Borland Software: Back in the Black

A company on the verge of death makes a comeback in Silicon Valley.

It didn't take long for Dale Fuller to realize that he was in deep trouble. One week into his tenure as president and CEO of Inprise, the software company formerly known as Borland, Fuller gathered his senior managers in a conference room to learn what products were in development. He drew a timeline on the whiteboard, starting with the current date (May 1999), and mapped out quarters for the next three years. Then he asked each manager when he would ship his next product, what the follow-up product would be, and when he would be likely to ship that one.

One by one, the managers dutifully stepped forward. Each one noted through to September — and stopped. "I was sitting there saying to myself, 'Oh Lord, why did you bring me to this company?' " Fuller remembers now. "I wanted to rewind the tape and say, 'No, thanks. I don't want this job after all!' "

It wasn't as if he hadn't been warned. When Fuller, a Silicon Valley warrior of the ninja school — slicked-back hair, all-black clothes — told his pals on the Peninsula that he was thinking of taking the top job at the Scotts Valley company, their reactions ranged from disbelief to horror. "My friends all said the same thing: 'You're going to go in there and start performing CPR on a corpse.' They were right. This company wasn't on the ropes, it was hanging by a rope. It wasn't even still twitching."

Indeed, Inprise's vital signs were barely perceptible by the time Fuller's friend and mentor, Bill Miller, who chaired the company's board, convinced Fuller to take the helm. There was just $30 million in the bank and $15 million tied up in an offshore account. The company was burning through about $10 million per quarter. Employees were fleeing for the exits. Annual sales were at $174 million, down from their peak of $482 million in 1992. Worse yet, there was no discernible business strategy, and, Fuller discovered, there would soon be no new products. It appeared to be the ignominious end for the once-proud technology firm.

In its heyday, Borland had been a glorious place, and it still had a splendid campus: a 495,000-square-foot, Japanese-influenced building arced around a courtyard replete with babbling brook, set amidst the towering redwoods in the mountains south of San Jose. But like the company, the building itself was half-empty. Founded in 1983, Borland had been a pioneer in the field of developer tools. One of its first hits was Turbo Pascal, a groundbreaking product that enabled developers to write applications for PCs. But trouble began in the late 1980s, when then-CEO Philippe Kahn embarked on a plan to challenge Microsoft in the market for office-application software. Never a shy competitor, Microsoft fought back. "Going to war with a company in Redmond is not always a wise thing," says Borland CFO Fred Ball with laudable understatement.

Kahn left the company in 1995 and was followed by a series of management teams, each with its own strategy — none of which seemed to do the trick. By 1999, with booming Silicon Valley awash in stock options, IPOs, and twentysomething millionaires, Wall Street effectively put Inprise on a deathwatch. Not a single analyst would even cover the stock.

Ted Shelton, the company's chief strategy officer, recalls a meeting that he and Fuller had with a group of fund managers in Boston. "One old guy stood up and said, 'I don't understand how you people have the balls to come here and tell us how great this company is! I remember the money I lost in the mid-90s following the lies you propagated on us. Nobody's ever going to believe in Borland again!' "

Fuller didn't agree. He knew that the company still had strong fundamentals: great technology; a stubborn core of smart, committed developers; and customers who, despite the firm's shenanigans, were still intensely loyal to its products. He had seen the power of customer passion at Apple, where he had helped restructure the laptop business. "Customers stick with you not because they're nutcases but because you have a tool that lets them do what they were never able to do before," he says.

Audrey Snell, senior vice president and codirector of research at Brean Murray & Co., had watched Borland for 15 years but didn't think highly of its executive team. She perked up, however, when Fuller came on board: "I knew that they had great products and a large installed user base, but they had also had lousy management for a long time. It takes real talent to run a software company into the ground, because you're dealing with a perfect business model: 85% gross margins, 30% operating margins, 20% net margins, tons of free cash flow. You have to be really and truly asleep at the switch to lose that."

The question was, Could Fuller fix the company's problems fast enough to save it? Without a team of his own, Fuller crafted a strategy for short-term triage and a longer-term plan that would kick in if the company in fact survived. His first move was to take hold of the financial reins of the company, instructing his staff to hand over every purchase order for more than $2. "You couldn't buy a pen without me signing for it," he says.

The exercise revealed a culture where even the dumbest spending went unquestioned. There was, for example, the $100,000 annual tab for chemicals to keep the campus pond safe for aquatic life. Trouble was, there hadn't been fish in the pond since 1992. Raccoons had eaten them all.

While stanching the flow of red ink, Fuller also had to come up with a product strategy — and fast. The previous management team had steered the company away from its core strength in developer tools toward a plan for creating so-called enterprise middleware, a strategy that not only alienated the company's 3 million loyal customers, but also positioned it to be steamrollered by behemoths like IBM and BEA Systems.

