Back to GetFilings.com
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-16096
-----------------
BORLAND SOFTWARE CORPORATION
(Exact name of Registrant as Specified in Its Charter)
Delaware 94-2895440
(State or Other (I.R.S. Employer
Jurisdiction Identification No.)
of Incorporation or
Organization)
100 Enterprise Way, Scotts Valley, California 95066-3249
(Address of Principal Executive Offices) (Zip code)
(831) 431-1000
(Registrant's telephone number, including area code)
-----------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
PREFERRED STOCK PURCHASE RIGHTS
(Title of Class)
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of our common stock on February
28, 2002 was approximately $941,243,056.10. This calculation does not reflect a
determination that any persons are affiliates for any other purposes.
The number of shares of our common stock outstanding as of February 28, 2002
was 68,553,755.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents (or parts thereof) are incorporated by reference
into the following parts of this Form 10-K: Certain information required in
Part III of this Form 10-K is incorporated from our Proxy Statement for our
2002 Annual Meeting of Stockholders.
================================================================================
BORLAND SOFTWARE CORPORATION
FORM 10-K
For the Fiscal Year Ended December 31, 2001
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. BUSINESS......................................................... 2
ITEM 2. PROPERTIES....................................................... 26
ITEM 3. LEGAL PROCEEDINGS................................................ 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 27
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.......................................................... 28
ITEM 6. SELECTED FINANCIAL DATA.......................................... 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................ 30
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....... 56
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 58
ITEM 9. CHANGES IN AND/OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE......................................... 58
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............... 59
ITEM 11. EXECUTIVE COMPENSATION........................................... 59
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 59
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 59
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.. 60
SIGNATURES................................................................ 66
i
A CAUTION ABOUT FORWARD-LOOKING STATEMENTS
The statements made throughout this Annual Report on Form 10-K ("Form 10-K")
that are not historical facts are forward-looking statements and, accordingly,
involve estimates, projections, goals, forecasts, assumptions and uncertainties
that could cause actual results or outcomes to differ materially from those
expressed or implied in the forward-looking statements.
These forward-looking statements may relate to, but are not limited to,
future capital expenditures, acquisitions, future revenues, earnings, margins,
costs, demand for our products, market and technological trends in the software
industry, interest rates and inflation and various economic and business
trends. You generally can identify forward-looking statements by the use of
words such as "expect," "estimate," "project," "budget," "forecast,"
"anticipate," "intend," "plan," "may," "will," "could," "should," "believes,"
"predicts," "potential," "continue" and similar expressions or the negative or
other variations thereof. Examples of sections containing forward-looking
statements include the "Strategy," "Strategy in Depth" and other sections of
Part I, Item 1, entitled "Business" and "Our Business and its Evolution" and
Item 7, entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations." These forward-looking statements involve
substantial risks and uncertainties. Examples of such risks and uncertainties
are described under "Factors That May Affect Future Results and Market Price of
Stock" and elsewhere in this report, as well as in our other filings with the
Securities and Exchange Commission or in materials incorporated by reference.
You should be aware that the occurrence of any of these risks and uncertainties
may cause our actual results to differ materially from those anticipated in our
forward-looking statements, which could have a material and adverse effect on
our business, results of operations and financial condition. New factors may
emerge from time to time, and it is not possible for us to predict new factors,
nor can we assess the potential effect of any new factors on us.
These forward-looking statements are found at various places throughout this
Form 10-K. We caution you not to place undue reliance on these forward-looking
statements, which unless otherwise indicated, speak only as of the date they
were made. We do not undertake any obligation to update or release publicly any
revisions to these forward-looking statements to reflect events or
circumstances after the date of this Form 10-K.
GENERAL INFORMATION
We were incorporated in California in 1983 and reincorporated in Delaware in
1989. We maintain our executive offices at 100 Enterprise Way, Scotts Valley,
California 95066-3249, and our main telephone number at that location is
831-431-1000. We also maintain a Web site on the Internet at www.borland.com
and a community site at http://community.borland.com.
All Borland brand and product names are trademarks or registered trademarks
of Borland Software Corporation, in the United States and other countries. This
Form 10-K also contains additional trade names, trademarks and service marks of
other companies. We do not intend our use or display of other parties'
trademarks, trade names or service marks to imply a relationship with, or
endorsement or sponsorship of, us by these other parties.
WHERE YOU CAN FIND MORE INFORMATION
You are advised to read this Form 10-K in conjunction with other reports and
documents that we file from time to time with the Securities and Exchange
Commission (the "SEC"). In particular, please read our Quarterly Reports on
Form 10-Q and any Current Reports on Form 8-K that we may file from time to
time. You may obtain copies of these reports directly from us or from the SEC
at the SEC's Public Reference Room at 450 Fifth Street, N.W. Washington, D.C.
20549, and you may obtain information about obtaining access to the Reading
Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains
information for electronic filers (including us) at its web site www.sec.gov.
PART I
ITEM 1. BUSINESS
Overview
We are a leading global provider of software development and application
infrastructure technologies. Our best in class, standards-based products
maintain a large and loyal following of users. Our products address various
dimensions of the software application "lifecycle:" development, deployment,
integration and management. For development, we offer our JBuilder, Delphi,
Kylix and C++Builder products, as well as our recently introduced TeamSource
DSP service. Our deployment and integration products include our Borland
Enterprise Server family of application servers, including AppServer Edition,
VisiBroker Edition and the entry level Web Edition, and our JDataStore and
InterBase databases. To manage applications, we offer our Borland AppCenter
technology. Our professional services organization provides expert consulting,
training and support.
Our customers are enterprises of many sizes, including individual developers
known as the "Borland Nation," small independent software and services firms as
well as prominent companies worldwide, including leading companies in high
technology, telecommunications and financial services. Many of our customers
use Borland technology so that they themselves can create and ship software and
system products conforming to high performance specifications. Our principal
technology partners include leading technology companies such as Apple,
Ericsson, Hitachi, IBM, Intel, Macromedia, Microsoft, Nokia, Rational, Red Hat
and Sun Microsystems.
The key strengths and benefits of our products and services include:
. Comprehensive Solution. With products and services for the various
dimensions of the software application lifecycle--development,
deployment, integration and management--we give customers the ability to
implement applications critical to their businesses rapidly and
effectively, as well as access to one vendor to resolve issues across
underlying technologies.
. Best-in-class and Performance Leadership. When a Borland product is
installed, we believe it provides for a user experience that is as good
or better than anything available in the marketplace. Our products have
won numerous awards and maintain a large and dedicated following of users.
