Borland's loss put down to desktop market lost to Microsoft

The erosion by Microsoft of sales of Borland's desktop development tools is blamed for the expected first quarter loss for the Scotts Valley, California company.

The erosion by Microsoft of sales of Borland's desktop development tools is blamed for the expected first quarter loss for the Scotts Valley, California company, analysts and Borland officials say.

"We're recognising that the retail desktop business was a tough business and one that was going to be intensely competitive, and not contribute a lot of growth to the company," chief financial officer David Mullin say, in the wake of the resignation of president and chief executive Gary Wetsel. "We want to have entry-level products for the desktop, but our focus for growth and investment going forward will be oriented towards client/server and Inter- and intranet."

One problem for the software development tools maker has been an inability to attract new users to the flagship Delphi product. The latest release of Delphi was quickly embraced by current Delphi users, "giving us a false lead on what the overall demand picture would be like in the first quarter," Mullin says. A rebate programme offering new users half off the suggested US$200 street price should help, he says.

"Delphi was running up against a Visual Basic suite of tools," says Rob Enderle, analyst at Giga Information Group in Santa Clara, Calif. "Borland had a better product, but it didn't have the resources to go up head-to-head against Microsoft."

Borland should enhance Microsoft's tools, leverage the installed base of Visual Basic programmers and not waste too much energy on its development tool for the Java object-oriented programming environment, Enderle suggests. "I think they're too late for that one."

"The losses are clearly due to the loss of the desktop to Microsoft, and Delphi was late to market on this front with a superior product in many ways, but Borland was not able to compete with Microsoft's lead," says Donald DePalma, senior analyst at Forrester Research in Cambridge, Masachusetts.

Borland should hasten its acquisition of Open Environment, of Boston, in the meantime, DePalma says.

The plan to buy Open Environment has cleared some regulatory hurdles but still needs approval from the shareholders of that company, according to Mullin. The deal could close around the end of August, he says.

"Open Environment provides us with application server technology to help us really provide the solution I'm referring to in this N-tier (multi-tier) architecture, be it an Inter-intranet solution or a Wintel solution," Mullin says.

Meanwhile, Borland, which has cut its workforce by about 40%, does not plan any more layoffs at this time, Mullin says. He is refusing to comment on criticisms of Wetsel's tenure since he assumed leadership of the ailing company from founder Philippe Kahn in January 1995. He also could not say when the president and CEO spots will be filled. The formal announcement of the quarterly financial results will be on July 24 after the close of market.

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