Fuller, who had built and sold an Internet company called WhoWhere? to Lycos, knew that the future of computing was moving from the desktop to the network. Companies that could create applications for a range of Internet and wireless devices were likely to thrive. Fortuitously, Borland had created some of the original development tools for distributed computing. "The competitive competency was in the house, but nobody could see what was right in front of their faces," Fuller says. "It took somebody from the outside to do that."

In an all-hands meeting, Fuller told the company's 1,100 employees where they were heading. "I said, 'If you're working on a project that's not focused on the Net, you'd better figure out how to get it there quick, because over the next three months, I'm going to kill everything that isn't focused on the Net.' " With a clear direction that built on the company's longtime strengths, the developers, who had continued plugging along through all of the management turmoil, were energized.

Things weren't quite so merry, however, among the sales, marketing, and management teams. They had seen five different CEOs come and go in the preceding three years and assumed that Fuller was the latest in a series of short-term custodians. Rather than embrace the new direction, they figured that they'd just wait Fuller out. Fuller had other ideas.

Within six months, he fired about 400 people, including 60 of his top managers. But attracting fresh talent to fill those positions was no slam dunk. It was, after all, the height of the dotcom boom. Coming to Inprise, a company with the whiff of death about it, was widely perceived as a career-ending move. "The thing that scared me most when I arrived in 1999 was our inability to hire good people," Ball says. "It almost killed the company."

Fuller knew that he needed to make a dramatic move to signal that the company was still viable. So he went to Redmond to visit his company's arch rival. Fuller gave Microsoft two options: Pay Inprise $100 million for rights to use the company's patented technology in Microsoft products, or prepare to be sued for patent violations. And, he added, it would be nice if Microsoft purchased $25 million of Inprise stock, as a good-faith gesture. Microsoft, which was mired in the Justice Department's antitrust suit, wanted to avoid another legal hassle. Fuller headed back to Scotts Valley with a hefty check.

With $125 million in the bank, Fuller and Ball started building for the future. They launched a series of brutal meetings with staff. Every morning, Fuller, Ball, and a consultant would meet at 5:30 AM to recap the previous day's events and map an agenda for the day ahead. Then they would meet with the company's top 30 managers at 7 AM to outline the day's tasks. "It was excruciatingly painful," Fuller says. "It was 14 hours every day for 9 months." But slowly, the company began to get some traction.

In March 2000, the company actually turned a profit. Inprise was lean, it had a bunch of products in the pipeline, and it had a decent amount of money in the bank. In the spring of that year, Fuller brokered a deal to sell the firm to Corel for $1.1 billion in stock. But by May, when the sale was scheduled to be finalized, Corel reported an unexpected loss. Its plummeting stock price sliced the value of the deal by two-thirds. The board voted to scrap the deal.

"That was a bleak day for Corel but a great one for Inprise," says Shelton. That vote signaled the start of the company's next challenge: to effect an enduring turnaround and build a prosperous future. "Dale and Fred had managed to right the ship," Shelton continues. "Over the next two years, we had to bring the company back to being one of the foremost technology companies in the world."

Simply taking on Microsoft in the Windows environment — or Sun in Java or IBM in Linux — was a strategy riddled with risk. But the Inprise team saw an opportunity in cross-platform solutions that avoided a head-on collision with the big guys. In essence, Inprise would be the Switzerland of software, focusing on interoperability by building tools for Windows, Java, Linux, .Net, and Web services. Its Kylix product, for example, lets developers take code written for the Windows platform, using Delphi, and move it to Linux. Its JBuilder product enables developers to deploy Java applications on the Windows and Solaris platforms. Microsoft definitely isn't thrilled with this plan; Sun isn't giddy. But developers are delighted that they can avoid being glued to any one company's proprietary platform.

It's a strategy that seems to be working. Eight of the company's last nine quarters have been profitable, constituting its longest continuous stretch of profitability since 1995. There's nearly $300 million in the bank and no long-term debt. And in January 2001, as a signal to the market, to customers, to developers, and to his own staff that the once-great company was back from the brink, Fuller changed the firm's name back to Borland.

Even analysts are now taking notice. "I've rated it a strong buy," says longtime doubter Snell. "It has correctly identified three of the major trends in the industry for the next 10 years: the growth of wireless, the importance of cross-platform development, and the development of Web services to facilitate e-commerce. Those could be gigantic businesses."

Is Fuller prepared to declare victory? Don't bet on it. "Last year, we were good," he says, leaning back in his chair. "But next year, we have to be great. Twenty years from now, I want Borland to still be around." Who knows? A few more profitable quarters, and the company may find the spare change to put fish back in the pond.

Linda Tischler (ltischler@fastcompany.com) is a Fast Company senior writer.

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