Inprise/Borland Welcomes Microsoft to the Jungle

There's an old Chinese adage that can be taken both as a blessing and a curse -- "May you live in interesting times." So far this year, U.S. tools vendor Inprise/Borland Corp. has experienced a bit of both sides of that expression.

Back in February, the company was all set to merge with Corel Corp., but terminated the deal when the financial health of the ailing Canadian applications and Linux vendor turned out to be much frailer than had previously been thought.

The U.S. government's efforts to split Microsoft Corp. in two to resolve its antitrust violations, however, could be very good news for Inprise/Borland, according to Dale Fuller, Inprise/Borland's interim president and chief executive officer. The tools vendor enjoys an intriguing relationship with Microsoft given that the two companies do battle with each other in the tools arena, while Microsoft also owns 10 percent of Inprise/Borland.

IDG News Service talked to Fuller Tuesday about his company's relationship with Microsoft, the abortive merger with Corel, and where Inprise/Borland is heading. The company is holding its Borland Developer's conference in San Diego, California, this week, where Fuller announced Monday that his company will support Apple Computer Inc.'s forthcoming Mac OS X. [See "Inprise/Borland Embraces Apple," July 11.]IDG News Service (IDGNS): How does the whole Microsoft investment in Inprise/Borland work, and how do you feel about the planned breakup of Microsoft?

Fuller: I'm glad they own part of us. For years they were trying to crush us, it's a great deal for us. We're one of the top two or three developers for Microsoft and we're a Microsoft competitor. The breakup will be tremendously helpful to us. For the first time ever Microsoft will compete on an equal level to us. It will be guerilla warfare, they're coming to our level. They're lambs coming into the jungle. We've been in the jungle for a long time.

IDGNS: So, in hindsight, what was the whole story with the failed merger with Corel? In mid-April, everything still seemed OK, then Inprise/Borland terminated the deal the following month.

Fuller: Everything was fine in February. The way to look at the deal is to divide it into a strategic part and a tactical one. Strategywise, the deal was all about getting Corel's productivity apps to be part of the overall structure of (the) Web; that was a very, very sound deal, it still is today. But, tactically, both companies had to be able to deliver on the business plan, otherwise they would eat up all the business money.

In March, Corel didn't deliver and the deal broke down. All our business plans and models came unwound. We saw the business plan we had when we walked into the deal divided in half. We had to reset our priorities. We couldn't absorb the cost to manage the business to fix something falling apart that fast. It took us from March 4 until May to disentangle from it.

Corel has a lot of work to do, the key (for them) is execution.

IDGNS: Has the failure of the merger and Corel's financial position hurt Inprise/Borland, particularly since you, too, are still a loss-making company?

Fuller: I've been here four quarters, heading into my fifth quarter. (He joined the company in April of last year.) You have to look at the trend indicators.

Are we in profit? Not yet, but we said we would be next quarter; you'll see on July 25 (when the company's quarterly financial results are due out.)In April last year, the company was burning US$25 million a quarter in the U.S. and we had less than that in the bank and were not doing any new product development. Now, we have over $US150 million in the bank, new products, and we're adding to that money in the bank every quarter. We're going forward very, very quickly and you'll see us moving very, very fast.

The business is turning around, we still have a long way to go. We have enough money in the bank to last 36 quarters -- that's a lot of years. We've done everything we said we'd do, on time, and we've not been late.

We've kept our operating expenses in line with revenues. We're a few quarters away from seeing revenues rise. With our new products like Kylix (an upcoming Linux rapid application development tool), it'll be a couple of quarters before they generate money.

IDGNS: What about the company's changing name, from Borland to Inprise to Inprise/Borland?

Fuller: Delphi, Borland, Visigenics are the brands of the company, the parent company could be whatever name. It's like Kellogg's with their cornflakes and sugar frosted flakes, you don't have an attachment to company management, your attachment is to the brand. I bought the Borland brand back from being on the shelf. People ask me 'Dale, why don't you change the name back to Borland?' But there's a lot of brand equity in Inprise, too. If I change the name again, it'll be 'What, you can't make up your mind?'

IDGNS: Whatever happened to the Visigenics ORB (object request broker) VisiBroker? I see that Deutsche Bank AG in May standardized globally on the ORB, but otherwise, news on VisiBroker from Inprise/Borland seems somewhat lacking. Why?

Fuller: We have strategic initiatives like companies such as Cisco (Systems Inc.), Oracle (Corp.), Sabre (Inc.), Bank of America (Corp.) and Novell (Inc.) for VisiBroker. It's not like they're buying it like you buy razor blades or milk from the store, they're integrating VisiBroker into their core new technology.

Oracle's 8i database is all based on our architecture. Cisco's whole Application Server technology is integrated into our core technology. Sun (Microsystems Inc.'s) whole CRM (customer relationship management) strategy is our architecture. Siebel (Systems Inc.'s) new CRM technology strategy is all our product.

We're not very good at just standing up and taking credit, our software is integrated into other products. Yahoo (Inc.'s) Web sites use our products and we don't get a lot of credit for that.

IDGNS: What are your best-selling products and are you off-loading any of the not-so core offerings?

Fuller: Our best-sellers are Delphi, JBuilder and VisiBroker. We've open sourced InterBase (the company's SQL database) and spun it out to be a separate company. With our end-of-life strategy for products they're still there for another two to three years, there's just no more new development. For instance, we're still selling Turbo Pascal and we've not developed that product for three years. However, it's paying for itself. It generates a couple of hundred thousand dollars a year with one person stuffing envelopes.

IDGNS: Looking ahead, what's Inprise/Borland's strategy?

Fuller: It continues to be 'nothing but the 'Net' -- integrating our software totally to networks across all platforms in terms of automatic management, scalability and easy access. The enterprise of the future is one person and the whole network is the enterprise. We have a strategy called Blue Dwarf, which is pointing all our products to that goal.

Our strengths as we go forward are our professional services group and technical support organizations. We're almost following (Oracle CEO) Larry Ellison's playbook on how to run them and make money. Last quarter, services made up about 10 to 15 percent of our revenues. I would like to have services being about 20 to 22 percent of our business.

Over the next quarters, we'll have new technology -- the products are in our labs now -- strategic investments and partnerships as well as acquisitions.

IDGNS: In terms of acquisitions, presumably these won't be the huge size of purchases that burdened the company financially for many quarters in the past?

Fuller: Exactly, our goal is to make investments in companies and buy small technology shops that fit in comfortably with what we do in terms of making $US5 million to $US10 million to $US15 million purchases vs. $US150 million to $US300 million acquisitions. We're not blocking making a $US150 million purchase, say, if Microsoft was for sale for that amount!

IDGNS: What about internationally, how is Inprise/Borland doing:

Fuller: China and India are two of the fastest IT developments in the world for us. There are tremendous opportunities in China, since they said the country will be all Linux. India is growing like gangbusters. Europe is gigantic and in Eastern Europe, 50 percent of the development tools there are ours right now.

The Borland brand is very, very strong and used worldwide. What we have to work on is how we integrate all that to create one big push going forward.

IDGNS: When are you likely to lose the 'interim' tag from your title? You've been in the CEO and president roles since April of last year.

Fuller: I have to earn that. They have to give me a jet! Perhaps if I bring the stock to $US100. (Inprise/Borland stock closed Tuesday at $6.31). Everything is possible.

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