. Freedom of Choice. Borland products eliminate "lock-in," which is
prevalent with solutions from major system vendors. Borland products do
not promote one software platform over another; they simply enable all
major technology platforms for productive implementation. One key reason
our products eliminate "lock-in" is that we provide interoperability
between competing technologies.
. Standards-Based. We aggressively adopt standards whenever possible. As a
result, Borland products are standards-based when standards exist or are
emerging. Standards promote interoperability and mass adoption of
technologies.
. Simplicity and Control. Borland products simplify the process of
developing and deploying applications, improving efficiency and
productivity and speeding time to market.
. Low Cost of Ownership. Borland products lower cost of ownership because
they promote productivity and reduce computing infrastructure investment
wherever possible. We also accomplish this with small foot-print, highly
optimized products.
Our goal is to leverage these strengths to become the dominant provider of
implementation technologies, particularly in areas such as Java and J2EE, .NET,
Web Services, Linux and wireless and mobile computing. Key elements of our
strategy to achieve this goal include:
. Widening our lead in Java products;
. Promoting platform independence and interoperability, including through
Web Services;
2
. Leveraging our strategic relationships and partnerships, including in
growing areas such as wireless and mobile application development;
. Targeting large enterprises with our comprehensive application lifecycle
management solutions;
. Focusing on the needs of our installed base, e.g., the "Borland Nation;"
. Capitalizing on the strength of the "Borland" brand, with new product and
service offerings and through international expansion; and
. Undertaking selective strategic acquisitions, including those that extend
the breadth of our application lifecycle management solutions.
We support our growth strategy through focused efforts in sales and
marketing, including a sales model that combines strong indirect and direct
sales efforts, as well as through particular attention to our research and
development activities.
Industry Background
In today's highly competitive business environment, a company's operational
success is greatly dependent on the strength of its information technology
assets, particularly its software. Enterprises strive to stay ahead of the
competition by investing significant resources in new software applications
that enhance the productivity and profitability of their operations.
Because software is fundamental to an enterprise's business, technology to
help streamline the software implementation process is a requirement for
business success. Software development in particular can be a time-intensive,
frustrating and costly process. Speedy and effective development of
applications not only saves money, but becomes vital when
productivity-enhancing applications are needed to counter the effects of
changing business conditions or emerging competitive threats. In this context,
technology that simplifies and automates the development process--including an
application's design, creation and troubleshooting in one environment--is
invaluable. This type of technology is critical to allowing enterprises to
produce and install robust, productivity-enhancing applications in a timely and
efficient manner. In particular, using multiple, un-integrated development
products for various design and development functions increases the amount of
time needed to complete development projects because information from one
development product must be carried over to another product. Enterprises faced
with a long and costly development process may risk seeing the competition
acquire a critical edge.
The growth and expansion of the Internet has further increased the pressure
on enterprises to implement new software applications quickly. The Internet has
also increased the challenges involved in doing so. Through a variety of means
such as e-commerce storefronts, online marketplaces and various forms of
Internet communications, the Internet gives corporations the flexibility to
revise their products and service offerings frequently and allows organizations
to keep up with the growing and changing needs of their customers. However,
programming languages best adapted for the creation of e-business applications,
particularly modular or object-oriented programming languages such as Java, are
sophisticated, and many developers lack the requisite skills and tools to use
the power of these languages. In addition, in order to allow applications to
scale to numerous users and to protect the integrity of underlying data,
e-business applications typically require their own dedicated deployment
environments: "application servers" which host a program's core business logic
and reside on a "middle-tier" server within a distributed network, between
front-end computers with a browser-based graphical user interface, or GUI, and
back-end systems including the database. An additional challenge is that
e-business applications need to be integrated seamlessly with existing systems
and data. Technology that simplifies and automates the process of creating and
deploying e-business applications can mean the difference between an enterprise
rapidly exploiting the promise of the Internet or being relegated to a legacy
of lost opportunity and competitive failure.
In addition to efficient development and deployment, timely and effective
management of applications is also vital to the implementation process.
Monitoring and management technology provides critical insight into
3
the responsiveness of applications to the performance demands of the enterprise
and the Internet. Such technology also preserves the integrity of applications
for future modification and extension.
Several other recent or emerging trends further highlight the overwhelming
need for technology to help streamline application software implementation for
enterprises:
. Like the Java platform, the emergence of new platform technologies,
including Linux as an open and cost-effective alternative to the
proprietary Windows or Solaris operating systems, has created the need
for products to simplify these new technologies for use by unfamiliar
developers. Products that both facilitate development to new platforms
like Linux as well as provide capabilities for re-purposing existing
software code for deployment to such platforms are a particularly vital
resource.
. Technology that facilitates interoperability is the essence of the
emerging paradigm of Web Services. With Web Services, dynamic software
components and applications from disparate platforms and systems are
delivered via the Internet, interconnecting businesses. Technology to
assist in integrating Web Services components, as well as creating them,
deploying them to particular platforms and sharing them over the
Internet, is increasingly in demand.
. With enterprises implementing mobile strategies and telecommunications
carriers rolling out new services, sophisticated software applications
are being extended to mobile and wireless devices. The variety of these
devices is substantial, creating a need for technology that permits
companies to develop and deploy mobile and wireless applications
efficiently without worrying about differing technical and physical
characteristics.
. Increasingly complex software components--such as pre-written, reusable,
combinable building blocks of Java software code known as Enterprise
JavaBeans, or EJB--have created a need for technology to ease assembly
and maintenance of these components. Development, deployment and
maintenance of scalable enterprise-level applications using EJBs has
significant potential benefits, but is challenging.
. Shifting or evolving technology standards makes compliance challenging,
creating a need for technology that automatically enables applications in
development for the latest industry standards. These standards include
extensible markup language, or XML, for enabling components as Web
Services, wireless application protocol, or WAP, for wireless
applications, Java 2 Platform, Enterprise Edition, or J2EE, for
enterprise applications in Java and the subtly varying approaches to
these and other standards used by a host of different technology vendors.
. With companies seeking to enhance their returns on existing technology
investments, application and systems integration is necessary but is
among the most complex and costly parts of the software implementation
process. Technology facilitating interoperability among new platforms and
between new platforms and functioning legacy systems helps companies
overcome these challenges.
To be effective, implementation solutions must provide simplicity and
control, allowing companies to leverage emerging technologies and standards
rather than be constrained by them. Effective implementation solutions must
also be complete, providing technologies for each of the development,
deployment, integration and management phases of the implementation process.
