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WebGain uncertainty an opening to rivals

While the future of Java development tools maker WebGain remains uncertain, Sun Microsystems, IBM, Borland and Oracle are wasting no time trying to lure away customers.

While the future of Java development tools maker WebGain remains uncertain, rivals are wasting no time trying to lure away valuable customers.

A three-year-old company spun off from Symantec, WebGain sells the popular Java development tool Visual Cafe, along with other software.

Last month, the company sold its TopLink object-relational mapping software to database giant Oracle for an undisclosed sum. As part of the deal, about 90 WebGain employees became Oracle employees.

Since the Oracle deal, WebGain's status has remained a mystery. Repeated calls to WebGain headquarters have not been returned, and major investors declined to comment on the company's standing.

On Tuesday, the parking lot at WebGain's Santa Clara, Calif., headquarters was empty and the entrance to the building was locked.

Given the popularity of the company's tools--and sensing a rare opportunity to increase their market positions--Sun Microsystems, IBM, Borland and Oracle said this week that they are offering deals to lure WebGain's remaining customers to their respective tool lines.

While none of the toolmakers is sure of WebGain's status, they all see an opportunity to gain valuable customers. Visual Cafe was once one of the leaders in the Java tools market, and is still used by thousands of developers.

"We'd be silly if we didn't take advantage of this (uncertainty)," said Drew Engstrom, product line manager for Sun's Sun One Studio tools. "Visual Cafe was among the top three Java (development tools) in the industry as recently as a year ago."

IDC analyst Michele Rosen said it makes sense for rival software makers to chase after WebGain's customers because developers are key to their overall success.

Development tools are an important part of software companies' product portfolios, but they aren't big moneymakers. Although tool research, development and marketing can cost a company millions of dollars, the products are often sold at cut-rate prices--or even given away--to woo developers and seed the market for more profitable technologies such as operating systems, database software and high-powered computers by the likes of Microsoft, IBM, Sun and Oracle.

"They see low-hanging fruit. It's an opportunity to bring over a couple thousand developers," Rosen said. "Even though WebGain hasn't stated what they're going to do, the risk (for WebGain customers) is that they may have problems getting support and getting new versions down the road. That's reason enough to consider switching."

With that in mind, Oracle, Borland, IBM and Sun said they are readying special programs and incentives for users of WebGain's development tools.

Oracle has dedicated a special section of its developer Web site, providing information and tools to help WebGain customers switch to Oracle's JDeveloper tool.

Borland executives say they are aggressively pursuing WebGain customers, hoping to capture new customers in the next three to 12 months. "We are pursuing them with a vengeance," said Frank Sootman, senior vice president of Borland's software products.

Borland is planning price discounts and IBM will offer training classes if WebGain's customers switch to their respective Java development tools.

Not to be outdone, Sun has launched its own marketing campaign by offering WebGain customers Web-based training classes and a discounted price to upgrade to Sun's Java tool. Like Oracle, Sun is creating technology that helps WebGain users easily move their software projects to work with Sun's tool.

Unclear status feeds rumors
With no official word from WebGain or its investors, rumors of the company's demise continue to spread.

Sources said WebGain underwent a large layoff following the Oracle deal. The day of the deal, auctioneer A.R. Pagan auctioned off WebGain's furniture and computer gear, according to an A.R. Pagan employee.

A representative of Warburg, Pincus, the largest investor in WebGain, declined to comment on the status of the company.

According to regulatory filings, Webgain had pro forma cash and equivalents of $25.6 million as of Jan. 31, 2001. Webgain's cash projections included proceeds from convertible debt.

Last November, the county of Santa Clara filed a tax lien on WebGain, meaning the Java toolmaker had failed to pay taxes to the county.

WebGain had filed for an initial public offering in February of 2001, but the company cancelled its plans in September of last year, citing unfavorable market conditions.

BEA Systems, which markets WebGain's products, declined to comment on WebGain's status. In May, when BEA earned a profit of $3.87 million, or 1 cent a share, on revenue of $224.8 million, Chief Financial Officer Bill Klein said BEA's minority investment in WebGain forced BEA to reduce its first-quarter net income by 4 cents a share.

A BEA representative declined to comment on whether the company plans to continue its relationship with WebGain, but said the company last week formed a closer relationship with WebGain rival Borland. Borland announced it had built tighter links between its JBuilder tool and BEA's application-server software, software that runs e-business and other Web site transactions.

News.com's Larry Dignan and Mike Ricciuti contributed to this report.