the Open Environment deal was a major blow to BORL shareholders
There have been a number of references on this thread to "the disaster" of Borland's acquisition of Open Environment last year. I would encourage those who are genuinely interested (as opposed to those who like convenient pegs upon which to hang their own opinions) to take a close look at what really happened. Here is my perception of the events.
At that time, Gary Wetsel and Paul Gross were running Borland. They had this notion that Borland should get out of the Microsoft "packaged product" limelight, and into the world of enterprise development. They chose Open, which had great technology but suffered from a lack of economies of scale in getting their products in front of the world.
[Note: at this point, you could easily substitute Del Yocam for GW & PG, and Visigenic for Open]
After the acquisition was announced, Borland discovered that Microsoft had already delivered a marketing sucker punch, dropping the street price of VB4 to $49, at the time that Delphi 2 was in Borland's distribution channel at $199 - the revenue for which had already been (legitimately) recognised in calendar Q1 '96. This crippled Borland's calendar Q2 revenues.
In the meantime, three major side effects were compounding the problem. One, as a result of Microsoft's smart marketing move, Borland's stock plummeted below the "lower bound" of the acquisition agreement, making the deal substantially more expensive for Borland shareholders. Two, management was trying to come to grips with the merging of two totally different businesses, which effectively brought both companies to a grinding halt. And if that were not enough, Gary Wetsel was removed, leaving severe instability at the top of the company for over six months.
Other side effects include massive delays to Open's product development, the closing of Open's development shop in Boston, the disappearance of almost the entire Open development team, support team and consultants, and of course, the ultimate defection of Paul Gross to Microsoft.
My point is that there is far more to an acquisition than a great strategy, technical smarts and good intentions. I think the market is right to take a step back at this point, and watch carefully.
On the topic of the price paid, my view is simple (and, if you like, simplistic): it was the price they had to pay to acquire the company. It is highly unlikely, I believe, that Borland was the only company interested in Visigenic, hence they paid a price unrelated to internal calculations of earnings dilution, simply the price that was the best available to the shareholders of Visigenic.
david |