Effective implementation solutions must be platform-neutral and facilitate
interoperability, allowing for maximum flexibility and freedom of choice in an
increasingly cross-platform world. Effective implementation solutions must also
provide for lower cost of ownership and enhanced return on investment. These
implementation solutions can help enterprises truly realize the
profitability-enhancing potential of innovation.
Our Business and its Evolution
As a leading global provider of technology for the rapid and effective
implementation of software applications, we enable enterprises to realize the
profitability-enhancing potential of innovation. By delivering comprehensive
"best-in-class" technology solutions dedicated to interoperability, we allow
enterprises of all
4
sizes to move into Web-based computing while leveraging their legacy systems.
From Fortune 1000 companies to the Borland Nation, we provide our customers the
freedom to develop applications, deploy them on most major platforms, and
integrate and manage them across the enterprise. Our solutions, including for
the high potential growth areas of Java, Linux, Web Services and wireless, are
designed to enable organizations to increase productivity and deliver higher
performance projects faster and on budget, while lowering total cost of
ownership.
Our history highlights our long-standing focus on delivering effective and
dependable application software implementation products. We have pioneered many
new product categories and have continually refined our technology and
offerings to meet the evolving demands of business environments. As an early
mover in the software development space, Borland led C and C++ development and
launched one of the first full-featured integrated development environments
("IDE") for the personal computer, or PC, Turbo Pascal. Turbo Pascal made
possible the commercial development of PC applications. Later, in 1993, we were
the first to market with a complete shrink-wrapped client/server development
solution, the Borland Client/Server Pack. In 1995, with the widespread adoption
of the Microsoft Windows operating system, we introduced Delphi, another
pioneering technology. Delphi combined the Rapid Application Development, or
RAD, benefit of visual component-based design with the power of a native code
compiler and scalable database access. Then we combined this RAD feature with
our C/C++ compiler to create the most productive enterprise C++ development
platform, C++Builder. In 1997, we began expanding our offerings to serve a
broader range of customers, including launching our award-winning Java
development environment, JBuilder. JBuilder has become an industry leader for
all categories of Java development. Also in 1997, we acquired Visigenic
Software, Inc., enabling us to extend our application development expertise to
enterprise application deployment. In 2001, we launched Kylix, a software
application development environment for the Linux operating system. Kylix
simplifies the porting of Delphi-based applications for Windows to the Linux
operating system. Within six months, Kylix had become the industry leader in
its market. 2001 also saw us introduce more than 20 other new products and/or
product releases, including JBuilder MobileSet for wireless applications, Web
Services-enabled upgrades to our existing best-in-class development
technologies and our hosted developer services platform TeamSource DSP.
Our current suite of products includes key pieces now required to rapidly
and effectively implement software applications critical to our customers'
businesses. Our products address the various dimensions of an application's
lifecycle: development, deployment, integration and management. For the
development phase, our award-winning IDEs include JBuilder, Delphi, Kylix and
C++Builder, each focused on a different platform (Java, Windows, Linux and C++,
respectively). Within coherent visual frameworks, our IDEs provide easy-to-use
aides, templates and utilities for developers to rapidly build and troubleshoot
complex software applications. We also offer TeamSource DSP, which includes
hosted infrastructure, utilities and services for collaborative distributed
development teams. For the deployment and integration phase, our products
include the Borland Enterprise Server family of application servers as well as
JDataStore and InterBase, our small-footprint embedded databases. Borland
Enterprise Server is a high-performance environment for the deployment and
integration of e-business applications within distributed networks. Borland
Enterprise Server comes in three versions: our AppServer Edition for EJB-based
enterprise-level deployments, our midrange VisiBroker Edition based on our
award-winning VisiBroker object request broker, or ORB, integration technology,
and our Web Edition designed for effective and reliable deployment of
JavaServer Pages, or JSPs, and servlets. JDataStore is designed to be embedded
in web and mobile applications, while InterBase is intended for desktop and
small server applications. To help manage applications, we offer Borland
AppCenter, a component-level monitoring solution which integrates tightly with
Borland Enterprise Server. Our professional services organization provides
consulting, training and support services for all of our software products.
Key strengths and benefits of our offerings include:
. Comprehensive Solution. Our portfolio of products and services address
various dimensions of the software application implementation
"lifecycle"--development, deployment, integration and management. Our
IDEs provide developers with frameworks in which to design, build, check,
test and
5
debug large-scale applications. Borland Enterprise Server offers a highly
reliable, scalable and secure option for deploying and integrating
enterprise applications. Borland AppCenter permits our customers to
effectively monitor the performance and availability of those
applications. On-going support for our products, as well as expert
consulting and training, is provided by our own professional services
organization. As a result, customers who purchase our offerings can
efficiently design, create, debug, test, deploy and maintain
applications, with the added benefit of having a single vendor to train
personnel and resolve problems as they arise across the underlying
technology. Our recently introduced Borland Software Platform for J2EE
combines our products into one offering to provide enterprises with a
single comprehensive solution for the implementation of their enterprise
applications.
. Best-in-class and Performance Leadership. We believe that the Borland
brand is synonymous with quality and performance. When a Borland product
is installed, we believe it provides a user experience that is as good or
better than anything available in the market place. As a result, our
products are favored by professionals at other leading software and
technology companies so they themselves can create, ship and deploy high
performance products. A critical element of our performance leadership
and enhanced user experience is our incorporation of new and emerging
technologies. Our JBuilder MobileSet was chosen in 2001 by two leading
wireless device manufacturers, Nokia and Siemens, for cutting edge
wireless application development on the Java 2 Platform, Micro Edition,
or J2ME. In 2001, we also added Web Services capabilities to all our
IDEs. Kylix is a pioneering development environment for the emerging
Linux platform. In turn, our commitment to innovation, quality and
performance has been honored by industry experts worldwide. Our recent
product awards include six of the seven JavaPro Reader's Choice Awards at
JavaOne in 2001 (JBuilder), Java Development Journal's World Class Award
in 2001 (Borland AppServer) and Show Favorite Award at 2001 LinuxWorld
Expo (Kylix).
. Freedom of Choice. Our platform-neutral products give our customers
maximum flexibility in their information technology decisions. Our broad
line of IDEs allow developers to write to major operating systems,
whether Windows, Solaris, Linux or Mac OS. These IDEs allow for
applications to work with major databases, whether Oracle, Microsoft SQL
Server, Informix, IBM DB2, Sybase and our own JDataStore and InterBase.
