BORL recieved coverage today-growth projection numbers look great
full report:
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Equity Research
Server & Enterprise Software
June 25, 2001
David Breiner
415 772-2948
dbreiner@bear.com
Borland Software Corporation (BORL-13.32) - Buy
"Not Your Father's Borland"--Initiating Coverage with a Buy
Data
Long-Term Growth 25% 52-Wk Range $4.16 - $14.45 Market Cap (MM) $957.6
*** A “new” Borland is back and poised for growth. We initiated coverage of Borland Software with a Buy rating, at a
price of $13.32 on June 25, 2001. Borland is a leading provider of development tools and application middleware.
Under new leadership, Borland appears well positioned to capitalize on trends moving in its favor. For investors
that may recall the Borland of years past, we suggest now is an opportune time for a refresh.
*** An under-followed play on enterprise Java and distributed applications. We consider Borland an inexpensive play
on enterprise Java and adoption of next generation distributed application architectures. Borland is a leader in the
Java development tools market and is participating in healthy demand for Java application server platforms, a
market projected to reach $5.5 billion by 2003.
*** Improving fundamentals. Operational disciplines under the current management team (in-place since early 1999)
are beginning to come through in the numbers. Borland has produced six straight quarters of growth – the last four
profitable on the operating line. Operating cash flow and margins are steadily expanding. This track record lends
credibility to 2001 projections targeting 20% top-line growth and record profitability.
*** Attractive valuation. The market is beginning to recognize improving fundamentals of the “new” Borland. BORL
shares trade at 36x 2001 EPS versus a comp group median multiple of 50x. Adjusting for $246 million in net cash,
the shares trade at 3.1x enterprise value to revenue versus a comparable multiple of 4.5x. We rate BORL a Buy.
Earnings Estimates
Q1 Mar Q2 Jun Q3 Sep Q4 Dec Year
2000 $0.01 $0.06 $0.12 $0.11 $0.29
2001 $0.08 $0.09E $0.09E $0.10E $0.37E
2002 $0.10E $0.11E $0.12E $0.12E $0.45E
COMPANY DESCRIPTION
Borland provides application implementation software – development tools and middleware for distributed applications.
Revenue is generated from three solution families: Rapid Application Development (RAD) tools for Windows platform
development, Java development tools, and enterprise deployment platforms (application servers and object middleware).
Borland has 150 quota-bearing sales reps calling on Global 2000 customers. The Company also has a strong OEM
channel, including 20 leading independent software vendors such as Oracle, i2, and Siebel that embed or resell Borland
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