Borland, Not So Fast BORL
Borland Software announced results for its Q1 06 ending March 31. The company had delayed its filing for the quarter and announced a realignment of its business to cut annual costs by $60 million.
Borland optimizes application software products for companies. The company describes its advantage this way: "An end-to-end managed software delivery process that mirrors the success enterprises have had with other key business functions, including manufacturing, human resources, customer relationship management, procurement, finance, and IT operations". Not an easy business to understand.
Borland, which just finished the acquisition of Segue Software in April, saw its revenue drop in Q1 to $69.6 million from $71.3 million in the same period a year ago. Operating loss jumped to $8.9 million from $1.5 million. Costs were driven up $4.4 million by stock-based compensation and M&A costs. Revenue outside the U.S. and Germany dropped 6% compared to the period a year ago.
Borland payed about three times sales ($105 million) for Segue, which had revenue of $36.4 million in 2005 up 10% from 2004. Segue had net income of $2.9 million in 2005. Not exactly a barnburner of a business.
Borland is a company in transition. It is selling off some lines of business while it integrates Segue. The company admits that it is relatively new to marketing and selling comprehensive solutions for the application development lifecycle. Whether the company can actually make $60 million in cost cuts is open to question. And, the company's revenue has been running down since it hit $309.5 million in 2004.
The market's reaction to the quarter was good, but it leaves open the question as to what real positives there are in the company's news. The stock is at $5.40, up about 7% on the news, on a 52-week high/low of $7.14/$4.72. This was a stock that traded at $12 in late 2004.
There is more downside to Borland now because of the risks of its business transformation. The stock is likely to reflect that over time.
Douglas A. McIntyre
Borland optimizes application software products for companies. The company describes its advantage this way: "An end-to-end managed software delivery process that mirrors the success enterprises have had with other key business functions, including manufacturing, human resources, customer relationship management, procurement, finance, and IT operations". Not an easy business to understand.
Borland, which just finished the acquisition of Segue Software in April, saw its revenue drop in Q1 to $69.6 million from $71.3 million in the same period a year ago. Operating loss jumped to $8.9 million from $1.5 million. Costs were driven up $4.4 million by stock-based compensation and M&A costs. Revenue outside the U.S. and Germany dropped 6% compared to the period a year ago.
Borland payed about three times sales ($105 million) for Segue, which had revenue of $36.4 million in 2005 up 10% from 2004. Segue had net income of $2.9 million in 2005. Not exactly a barnburner of a business.
Borland is a company in transition. It is selling off some lines of business while it integrates Segue. The company admits that it is relatively new to marketing and selling comprehensive solutions for the application development lifecycle. Whether the company can actually make $60 million in cost cuts is open to question. And, the company's revenue has been running down since it hit $309.5 million in 2004.
The market's reaction to the quarter was good, but it leaves open the question as to what real positives there are in the company's news. The stock is at $5.40, up about 7% on the news, on a 52-week high/low of $7.14/$4.72. This was a stock that traded at $12 in late 2004.
There is more downside to Borland now because of the risks of its business transformation. The stock is likely to reflect that over time.
Douglas A. McIntyre
posted by douglas mcintyre at 10:13 AM
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