They also support the leading Web servers, including AOL's Netscape,
Microsoft Internet Information Services (IIS) and Apache. For Java
implementations, JBuilder supports deployments to all major application
servers, including BEA WebLogic, IBM WebSphere, Sun Microsystem's iPlanet
and the Borland Enterprise Server. As a result, in general our customers
have numerous choices for their systems configurations and are not locked
into any particular solution, technology or vendor. In addition, with our
VisiBroker technology, the foundation for Borland Enterprise Server, we
allow client and server applications to communicate seamlessly across the
competing hardware, operating systems and development languages. The
result is both a highly flexible and fully integrated solution for
software implementation.
. Standards-Based. A deep commitment to open industry standards is a key
reason we can offer maximum flexibility and interoperability to our
customers. VisiBroker, for example, is the leading implementation of
CORBA (Common Object Request Broker Architecture), the industry standard
for enterprise class distributed systems. Another example is that Delphi
was the first IDE to provide integral and native support for the Web
Services interoperability architecture and its associated standards,
including XML and Simple Object Access Protocol, or SOAP. Standards also
promote mass adoption of new technologies, and our focus on standards
allows us to extend the benefits of these technologies to our customers.
As an executive member of the Java Community Process (JCP), a leading
standards body, we offered the first EJB compliant implementation through
our Borland Enterprise Server.
. Simplicity and Control. Our products simplify the process of
implementing software applications, enhancing control and increasing
productivity. One key methodology employed by our technology that
improves efficiency is component-based development. Using a visual "drag
and drop" interface, developers using our IDEs can combine pre-built,
reusable components from our extensive component libraries or even import
them from outside sources, including over the Internet through Web
Services. Separately, many of the frustrating and time consuming parts of
the development process can be done
6
automatically in our IDEs, including the creation and editing of complex
code and documentation. Code that is required based on an application's
visual design or for particular platform deployments is generated
automatically. Documenting the complexities of the development process is
also mechanized. With a coherent visual console, our tightly integrated
Borland Enterprise Server in turn simplifies deployment, integration and
management of resulting applications, particularly those using complex
components.
. Low Cost of Ownership. By enhancing productivity and reducing computing
infrastructure investment wherever possible, our products lower the cost
of ownership of technology which then saves our customers money. As a
result, customers can channel scarce resources on growing their
businesses. Our comprehensive solution streamlines the implementation
process through the various dimensions of the application lifecycle. Our
integration technology helps companies make the most of their past
investments, enabling new and legacy technologies to co-exist
productively and allowing our customer to move into Web-based futures
without having to abandon their past. Finally, our small print, highly
optimized products fit seamlessly into our customer's environments.
Strategy
Our goal is to extend our leadership position to become the dominant
provider of technology solutions for the rapid and effective implementation of
software applications, particularly in areas such as Java and J2EE, .NET, Web
Services, Linux and wireless and mobile computing. Key elements of our strategy
to achieve this goal include:
. Widening our lead in Java products;
. Promoting platform independence and interoperability, including through
Web Services;
. Leveraging our strategic alliances and technology partnerships, including
in growing areas such as wireless and mobile application development;
. Targeting large enterprises with our comprehensive application lifecycle
management solutions;
. Focusing on the needs of our installed base, e.g., the "Borland Nation;"
. Capitalizing on the strength of the "Borland" brand, with new product and
service offerings and through international expansion; and
. Undertaking selective strategic acquisitions, including those that extend
the breadth of our application lifecycle management solutions.
Strategy In Depth
The following is a detailed overview of our strategy:
Widen lead in the Java market. We intend to grow our revenues by focusing
on Java and Java-based implementation technologies. With industry surveys
showing that more than 40% of developers are using JBuilder, we are already a
leading player in this growing market. Still, if we can continue to enhance
JBuilder's performance and functionality and leverage our strong reputation in
the developer community, we believe we can extend JBuilder's leadership
position in this market as well as capture additional new Java developer seats.
New seats are expected to be significant: according to IDC, an independent
research firm, Java developer seats are expected to increase from 1.3 million
in 2001 to 4.4 million in 2003, growing from 13% of the developer universe to
approximately 33% of developers. In addition, based on our experience, numerous
existing Java developers often cling to basic text editors for assistance and
do not use any development technology at all. We believe these developers would
experience dramatic improvements in efficiency and time to market using
JBuilder's integrated suite of productivity tools and wizards. In 2001, we
introduced JBuilder 6, which includes robust new design and testing features,
and also added innovative mobile and Web Services capabilities. We believe that
this additional functionality helps solidify our Java development leadership
relative to the current
7
competition, which we believe either lags us technologically, remains more
focused on the non-software parts of their businesses, or has limited financial
resources to keep up with us going forward.
The fact that Java and Java standards are still evolving is, we believe, a
critical advantage for us as we also target the broader Java implementation
market. We plan to leverage our core competency, development expertise, to spur
demand throughout our comprehensive product line. While high quality upgrades
of JBuilder will be needed to allow developers to capture the benefits of the
language's evolving standards and usability, effectively using these new Java
applications will require products and upgrades throughout the lifecycle,
including tightly linked deployment products facilitating front- and back-end
integration. For example, the recent emergence of J2ME as the programming
platform of choice for wireless application software development gives us the
opportunity to offer wireless capabilities--through our JBuilder MobileSet
plug-in to JBuilder, coupled with a tightly linked Borland Enterprise Server
for deployment--to both current customers as well as an extensive new developer
audience. We envision a future in which implementation technologies will be
necessary to support Java development and deployment to a wide variety of
future devices and appliances. Our active influence on Java's evolution and
direction through our participation in key Java industry groups, including as
an executive member of the Java Community Process (JCP), will help us shape
this future and benefit from Java's spread and proliferation through our
product line.
Promote platform independence and interoperability, including through Web
Services. Our focus on Java implementation products underscores our commitment
to technology independence, as Java applications run on most major operating
systems with little additional configuration. By focusing on neutrality and
independence, we believe we maximize our opportunity for success regardless of
which programming platform or operating system emerges as a market leader.
Also, by facilitating cross-platform development and interoperability, we
enable change and are positioned to profit from it as applications are
developed and deployed on new platforms. Our strategic focus on the Linux
market through our Kylix product is consistent with this approach. Linux is an
open source alternative to the proprietary Windows or Solaris operating
systems, with significant potential for cost savings as well as improvements in
speed and stability. Key hardware vendors have endorsed Linux, including IBM
and Sun Microsystems. And with the compiler contained in our Kylix IDE,
developers can more efficiently create single source code applications that run
on both Linux and Windows, capturing the advantages of Linux while leveraging
existing Windows-based applications and systems. We believe that products that
facilitate efficient development on Linux represent a key revenue opportunity,
and we intend to take advantage of this opportunity.
