Borland’s 2001 Revenues Up 16 Percent

Borland Software Corp. , the Scotts Valley, Calif.-based provider of e-business platform solutions, yesterday announced its financial results for the fourth quarter and year ended December 31, 2001.

Revenues for the fourth quarter increased 17 percent to $59.0 million from $50.3 million for the same quarter a year ago and increased 7 percent from the third quarter of 2001. Gross margins were approximately 84 percent for both the 2001 and 2000 fourth quarters. Operating income rose 12 percent to approximately $6.0 million in the 2001 fourth quarter from $5.4 million in the year-ago quarter.

Net income for the 2001 fourth quarter was $6.2 million, or $0.08 per diluted share on 75.6 million weighted average shares outstanding. Net income for the year-ago fourth quarter was $8.4 million, or $0.12 per diluted share, on 69 million weighted average shares outstanding.

The decline in interest rates throughout 2001 negatively impacted Borlands fourth quarter interest income, which declined by $2.3 million, or $0.03 per diluted share, compared to 2000. The increase in diluted shares outstanding reflects the increase in the number of dilutive (“in the money”) options and the exercise of warrants and options.

Total revenues for 2001 increased 16 percent to $221.8 million from $191.1 million for the 2000 calendar year. Gross margins for the 2001 period increased slightly to 84 percent versus 83 percent for the year-ago 12-month period.

Operating income for 2001 grew almost 44 percent to $17.8 million from $12.4 million for 2000. Year-to-date interest income declined by $3.2 million, or $0.04 per diluted share, as a result of falling interest rates during the year.

Net income for 2001 increased almost 12 percent to $23.1 million, or $0.31 per diluted share on 74.1 million weighted average shares outstanding. This compares with net income of $20.7 million, or $0.30 per diluted share on 69.9 million weighted average shares outstanding for the year ended December 31, 2000.

“We are very pleased to report strong operating performance for the quarter and the year and we made significant investments in building a direct sales force, strengthening our marketing organization, and developing a pipeline of new product releases,” said Dale L. Fuller, Borland’s president and chief executive officer.

“These investments are fueling strong initiatives in the wireless, Web Services, and Linux markets, as well as our continued expansion in the Java development market,” he continued.

Borland launched 18 new or upgraded products in 2001 in addition to nearly doubling its overall sales force and upgrading sales management teams in the Asia/Pacific and Americas regions. The firm believes these moves have helped lead to its seventh consecutive quarter of profitability.

“Once again, our Java Business Unit led Borland’s revenue growth, generating almost 50 percent more revenues in the 2001 fourth quarter compared to same quarter last year. The Java Business Unit, which represented over 40 percent of revenue for the fourth quarter, continues to be driven by our Jbuilder products,” said Fuller.

The launch of several new product releases during the year and the fourth quarter kept Borland’s Rapid Application Development (RAD) Business Unit strong, while the firm’s focus on Web Services, Linux, and cross-platform compatibility between Windows and Linux helped the business unit grow revenues 15 percent over the same quarter in 2000 to generate 21percent of fourth quarter 2001 revenues.

Borland’s Enterprise Business Unit declined from the year-ago fourth quarter, but demonstrated a rebound from revenue levels seen in the last few quarters, generating 19 percent of 2001 fourth quarter revenues.

At December 31, 2001, Borland’s financial position remains strong, with cash, cash equivalents, and short-term investments reaching almost $295 million. Day sales outstanding were 59, below the company’s target range of 60 to 65 days. Deferred revenues rose $5.1 million to $23.9 million, a 27 percent increase over the year-ago quarter.

“Our continued focus on financial discipline helped us increase operating profits by almost 12 percent compared with the fourth quarter of 2000. We believe our financial position provides us the strength and flexibility we need to support our strategic growth objectives,” said Frederick A. Ball, Borland’s executive vice president and chief financial officer.

Borland expects revenues to increase approximately 14 percent – 17 percent in first quarter of 2002 when compared with the first quarter of 2001. Gross margins for the 2002 first quarter are expected to remain in the 83 percent – 85 percent range, and operating margins are expected to approximate those delivered in the fourth quarter of 2001.

Non-operating income is expected to continue to be impacted by changes in the Federal Funds rate. Earnings per diluted share are expected to be in the range of $0.07 to $0.09 in the first quarter of 2002. Depending on Borland’s stock price performance, weighted average shares outstanding could range from 75 million to 77 million diluted shares as determined by the Treasury method.

For the coming year, Borland anticipates 2002 annual revenues to increase 12 percent – 18 percent over 2001.

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