News

UPDATE: Borland Sheds Staff, Faces Challenges

• By Michael Desmond
• January 7, 2009

Tod Nielsen, CEO of application lifecycle management (ALM) tools maker Borland Software, has left the company to join VMware as chief operating officer.

Borland also said it will lay off about 130 workers as part of a cost-cutting move designed to save between $12 and $14 million annually.

Nielsen, who joined Borland in November 2005, will remain on Borland's board, the company said Tuesday. Borland has named Chief Financial Officer Erik Prusch acting president and CEO.

Prusch will have his work cut out for him, according to Jeffrey Hammond, principal analyst at Forrester. "It's challenging times for [Borland]," Hammond said. "I think the [Open ALM] vision is good and I think the strategy is sound. But I think they are kind of getting caught between commoditization on one hand and by larger competitors on the other."

Borland's stock dropped sharply on news of the layoffs and Nielsen's departure, falling from $1.07 per share on Tuesday to $0.92 per share at the close of trading on Wednesday. Share prices had recovered slightly by 12:45 p.m. Thursday, from a bottom of $0.85 to $0.88.

ALM Adversity
While the economic downturn has impacted virtually every software company, Hammond thinks Borland's ALM business is particularly vulnerable. He said cash-strapped dev shops are turning to lower-cost alternatives to address test, source code management and other critical lifecycle tasks. He singled out the low per-developer cost of Microsoft Team Foundation Server (TFS) and open source point solutions such as Subversion.

"Increasingly in the SCM space, we are seeing different tools being used. There are other options that, for better or worse, people seem to be choosing," Hammond said.

Bola Rotibi, principal analyst for U.K.-based Macehiter Ward-Dutton, said Borland has changed fundamentally since successfully weathering the last major downturn in 2000-2001. In an interview with RDN, she noted that many ALM deployments are on hold, and later wrote on her blog that "Borland's ability to ride out this recession is much less clear."

She also pointed out the largely unnoticed departure of Borland Senior VP of Research Peter Morowski.

"The loss of both the CEO and the head of R&D and changes on the board coupled with a perilously low share price will be disquieting for shareholders and customers alike," Rotibi wrote.

But not all the news is grim for Borland, which Rotibi praised as a lean organization that "has invested wisely in...agile working practices that should allow it to react quickly and engage more effectively with its customers."