Our Web Services initiative demonstrates still another important way we
intend to benefit from our commitment to platform independence and
interoperability. Under the Web Services interoperability architecture,
applications and application components residing on disparate platforms and
systems are connected over the Internet. Business processes can be discovered
and run over the Internet using pervasive and standards-based technologies. We
believe that the possibilities offered by Web Services--both business and
technical benefits--are exciting, including improved collaboration between
partners and new uses for legacy systems and applications. By providing the
critical capabilities to build and deploy applications conforming to Web
Services standards, we allow companies to both produce Web Services and to use
them in their applications. And the Web Services shift itself is consistent
with our overall strategy: Web Services remove the technical distinctions
between applications and gives customers flexibility in their information
technology implementation decisions. As a result, we believe our products
occupy a key position in the Web Services shift. With the Gartner Group
estimating that almost 50% of all projects going forward are expected to use
both Java and Microsoft .NET, we believe there is a significant market
opportunity for us to connect these platforms through Web Services. Most major
Borland development and deployment products--JBuilder, Delphi, Kylix,
C++Builder and Borland Enterprise Server--are now shipping with built-in Java
and .NET interoperability through Web Services, and we plan to continue to
enhance the Web Services capabilities of these products to capitalize on this
promising cross platform opportunity.
Leverage strategic relationships, including in growing areas such as
wireless applications. Because of our commitment to independence and freedom
of choice and our role as a provider of enabling technology for
8
development and deployment to a variety of platforms, we believe we also have
another critical advantage: an opportunity to partner with industry leaders who
adroitly view our best-in-class solutions as necessary to promote and enhance
development on their technologies and platforms. As a result, we have access to
a number of additional customer markets that we intend to penetrate, as well as
important emerging technologies. Under our strategic relationship with Nokia,
for example, Nokia is recommending JBuilder as the preferred IDE for the
development of wireless Java applications on its mobile platforms, opening up
numerous additional sales opportunities for us in the potentially high growth
market for wireless application development. Consistent with our goal to
maintain platform independence, including to enable Java and .NET
interoperability, we also maintain close relationships with both Sun
Microsystems and with Microsoft. For example, in addition to maintaining Java
licensing arrangements with Sun, we participate closely with Sun in a number of
Java industry groups, including the Java Community Process and JavaOne. In
addition, since June 1999, when we entered into a comprehensive set of
technology and licensing agreements with Microsoft, Microsoft has been an
important partner for us. For example, we license Microsoft Foundation Classes
and the Windows Software Development Kit, or SDK, for shipment with our C++
products, while Microsoft licenses from us a number of our key patents. Other
highly visible leading technology companies with whom we maintain close working
relationships include Intel and IBM.
In addition to these relationships, we are entering into joint development
and co-marketing arrangements in order to directly leverage our partners'
technical expertise and strong brand recognition. In 2001, we introduced
JBuilder MobileSet, Nokia Edition, for mobile and wireless Java development on
Nokia's devices and anticipate additional such co-marketed products tailored to
the specifications of particular developer audiences. Similar strategic
partnerships also include bundling arrangements, such as with Rational wherein
we bundle Rational products in our Borland Enterprise Studio offerings.
Combining the best-in-class modeling capabilities of Rational Rose with
JBuilder or with Delphi, gives our Borland Enterprise Studio customers
comprehensive design, development and deployment platforms. Borland Enterprise
Studio for Java also comes with a development license for Borland Enterprise
Server and comes optionally bundled with the award-winning Macromedia
Dreamweaver UltraDev for accelerated Web development. Additionally, we have
original equipment manufacturer, or OEM, arrangements where our products are
incorporated into products marketed by technology leaders including Oracle, I2
Technologies and Business Objects. Many of our OEMs use Borland Enterprise
Server to enhance their own products' scalability. We will continue to seek to
enter into additional such relationships in order to drive revenue and increase
our customer base.
Target the enterprise with comprehensive solutions. With a value
proposition premised on IT flexibility and expanding access to a range of large
enterprise customers, including through key recent strategic partnerships, we
also believe that we have a significant opportunity to sell our solutions to
major global enterprises. Our ability to offer large enterprises a
comprehensive, integrated application lifecycle management product set with
robust cross platform support is not our only advantage. Because of our
position in the IDE market and the architecture of our products, we believe we
have other key strategic advantages. For one thing, a number of major global
enterprises are already using our IDEs; as a result, we already have strong
relationships with various global enterprises. Secondly, as the time between
the development and deployment stages of the implementation process is
increasingly compressed, the tight integration between our development and
deployment environments is increasingly attractive to enterprises. Only a
handful of our infrastructure competitors also offer high performance IDEs.
Also, relative to those few major competitors that do offer high performance
IDEs, we pride ourselves on our products' ability to integrate smoothly into
existing environments. As a result, we are in a position to obtain a critical
foothold through our IDEs, even if an enterprise is not yet prepared to upgrade
their remaining application infrastructure software.
We believe advantages for us also rest with the architecture and performance
of our application infrastructure products, including Borland Enterprise Server
and Borland AppCenter, particularly for deployments of large-scale enterprise
applications constructed using EJBs. EJB is a framework for setting up Java
components that run on a server. Because EJB components can be difficult to
create, deploy and manage, high performance products with advanced capabilities
are critical to achieving the benefits of EJB. Our Borland
9
Enterprise Server product has an innovative EJB container to run EJB
components, along with advanced partitioning and clustering features, while
Borland AppCenter has differentiated EJB component-level monitoring
capabilities. Advanced partitioning enables customers to run multiple EJB
applications at the same time on the same machine--each within a virtual
application server--thereby obviating the need for multiple dedicated servers.
In addition to robust EJB support, our Borland Enterprise Server, including our
VisiBroker Edition, has a strong CORBA foundation, permitting enterprises to
smoothly integrate newly deployed and legacy applications (including those
implemented using our development products). Sanctioned by leading industry
consortia as the standard architecture for distributed objects, CORBA allows
programs at different locations and developed by different vendors to
communicate in a network through an "interface broker" or an Object Request
Broker (ORB). We believe that CORBA technology is rapidly emerging as a
critical and consistent underlying source of J2EE application server
scalability, evidenced in part by the OEM demand for VisiBroker. CORBA
components also integrate smoothly with EJB. We believe that our history and
financial resources--as well as our technology and ability to offer J2EE
compliant upgrades through Borland Enterprise Server, AppServer Edition--give
us significant advantages over the limited competition in the CORBA application
server market.
