Borland Buys Segue For $100M

UPDATED: Borland Software made two divergent announcements today — an acquisition and
plans to sell its integrated development environment (IDE) product lines.

The purchase of Segue Software , the Lexington,
Mass.-based provider of global software quality and testing solutions, is
part of Borland’s plan to move aggressively into the market for delivery of
software applications known as application lifecycle management (ALM).

In
addition, Cupertino, Calif.-based Borland said it plans
to seek a buyer for its Integrated Development Environment (IDE) which
includes Borland Developer Studio, Delphi, C++Builder and C#Builder and
JBuilder product lines.

“Segue’s quality optimization products and services will add significantly
to our growing portfolio of application lifecycle management solutions,”
said Tod Nielsen, Borland president and CEO, in a statement.

Borland and Segue have entered into a definitive merger agreement in which
Borland would acquire Segue in a one-step merger transaction for $8.67 per
share in cash, and anticipates the transaction to close in the second
calendar quarter.

“Borland and Segue share a common vision of
implementing quality checks through the entire process from when an
application is defined right on through to deployment,” Mike Hulme, senior
director of product marketing at Borland, told internetnews.com.

“You’ll see us deliver a unique solution for lifecycle quality management as
soon as the deal is closed.”

Borland said the transaction is valued at approximately
$100 million and will be funded with existing cash on hand.

Borland officials said the decision to sell its core developer tools was a
question of resources. The company sees more opportunity in ALM and doesn’t
have the resources to support continued development in both.

Research
company IDC
forecasts the ALM market will grow to $3.3 billion in 2009, achieving a 9.2 percent compound annual growth rate from 2004 to 2009.

Gartner analyst Matt Light said Borland is
moving upstream to higher margin products in going after testing and
development lifecycle areas.

“The IDE products have consistent revenue but
it’s a very low margin business,” said Light. “There’s a big upside for
Borland if they can succeed in software delivery optimization, and these
other areas, which is a much higher margin; you’re selling to enterprise IT
management rather than to individuals and resellers.”

Borland has retained Bear, Stearns & Co. Inc. to manage the process of
seeking a buyer for Borland’s IDE assets.

Borland said Segue’s Silk product line will play a central role in its
upcoming Lifecycle Quality Management Solution, which is designed to “infuse”
quality early in the development process, heading off more costly fixes
later.

Segue’s technology will also be a key element of future versions of
Borland’s integrated ALM platform.

“Rarely do two companies share such a strong vision for transforming their
industry,” said Joseph Krivickas, president and CEO of Segue. “Borland
and Segue have been partners for several years, helping our customers
overcome the challenges that cause project failure and poor software
quality.”

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