Borland Plans Layoffs, Expects Quarterly Loss
Seeking to improve its razor-thin profits, Borland International Wednesday announced a corporate reorganization calling for the layoff of about 90 workers.
As a result of the shake-up, the Silicon Valley company--the nation’s sixth-largest software publisher--said it expects to report a loss in the quarter ending Sept. 30. In its most recent quarter, the company reported a profit of $501,000 on revenue of $22 million.
Despite the projected loss, the reorganization was widely praised by analysts as a necessary step in the company’s efforts to capture a larger slice of the fast-growing corporate software market.
“They’re in transition now and these are the growing pains of a company that’s stretching,” said David Bayer, an analyst with Montgomery Securities, a San Francisco brokerage firm.
Shifting Strategy
Founded in 1983, Borland for several years stuck with its original plan of delivering inexpensive mail-order software, such as its hit multipurpose program “Sidekick,” to hobbyists, home users and small businesses.
But in more recent times, the software industry, much like computer hardware, has evolved into a business dominated by a few large companies. And these large companies, such as Microsoft of Redmond, Wash.; Lotus of Cambridge, Mass., and Torrance’s Ashton-Tate, have won most of the lucrative corporate software sales.
“We’re changing to play in the big leagues now,” said Borland’s French-born founder and chairman, Philippe Kahn, who is known as much for his personal flamboyance as his technical wizardry. “We’ve been criticized for being too loose, and rightly so . . . It’s time to say we’re going to be serious about this stuff.”
Kahn said the reorganization will allow the company to focus on the wholesale, retail and direct corporate sale markets and provide additional technical materials and support to the sales forces handling Borland products. The new sales effort will be directed by Stephen Kahn (no relation), who was hired several days ago from rival Lotus to fill the newly created position of marketing vice president.
In addition, Kahn said the company is cutting its advertising budget--once one of the industry’s largest--from $6 million a year to about $2.2 million annually. The 90 employees who are being dismissed are mainly clerical and distribution workers at the company’s Scotts Valley headquarters.
Kahn said the reorganization is expected to boost profits by saving the company from $6 million to $12 million a year.
Counting on Programs
“Right now they’re working on a 2% after-tax (profit) margin. That’s more like a grocery story than a software business,” said William Higgs, an analyst with InfoCorp., a Santa Clara market research firm. He said an 8% to 10% after-tax margin is “the minimum acceptable” for any company expecting to last in the industry.