In 2001, we had nine revenue transactions of over $1,000,000, including
transactions for Borland Enterprise Server, JBuilder and VisiBroker, which
compares favorably to the five such transactions in 2000. Elements of our
comprehensive strategy to continue to successfully market the range of our
products into large enterprises involve:
. tightly linking our products with market leading JBuilder to create a
"pull through" effect, including demonstrating the performance advantages
of our deployment products to our loyal developer customers (JBuilder
Enterprise, for instance, includes a Borland Enterprise Server
development license to enable developers to develop and test their
applications in run time environments);
. marketing our aggressively-priced Borland Enterprise Server, Web Edition,
to non-developer decision-makers in order to gain an entry to demonstrate
to them the strengths of our deployment technologies;
. targeting verticals such as financial services, technology and
telecommunications where we have traditional strength and experience and
where the performance advantages of our products--including reliability,
security, scalability and extensibility--are particularly important;
. continuing to expand and strengthen our direct sales force;
. leveraging key relationships, including with major systems integrators,
to obtain access to additional new enterprise accounts and verticals,
including large local, state and federal government accounts;
. marketing through our own consulting engagements and professional
services staff;
. strategically utilizing feedback we gain through technical support
services, including to improve our products;
. synchronizing the release cycles for our development and deployment
products; and
. introducing additional complete solution offerings, such as the Borland
Software Platform for J2EE.
Focus on the needs of our installed base. Our strategic focus on the large
enterprise market does not mean we overlook our core individual developer
constituency. To the contrary, we intend to continue to nurture and grow this
constituency--the Borland Nation--which we believe is among the most loyal and
extensive installed bases in the software industry. The basic requirements of
the Borland Nation are dependable high performance products that improve
developer productivity and efficiency. In order to maintain and grow the
Borland Nation, we must listen carefully to its members and address their
needs. This includes both the development of products centered around emerging
technologies, such as the introduction of Kylix or JBuilder MobileSet, as well
as timely, dependable upgrades to our existing products, particularly Delphi
and C++Builder. In 2001, we introduced over 20 new products or upgrades,
including significantly enhancing the quality and flexibility of our
10
existing technologies with the addition of innovative Web Services
capabilities, and we intend to continue to focus on improving the performance
of our products in order to best serve these loyal customers and grow our
revenues. We have announced, for instance, that our C++ environment is
anticipated to support development to Symbian-based mobile phones and that our
development products will include support for the Microsoft .NET platform.
We facilitate responsiveness to the Borland Nation through dedicated
personnel--such as our Vice President of Developer Relations, David
Intersimone--as well as our community Web site and our annual user conference
dubbed "BorCon" (Borland Conference). A member of our team since Borland's
earliest days, David I., as he is known, is responsible for the Borland
Community Web site, an online community that allows software developers to
communicate, collaborate and gain access to unique content and feedback. David
I. works closely with professional programmers and user groups, as well as
Fortune 1000 customers, to conduct technical presentations and to ensure that
important needs and requirements are folded into our product plans and
supported through the technical press. David I. also chairs BorCon. BorCon,
which we believe to be one of the best-attended user conferences in the
software industry, is a spectacular display of enthusiasm and excitement for
our products and our product development team. At BorCon, we conduct seminars,
training sessions and certification exams for our products, as well as host a
number of special events on subjects including emerging product initiatives and
industry trends. This keen focus on the installed base actually furthers our
enterprise strategy, in addition to giving us access to the ideas and
creativity of a range of talented developers. As members of the Borland Nation
take positions in Fortune 1000 enterprises, they introduce the products they
are committed to and have been trained on--Borland products--into the
enterprise. This "bottom-up" approach seeds the enterprise and provides a key
advantage over our competitors as we simultaneously pursue a "top-down"
enterprise-level direct sales strategy.
Capitalize on our brand, including through international
expansion. Constant attention to our installed developer base and their basic
needs is the reason we believe the Borland brand is among the most respected
brands known to software professionals worldwide. We believe that Borland
stands for quality, performance and innovation, for solutions that enable
developers to increase productivity and deliver high performance projects
faster and on budget, while lowering total cost of ownership. A critical
underpinning of all elements of our strategy--whether delivering high quality
product upgrades to our installed base or providing comprehensive e-business
implementation solutions to large global enterprises--is to capitalize on the
"Borland" brand. Internationally, in particular, we believe we have a
significant and emerging opportunity to capitalize on the strength of our
brand, particularly as our core vertical markets--trained professionals in
industries such as high technology, financial services and
telecommunications--naturally expand with growth and economic development.
While our international sales were $134 million in 2001, accounting for 60% of
our revenue, we intend to continue to focus aggressively on global markets in
order to grow our international sales.
One approach we are using to grow our international sales is targeted
expansion into particularly promising markets. In 2001, for instance, we opened
our first sales office in China. In addition to being a large market for IT
hardware, software and related services, China recently announced the
conversion of all government systems to the Linux operating system. Our market
leading IDE for development on Linux, Kylix, could potentially provide us with
a significant competitive advantage in China. Improvements in piracy
enforcement in China, while minor compared to the enforcement environment
within the U.S. and other western countries, are encouraging to us as well.
Recently, we have also expanded into the developing high technology markets of
India, South Korea and Sweden. A related approach we are using is to seek close
relationships with foreign governments, such as China, who we believe view
adoption of IDEs such as JBuilder or Kylix in their countries as important to
increasing the productivity and size of their own developing high tech
industries. A third tactic we are employing is to proactively work to augment
opportunities in potentially large international markets by providing key
underlying infrastructure and professional training. To that end, we recently
acquired Advanced Training Center Ltd. (ATC), a Brazilian IT training company,
in order to proactively enhance software development skills in the burgeoning
Latin American market. Finally, where the return on investment is clear to us,
we also intend to undertake increased direct marketing--both internationally as
well as domestically--in
11
order to continue to extend our brand and our brand's reputation to key
decision-makers outside the professional software community.
