Borland Spins Off Its Tools Unit

Rather than sell off its prized tools unit, Borland CEO Tod Nielsen decides to spin it out as a wholly owned subsidiary known as CodeGear.

Rather than sell off its integrated development environment tools business, Borland Software announced that it will instead spin its developer tools group off into a wholly owned subsidiary known as CodeGear.

In an interview with eWEEK, Borland chief executive Tod Nielsen said he decided to keep the company, to be known as CodeGear, in the Borland fold—albeit as a separate entity—because he did not believe any of the prospective suitors would be able to "reflect the core value of the asset."

Borland, of Cupertino, Calif., announced the news during its earnings call on Nov. 14.

Nielsen said that none of the many offers Borland received for its developer tools unit satisfied the high standards he had set for a sale to be completed, namely protection of the technology base, the developers and the overall value of the entity.

Indeed, Nielsen said in talk with bidders he realized the unit was more valuable than he anticipated.

"We talked to a number of bidders, but one of the things we struggled with was showing true independence, because bidders would ask us about some of our bigger deals," Nielsen said.

"Theyd ask us which part of the company drove the deal: the IDE [integrated development environment] part or the ALM [application lifecycle management] part."

So Nielsen said he did not get the sense that many of the bidders would adequately carry the Borland tools heritage forward and he essentially decided to do it himself.

"I didnt feel like we were getting the value of the overall business," Nielsen said of the bids he turned down.

Thus the decision to form CodeGear was the best move "for our customers, shareholders and employees," he said.

Borland officials said a number of interested parties approached the company about its tools business, but Borland narrowed that number down to five "serious bidders" who were involved in the due diligence process.

The company would not disclose the value of the top bid, nor would it offer any estimate of what it projects the value of the tools unit to be.

However, a company spokesperson said: "In Q3, the IDE revenues were approximately $15 million. In fiscal year 2005, IDE revenues were approximately $90 million."

Borland announced plans to spin off its developer tools unit, which became known internally as "DevCo" as it awaited a buyer, last February.

/zimages/2/28571.gifClick here to read more about Borlands plans to divest its tools unit.

However, the so-called divestiture of Borlands tools unit was not to come through a sale.

Instead, CodeGear remains close to its Borland roots and will occupy what to this point has been the Borland facility in Scotts Valley, Calif., and Borland will maintain its headquarters in Cupertino, Calif., Borland officials said.

"Our goal was to drive as much separation as possible [between Borlands ALM business and its IDE unit], and were still doing that, but the IDE company will still be owned by Borland," Nielsen said.

"They will have their own brand, their own HR [human resources], their own G&A [general and administrative costs], their own roadmap; the difference is I will be the owner of CodeGear instead of some other entity."

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