Borland Does About-Face, Keeps Tools Group

The move marks a reversal for Borland. The Scotts Valley, Calif.-based software company announced in February that it would spin off its legendary tools group to focus exclusively on the application life-cycle management market.

CodeGear will have its own brand and management team, led by Ben Smith as CEO. The unit will remain based in Borland's headquarters.

A company spokeswoman said Borland decided to keep CodeGear after concluding that none of the parties it with about the tools group would nurture the organization the way Borland wanted.

The group was set to become an independent company backed by private investors, a la Ingres, the open-source database vendor that CA spun off last year. Structurally, CodeGear will operate independently of Borland, which would make it easier to divest if a buyer is later found.

No one was willing to meet Borland's price, CEO Tod Nielsen implied during the company's third-quarter earnings call late Tuesday. The private-equity firms with which the company was negotiating "couldn't come up to numbers that appropriately reflected the value we think is in the business," Nielsen said.

Borland's developer tools group, the team that will become CodeGear, pioneered the integrated development environment (IDE) business. CodeGear will take over the responsibility for Borland's Developer Studio, JBuilder, Turbo and Interbase product lines.

Borland will break out CodeGear's financial results once the subsidiary is up and running, Nielsen said. Though Borland hasn't traditionally broken out its IDE revenue, Nielsen said he believes the IDE business is profitable.

Borland, overall, isn't. For the third quarter ended Sept. 30, the company reported revenue of $82.4 million and a loss of $12.2 million. Borland doesn't expect to reach profitability by the end of this year, Nielsen said.

"I appreciate investor patience during our transition," he said.