Undertake selective strategic acquisitions, particularly those extending the
breadth of our lifecycle solutions. As highlighted by our acquisitions of ATC
and VMGear, our strategic objectives can be advanced through carefully
considered and opportunistic acquisitions, and we intend to consider additional
such acquisitions that give us resources to grow our company. Acquisitions that
improve the range and depth of our application lifecycle solutions are a key
area of focus, particularly those that extend our leadership and give us access
to promising and complementary new technologies, research and development
talent and customers. Our acquisition in January 2002 of Redline Software,
Inc., or VMGear, is a case in point, allowing us to extend our footprint into
another phase of Java application lifecycle management--performance assurance
tools--as well as strengthening our Java research and development capabilities.
Performance assurance differs from de-bugging in that it provides real time
interactive analysis of the developer's code, proactively searching for and
addressing bottlenecks. By giving developers this critical capability, VMGear's
Optimizeit technology enhances the performance of our own IDEs. This
acquisition fits squarely within our value proposition of increasing developer
efficiency and productivity. For these reasons--and also because it is already
used in a number of enterprise accounts including Borland--we believe that the
addition of VMGear's sophisticated technology directly supports the enterprise
penetration potential for JBuilder.
Another example of a strategic acquisition that extended the range and
breadth of our application lifecycle management solutions was our acquisition
of Bedouin, Inc., a Chicago-based software company, in November 2000. With our
recently introduced TeamSource DSP, the acquisition enables us to provide
distributed developer teams with critical underlying hosted lifecycle
infrastructure, including source code management and version control, messaging
and security functionality. We view a position in the nascent hosted
development services, or HDS, market as particularly helpful in promoting
further adoption of our IDEs, as distributed development teams look to their
online infrastructure for tools and development support. Going forward, we will
consider acquisitions of appropriately priced, easily integratable targets such
as VMGear, Bedouin and ATC that provide us with additional resources to grow
our company, expand our customer base, leverage the "Borland" brand and meet
our strategic objectives. These could include, for example, strategic
application infrastructure acquisitions as well as the development products
businesses or assets of larger companies whose non-development heritage
prevents such companies from exploiting the full potential of such products.
Recent Initiatives in Web Services and Wireless
Consistent with our growth strategy, we recently expanded on our initiatives
in Web Services and wireless and mobile computing:
Web Services. In 2001, we announced our commitment to the emerging Web
Services architecture and standards. Web Services are business processes that
can be accessed and run over the Internet using pervasive and standards-based
technologies. Using Web Services, all elements of the business supply
chain--employee, customers and suppliers--can be connected seamlessly,
efficiently and flexibly. Web Services interconnect applications from
completely different hardware platforms, such as mainframes, application
servers and Web servers. Web Services also support connections among disparate
software platforms, such as Windows, Linux, Java and Unix.
As a leader in application development products and platform independent
technologies, we believe we are uniquely positioned to enable the development
of Web Services and therefore to promote and profit from adoption of this
promising technology. In particular, since major commercial proprietary
platform vendors have incorporated Web Services as key parts of their overall
strategies--Microsoft's .NET and Sun Microsystems' ONE--we believe we have a
significant market opportunity to leverage our cross platform strengths to
permit the sharing of Web Services between developers on both of these
platforms. Gartner Group estimates that nearly 50% of all enterprise projects
will involve both Java and .NET. All major Borland development and deployment
12
products currently support Java and .NET interoperability through Web Services,
and additional product announcements furthering this effort are planned for
2002.
Our Web Services efforts over the last year have included the successful
launch of Delphi 6, providing pioneering support for Web Services for
development on the Windows platform. Delphi 6 helps users build applications
that support Web Services specifications, including XML, SOAP and WSDL (Web
Services Description Language), through a fully integrated set of visual tools
and a library of re-usable Web Services-enabled software components. With
Delphi 6, users can both use, or "consume," Web Services in their applications
under development, as well as create and share, or "expose," components and
applications that themselves are Web Services. The IDE both enables developers
to create Web Services from scratch, as well as Web Services-enable existing
legacy applications. Delphi 6 supports emerging Web Services-based platforms,
.NET and BizTalk from Microsoft and ONE from Sun Microsystems. In October 2001,
Kylix 2 was introduced, providing Web Services support for enterprise-class
applications built on the Linux platform. In December 2001, as part of our Web
Services strategy for the Java platform, we also announced the availability of
the Borland Web Services Kit as a plug-in to JBuilder. Our Web Services
strategy for Java also includes support for Web Services through our Borland
Enterprise Server. Borland Enterprise Server allows developers to both connect
and host newly developed Web Services, as well as extend CORBA and EJB
applications as Web Services. As part of our ongoing commitment to offer best
in class technology solutions and proactive effort to advance promising
markets, in 2001 we also began offering interactive training courses, seminars
and other events specifically covering Web Services development.
Wireless and Mobile. Through recent new product introductions and
partnerships with leading technology companies, we have also extended our reach
and expertise into the emerging field of mobile and wireless application
development. We believe that wireless applications are growing in significance
and impact. With increasingly sophisticated applications extended to mobile and
wireless devices, additional services and more compelling user experiences are
now being provided to consumers. In addition, enterprises are increasing
employee productivity by extending data and applications to mobile and wireless
devices.
The complexity and variety of mobile devices now emerging is, we believe, an
advantage for Borland, as we leverage our development expertise to provide the
products that allow developers to concentrate on rapidly creating compelling
applications rather than on the intricacies of the devices on which those
applications will run. Consistent with our strategic focus on platform
neutrality and interoperability, our ultimate intention is to be able to
provide development environments across the multiple mobile and wireless
platforms now emerging, including Microsoft's Windows CE, Symbian, RIM Wireless
Handhelds, Palm, Linux and others. Announced product introductions to date in
the wireless market have targeted the market for development in Java. An open
standard and a robust platform particularly suitable for the mass market, Java
is a useful approach for carriers to implement and distribute mobile services
in a fast and cost efficient way. The J2ME platform and its related programming
specification for user interface, networking, and messaging support, the Mobile
Information Device Profile, or MIDP, allow developers to create small and
efficient applications for portable devices, often through the reuse of
existing Java code, while providing applications for multiple devices. By
targeting the wireless market in Java, we also believe we can further increase
the installed base of JBuilder and for our Java-based products, including our
deployment products. In addition to Java, we have also announced our intention
to enter the markets for mobile development on other platforms such as C++ and
are currently engaged in R&D activities with respect to additional platforms as
well, including embedded Linux.
