Micro Focus buys Borland in $75m deal

The British application-management company buys US rival Borland and, in a separate deal, spends $80m on application testing and software quality products from Compuware
Written by Manek Dubash, Contributor

Enterprise application management company Micro Focus said on Wednesday it has bought ailing competitor Borland for $75m, a move that marks the end of one of the longest-lasting names in the PC software business.

The boards of both companies agreed to the deal, which is expected to complete around mid-2009. Micro Focus said it will pay $1 (66p) per Borland share, a premium of 25 percent over its closing price on Tuesday of $0.80.

Micro Focus also announced it was acquiring all of Compuware's application testing and automated software quality products for $80m. Both Compuware and Borland acquisitions were made from the company's cash reserves.

Newbury-based Micro Focus said in a statement that it bought Borland because it wanted to seize greater market share, to increase its customer base, and to grow its product portfolio in order "to capture a greater portion of the software development and deployment value chain". It described the purchase as a significant step for the company.

Micro Focus did not make any statement about headcount reductions, but did say that it "has a clearly defined plan to address the financial and operating performance of Borland".

In 2008, Texas-based Borland made a pre-tax loss of $204m, almost four times the size of the previous year's loss. It had revenues of $172m, part of a consistent downward trend since at least 2004.

Corporate analysis firm Hoovers placed Borland as a key competitor for Micro Focus in the enterprise application lifecycle management sector.

Wednesday's deal, alongside Micro Focus's five other acquisitions since November 2006, leaves the software company with a market cap of $840m. However, it has major competition: both Microsoft and IBM have competing products, the former with its SharePoint Server and the latter with its Rational product lines.

Micro Focus chief executive Stephen Kelly said: "Micro Focus's proposed acquisition of Borland represents the next logical stage in Micro Focus's growth journey. [This] transaction will add new scale and breadth to further develop our customer proposition, in an attractive adjacent market to our existing business."

Borland was one of the oldest software companies in the PC software business, having been founded in 1981. Its most successful era was in the late 1980s via massive sales of Sidekick, a DOS-based terminate-and-stay-resident personal productivity application, and development tool Turbo Pascal, which challenged Microsoft's dominance in the application-development market.

These were followed in 1989 by a spreadsheet, Quattro Pro, which became a major competitor to established market leader Lotus 1-2-3. However, the company stretched itself with the purchase of database vendor Ashton-Tate in 1991 and its market-leading dBase product, a move that failed to take Borland to the next level.

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