February 8, 2006 12:00 PM PST
To grow, Borland to cut off its roots
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The company on Tuesday said it intends to purchase testing tool company Segue Software for $100 million in cash and sell its highly regarded but low-margin developer tools business.
Executives said the acquisition and divestment is intended to accelerate an ongoing realignment at the company: rather than sell one-off developer tools to programmers, Borland has been trying to sell large suites of tools to high-level technology executives.
"It's remarkable that they've been able to hang on and remain a reasonably sized company," said Anne Thomas Manes, an analyst at the Burton Group. "They were not going to survive trying to be an IDE (integrated development environment) company because nobody pays for IDEs anymore."
Borland is selling its development tools to focus on high-end lifecycle tool suites and will acquire testing company Segue Software for $100 million.
Open-source and increased competition are forcing Borland to abandon its traditional business and focus on new areas of growth potential.
In fact, Borland announced Wednesday that fourth quarter revenue declined 14 percent and losses grew to $9.6 million. But exiting the development tools business, where the company sells JBuilder, Delphi, and C# Builder, is a dramatic--and potentially risky?move for a company with a rich history in software development and a strong following among programmers.
It's also another major shift in strategy at Borland, which has had to make over its 22-year history so that i could adjust to competitors and changing habits among its customers.
Today, Borland's traditional business is being undercut by open-source. In the past two years, the rise of freely available open-source IDEs, notably the Eclipse software, has cut the legs out from beneath the stand-alone tools market, said analysts.
Over the past three years, Borland has acquired a number of specialized tools providers and recast its product line around so-called application lifecycle management. These suites provide large software development organizations with tools tailored for different stages of the development process, including gathering application requirements, modeling and testing.
Segue Software, based in Lexington, Mass., has a line of products for testing application performance and spotting bugs before and after they go into production.
The big picture
Although the market for IDEs has become less profitable because of free open-source products, analysts said demand is growing for more complete development-related offerings.
Software development projects are more complicated today because corporations often outsource portions of development jobs and many are shifting to a modular, flexible application design, called a service-oriented architecture.
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