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Borland profits crank up stock

After posting its first break-even earnings in a year, the tool maker sees its stock jump more than 11 percent.

    Borland International (BORL), after posting its first break-even earnings in a year, saw its stock jump more than 11 percent today.

    Shares of Borland ended the day at 7-5/16, up 3/4 over yesterday. And during the day, the shares reached as high as 7-5/8.

    The tool maker, which had posted four consecutive quarters of losses, yesterday posted a first-quarter net profit of $79,000, or no cents a share, compared with a net loss of $21.8 million, or 60 cents a share, for the same quarter a year ago.

    Analysts were expecting another loss of 19 cents a share for the quarter, according to First Call, which tallies analyst estimates.

    "I was surprised. I thought they'd lose about $7 million," said Mike Wallace, an analyst with UBS Securities. "I don't think that they are jumping up and down yet, but things have bottomed out. They are on the comeback trail."

    That is exactly what the company hopes to prove. Top management said today that the results indicate that their aggressive turnaround plan is working.

    "We had good expense control, an increase in revenue over the past two quarters, and a new product mix, with more client-server products, which are higher-priced and bring in new revenue," said John Floisand, vice president of worldwide of sales.

    But keeping costs in check required some "drastic measures," according to Kathy Fisher, Borland's chief financial officer. The company reduced its workforce by 30 percent and also cut its product marketing, which will result in annual cost savings of about $60 million.

    In a report, UBS Securities said that it had expected these reductions to take another two quarters to show the full effect, but the cost structure has turned around earlier than planned.

    Financial problems and "brain drain" lawsuits have overshadowed Borland's product development in recent months.

    The company has been steadily losing money for the last year. Last quarter, it posted a whopping loss of $1.16 cents a share. Analysts had only been expecting a loss of 49 cents.

    Borland has also slapped Microsoft (MSFT) with a lawsuit alleging that the software monolith has lured some of Borland's top talent with large signing bonuses and stock options. Borland officials could not discuss the suit because it is still pending, but CFO Fisher did say that no more employees had left the company for Microsoft.

    Top management said today that as the company returns to its roots--building hard-core development tools--its prospects are brightening.

    During the quarter, Borland introduced a number of new products. One was an update to its Entera middleware, acquired last year, that will better integrate it with Borland's flagship Delphi development tool and industry standard database connectivity tools. The next quarter should bring JBuilder, a long-anticipated Java-based rapid application development tool that Borland needs to stay competitive with a growing pack of competitors, analysts say.

    Borland announced a joint development deal with IBM to integrate JBuilder with IBM's upcoming object-oriented development framework, code-named the San Francisco project, that was unveiled today at Internet World. (See related story)

    "The IBM partnership will be a huge help to the company," Floisand said. "IBM has a large number of AS400 systems in the world, and to date, most of them are using green screens. What we can give them is a graphical user interface that brings them up to speed with modern computing. We can turn our developers on to the AS400 systems."

    Despite being late to market with a Java tool, analysts give JBuilder high marks and claim that Borland's offering is well suited to corporate development and to server-side Java applications.

    East Coast Bureau Chief Mike Ricciuti contributed to this report.