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Second acts, anyone?

Watching tricky transitions at Borland and Handspring, CNET News.com's Charles Cooper says history suggests that midstream changes are long shots. But nothing is etched in concrete.

When a computer company decides that it's time to change direction in midstream, that's usually a harbinger of big trouble. Most who have tried have disappeared or otherwise faded into permanent mediocrity.

In the 1980s, AST Research seemed to have figured out how to navigate through the shoals as it morphed from a board supplier into a full-fledged manufacturer of PC clones. This was a remarkable makeover but unfortunately for AST, management couldn't figure out how to withstand the price-cutting ways of the mail-order crowd while still remaining profitable.

A few years later, Owens Corning engineered an even more breathtaking transformation, turning away from making glassware and Pyrex beakers to developing fiber optics for the communications industry. During the heyday of the dot-com era, the decision appeared to be inspired genius. Nowadays, the company is dealing with the legacy of a bankruptcy declaration and billions of dollars in accumulated losses.

But there are precedents for second acts. Early in its history, Intel recovered after a bad stumble when it made the transition away from the memory business. One of the more recent intriguing comeback stories involves the folks over at Borland Software, a company whose colorful history stretches back to the early days of the PC industry.

Founded by Philippe Kahn as a language tool developer, Borland was one of the more successful and powerful software makers in the computer industry of the mid-1980s. Expanding beyond tools to sell databases and spreadsheets, Borland's self-styled "barbarians" were living large.

The good times came to an abrupt end when Microsoft got around to focusing its death ray on the company. Bill Gates' tender attentions should not necessarily have constituted a death sentence. Unfortunately for Borland, management only made things worse for itself through a combination of hubris and incredibly bad decision making.

By the mid-1990s, Kahn was gone and the CEO's office had turned into a revolving door with one feckless stooge followed by another. How bad was the poverty of imagination? With the company on the precipice, the brass's boldest idea was to change the name to Inprise.

Borland's fortunes finally changed a few years ago when it landed Dale Fuller, a former Apple exec. Fuller, who refocused the company's attention on the enterprise development tools business, also benefited from propitious timing.

The Internet had offered Borland a second chance to establish itself.
The Internet had offered Borland a second chance to establish itself--this time as a veritable Switzerland selling products that helped Web services developers on both sides of the .Net-J2EE divide.

Had the Web not existed, Borland's goose would have been cooked, but to his credit, Fuller didn't miss the opportunity he was handed. The final chapter of the Borland story remains unwritten, but this much is clear: Fuller's most important achievement is the return of a stability that had eluded the company for the better part of a decade.

The transition at Handspring is another story that bears close watching. In the last year, management has redirected Handspring's bread-and-butter business away from handhelds and toward communicators that combine the capabilities of cell phone and organizer devices. Time is not on Handspring's side, a fact well understood by co-founder Jeff Hawkins, a star gadget inventor who also co-founded Palm.

Swapping the organizer business for the communicator business may be a long shot, but Handspring has few other alternatives. The future growth of the handheld market is limited and even Hawkins agrees that it is destined to become a commodity business.

In certain respects, Handspring's management faces a trickier transition than Fuller faced at Borland.
As a result, Handspring has stopped actively supporting some of the innovations it has to popularize, such as its Springboard expansion slots and its Graffiti handwriting recognition in favor of keyboards.

In certain respects, Handspring's management faces a trickier transition than Fuller faced at Borland. This makeover involves not only new product development cycles but also new distribution channels. Indeed, Hawkins noted in an earlier interview with CNET News.com, with a communicator product like the Treo, you have to design it for the user--because they have to like it--and you have to design it for the carrier, because the carrier has to approve of it. "If the carriers don't like the product for whatever reason--if it doesn't meet their business needs or doesn't tie into their infrastructure--they might just decide to not carry it."

If that happens, Hawkins doesn't need me to tell him that it's lights out--forever. Faced with such a risk, many executives would stick with the same old hand. That's why you have to admire his willingness to take that chance.