this week that includes the following allegations. Apart from the 34 employees over 30 months being lured away deliberately from Borland to Microsoft, he told Borland staffers: They have paid lavish signing bonuses to lure some of our employees away. They have hired employees and sent them immediately on sabbatical or vacation – for even months at a time. They have sent limos to pick up employees up at Borland headquarters – at our headquarters – for lunch.
By Gary Flood
The signing on bonuses are claimed to have hit the seven figures- plus mark. The Scotts Valleyer believes Microsoft has been actively recruiting its employees since at least August of 1994. It goes on to claim that a few months later, in early 1995, there were already enough former Borland employees at Microsoft to form a Dead Borlanders Society, which met to share information and help recruit further Borlanders to Microsoft. But the headhunting drive really got going in the wake of the launch of Delphi, Borland’s well liked low end client/server development tool, in February 1995 (CI No 2,612), a tool that often outranked Microsoft’s own Visual Basic in competitive analysis. Borland says that once this campaign had swung into action, a Microsoft recruiter had access to a confidential Borland internal telephone list to aid making targeted calls. Microsoft also set up a recruitment center in a San Jose hotel to attract Borland hopefuls. The document goes on to claim that Brad Silverberg, Borland’s former vice president of research and development who left the company to join Microsoft in 1989, spearheaded the recruitment effort. Silverberg is said to have locked on to Anders Hejlsberg, chief architect of Delphi, trying to recruit him two summers ago, but failing (then). Paul Gross, at the time vice president of research at Borland, was next in the firing line – with Borland saying that Gross, now vice president of developer tools at Microsoft, was offered a package that included a $1m signing bonus, stock options and the title to selected real estate in or near Redmond. Borland found out and invited Gross in to discuss his future – to which Microsoft responded with an offer of an extra $500,000 if he quit Borland the same day.
More and more sweeteners
Gross then took a three month sabbatical to plan his wedding, which Microsoft agreed to, despite the seeming desperate urge to sign him. Then it went back to nabbing Hejlsberg, with more and more sweeteners, a $3m signing on bonus, salary of $200,000, and 75,000 of its prized MSFT shares. By October 1996 he had succumbed. According to the Wall St Journal yesterday, Borland had to sue under California law after failing to persuade US Justice Department antitrust lawyers to take action. Yocam, Borland’s chairman and chief executive officer since December 1996, since which time he says five or six further employees have quit for Bill’s shilling, complained to the paper, To have this predator, Microsoft, coming in from left field, continuously and systematically taking our employees and intellectual property, is just wrong. Yocam also claims Microsoft is trying to gain a monopoly in the low-end software-development tools market, where he says it currently holds 60% market share to Borland’s 20%. Yocam wants an unspecified amount in financial damages, and an end to Microsoft’s raids via an injunction that would employees from going to the software giant for a specific period of time. But Borland is not suing current or former employees, implying that they have not breached the terms of their contracts, taken any company secrets, or left with sensitive code. Microsoft sneered in response that it was forcing no-one to work for it, and that every company tries to recruit in this dynamic industry, and that (yawn) it believed the suit had no merit.
Complex legal and cultural issues
So what are we to make of this catfight? There are many complex legal and cultural issues here. Some have already pointed out that IT industry talent is very mobile in any case – asking Yocam if he has any problem with the fact that his vice presidents of human resources and sales, as well as the chief technology officer and general counsel, all used to work at Apple Computer Corp, to take an example near home. People with these kinds of skills, especially in Java and portable development environments, are going to be in very high demand whoever they work for, and there is a certain logic in the company with the most money to spend in software development being the place these experts gravitate to. It may not be solely that they can be paid champagne lifestyle salaries there – if their buddies and peers are ahead of them, and they are all still in social contact, that can be just as much an incentive. Plus, Yocam is being somewhat disingenuous about how attractive his company has been as a place for retaining top talent – endless losing quarters, takeover rumors last year concerning Oracle, downsizing like the 15% (125 jobs) slash of headcount in October, and the follow up he himself ordered in February that cut 300 employees and contractors, leaving only 700 employees on the payroll. Borland has offloaded most of its database and applications business, has had a disastrous merger with Open Environment (CI No 3,149), and last month (CI No 3,151) reported fiscal 1997 net losses of $108m, down from net profit of $14.7m the previous year, on turnover of $108m, down 38% year on year from 1996’s $151.4m. So surely this is an example of free agent movement in professional sports – it’s like basketball’s Shaquille O’Neal saying bye-bye to Orlando Magic at the end of last season and moving on to the LA Lakers for about as much money as it takes to film a modern blockbuster, right? Well, maybe. It’s one thing for a sports team to grab all the good players by throwing moolah all over them.
Deliberate engineering of a monopoly
But for one company to grab all the good programmers and managers so it can stomp on everyone is the one thing even the most libertarian capitalist cannot abide – it is the deliberate engineering of a monopoly. (Anti-trust legislators basically turns a blind eye to sports in the US, or things might be different even there.) Borland’s specific case may fail, certainly. Microsoft may well get away with saying this is common practice, that it didn’t target Borland any more or less predatorily than any other firm, blah blah. And after some dreariness in court and lots of lawyer bills (say 100 days at $5,000 a day, $5m?), Microsoft will probably win, or cave privately. But does that mean that Bill Gates putting intense pressure on a Gross or a Hejlsberg to leave and join the company where he’s always telling us all the Goddamn smartest people work anyway doesn’t stink? No, it does stink, and we applaud Borland for at least trying to make him squirm up there at his ludicrous summit with the 100 CEOs from 40 countries (plus ‘faithful assistant Al-gore’). And it’s also worth remembering that Microsoft is not invulnerable in the courts. There was the Stac compression algorithm suit in the early 1990s that Big Green (named thus for the leafiness of its Washington environs as for its capacity to generate cash) lost. Wang Laboratories Inc launched a patent infringement lawsuit in 1993 over Microsoft malarkey over some of its imaging software; in April 1995 Microsoft agreed to invest $90m in the company and signed a multi-year technical, service and marketing agreement as a result. And the Department of Justice did stop the Intuit merger, remember. Yes, there’s an element of smokescreen here, and a bid for some nice publicity, and all sorts of less than noble motives on Yocam’s side. But if there is any truth in these allegations, Microsoft deserves to be sent to its room for a very, very long time. And then be dismembered like that previous 800 pound gorilla, AT&T – into an operating system and applications company, which will surely happen within the next ten years, whatever Bill hypnotizes Gore to believe this week.