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Borland Separates Tools Group After Q3 Loss

Failing to find the right fit to buy its development tools business, Borland Software Corporation  said it would carve the group out as a subsidiary, called CodeGear.

The news came concurrent with the software maker's third-quarter earnings, in which it announced a net loss of $12.2 million, and appointment of new CFO Erik Prusch, formerly a vice president of finance in the consumer tax group of Intuit.

CodeGear, which will have a separate brand, management team and sales group, will develop and sell Borland's Developer Studio Delphi, C++Builder and C#Builder, JBuilder, Turbo and Interbase.

CodeGear will be led by CEO Ben Smith, who has been working with Borland and the developer tools group for the past year.

"We have always stated our intention to find the right buyer for this business -- one who was committed to our developer community, who would continue innovation in our products and who would offer a sum that matched the value of the business," said Borland President and CEO Tod Nielsen in a statement.

"After a lengthy due diligence process with several serious bidders, we feel the CodeGear decision is in the best interests of our customers, shareholders and employees."

With CodeGear serving software developers, Borland will continue to focus on the emerging application lifecycle management (ALM) market, which aims to improve the efficiency with which software is developed, tested and deployed.

The CodeGear spin-off comes a year after Nielsen joined Borland and nine months after the company laid out an aggressive plan to accelerate its ALM strategy.

In February, Borland agreed to acquire Segue Software to boost ALM, and promised to divest the integrated development environment business.

In May, Borland laid off 300 people to tighten up its business.

The stock compensation and severance expenses associated with those layoffs keyed a net loss of $12.2 million for the third quarter, compared with $5.27 million from the same period last year.

However, the company reported revenue of $82.4 million, up 21 percent from $67.9 million last year; analysts polled by Thomson First Call had expected revenue of $78 million.

The news could indicate the company is taking an upward turn under the direction of Nielsen, who is pushing the company's ALM flavor.