Borland Software: Back in the Black

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."