Selected highlights of our recent efforts in the wireless application
development market include:
. License of J2ME. In 2001, we announced our licensing of all currently
available components of Java 2 Platform, Micro Edition (J2ME )
technologies from Sun Microsystems. According to the specifics of the
licensing agreement, we licensed all currently available components of
Sun's J2ME technology, including the Connected Limited Device
Configuration (CLDC), Mobile Information Device Profile (MIDP) and
PersonalJava components. Together, the CLDC and the MIDP provide a
13
complete J2ME application runtime environment targeted at mobile
information devices such as cell-phones and two-way pagers. The
PersonalJava platform targets applications for home, office and mobile
consumer devices.
. Introduction of wireless application IDEs. In 2001, we announced the
availability of our first IDE specifically targeted at developers of
mobile and wireless applications, JBuilder MobileSet. In January 2002, we
announced JBuilder MobileSet 2. In conjunction with JBuilder, JBuilder
MobileSet enables companies to more easily build, debug and deploy
applications to a wide range of Java-enabled devices. Together, the
products include visual design tools for creating mobile applications, as
well as all of the standard features offered with JBuilder. Enhancements
in JBuilder MobileSet 2 include Over the Air (OTA) provisioning
capabilities and enhanced vendor device support. Mobile IDEs supporting
development on other platforms, including Borland C++Builder MobileSet,
are currently intended for release in 2002.
. Nokia partnership. In 2001, we announced a technology partnership with
Nokia. Under our partnership with Nokia, Nokia has agreed to recommend
JBuilder as the preferred IDE for the development of wireless Java
applications on its products. In turn, through JBuilder MobileSet, we
provide support for application development on Nokia's wireless
platforms, including the Symbian-based Nokia Series 60 Platform. In
addition, we are currently planning that our C++Builder MobileSet, when
released, will support the Nokia Series 60 Platform. Together, we also
announced the release of JBuilder MobileSet which includes customized
support for the Nokia Developer's Suite for J2ME and is fully integrated
with JBuilder 5 and 6, to support software development for Nokia's
Java-enabled phones, including the Nokia 9210 Communicator. Available for
download through the Forum Nokia Web site, JBuilder MobileSet, is
currently being distributed by Nokia to other device manufacturers,
enabling developers to standardize on one environment for the development
and deployment of Java applications across devices from multiple
manufacturers. Our collaboration with Nokia aims to advance the market
for wireless application development on platforms that expand Java
technology to mobile and wireless devices. In the wireless area, we also
established technology partnerships in 2001 with Siemens and Motorola.
Products and Services
We offer leading products and services for addressing various dimensions of
the software implementation process--development, deployment, integration and
management. Innovation, quality, performance, ease of use and interoperability
are the hallmarks of our products. Our products provide key pieces necessary
for enterprises to implement applications critical to their business rapidly
and effectively. For the development phase, we offer our JBuilder, Delphi,
Kylix and C++Builder IDEs, as well as our hosted TeamSource DSP service. Our
deployment and integration products include our Borland Enterprise Server line
of application servers, including Borland Enterprise Server, AppServer Edition
for high end EJB deployments, VisiBroker Edition to facilitate legacy
integration and our recently introduced Web Edition for JavaServer Pages
(JSP)/Servlet-based application deployments. Our deployment products also
include JDataStore, an embedded database for web and mobile applications, and
InterBase, our high-performance embedded SQL database. To manage applications,
we offer Borland AppCenter, a visual distributed application management
solution.
Application Development JBuilder family, including Borland Enterprise Studio for Java and Optimizeit
Delphi, including Borland Enterprise Studio for Windows
Kylix
C++Builder
TeamSource DSP
Application Deployment Borland Enterprise Server (AppServer, VisiBroker and Web Editions)
and Integration JDataStore
InterBase
Application Management Borland AppCenter
14
We also provide expert training, consulting and support services through our
dedicated professional services organization. In addition, we provide service
and support for software developers worldwide through an online developer
community and an e-commerce site, http://community.borland.com, which offers a
range of technical information, value-added services and third-party products.
The following are descriptions of our key product and service offerings:
Development
JBuilder Family
JBuilder. JBuilder is our award winning comprehensive set of visual
development tools and wizards that enable programmers to rapidly deliver
reliable and scalable applications written entirely in the Java programming
language. JBuilder supports the latest Java technologies and standards,
including applets, servlets, JavaBeans, EJB and distributed CORBA applications
for the Java 2 platform. JBuilder features a two-way visual designer to enable
developers to easily create conventional and Enterprise JavaBeans based on an
application's design. Other features include a project manager, code editor,
advanced debugger and rapid compiler. JBuilder also includes an extensible team
development environment that simplifies the concurrent management of source
code for large distributed teams.
In November 2001, we began shipping JBuilder 6. Key enhancements available
in JBuilder 6 include capabilities for Unified Modeling Language (UML) code
visualization, refactoring, unit testing and documentation. UML visualization
functionality allows programmers to browse diagrams of their applications to
identify interdependencies in the software code and potential problems.
Refactoring prevents particular physical code alterations from changing the
underlying logic of an application, including ensuring that references to the
altered items are automatically updated. Unit testing functionality allows
developers to create test cases for different parts of applications.
Documentation tools automate the generation and editing of documentation
according to Java standards. JBuilder 6 comes in Enterprise, Professional and
Personal editions. Key features of JBuilder 6 include:
. two-way visual EJB designers to easily create reusable Enterprise
JavaBeans;
. UML code visualization, refactoring, unit testing, and documentation
tools;
. productivity features to support extreme programming;
. tight integration with Borland Enterprise Server, BEA WebLogic, IBM
WebSphere, and Sun Microsystem's iPlanet application servers;
. Windows, Linux, Solaris, and now Mac OS X platform compatibility; and
. standards compliant, including Java 2, Java 2 Swing/JFC, XML, Java2D,
Java collections, message queue, accessibility APIs, JavaBeans, JDBC,
EJB, JSP/Servlets, serialization, inner classes, remote method
invocation, Java native interface, and Java archives.
Borland Enterprise Studio for Java. JBuilder is the core technology in our
Borland Enterprise Studio for Java offering, an enterprise-focused suite
combining capabilities for modeling, development and deployment of business and
e-commerce solutions. Borland Enterprise Studio for Java combines JBuilder with
the design and modeling capabilities of Rational Rose and the team productivity
and software best-practices framework of Rational Unified Process. Borland
Enterprise Studio for Java also includes a development license of Borland
Enterprise Server and is optionally bundled with Macromedia Dreamweaver
UltraDev to provide a comprehensive design and development solution.
Optimizeit. The Optimizeit Suite of performance assurance solutions, which
we added with our acquisition of VMGear (Redline Software) in January 2002,
integrates with JBuilder. Examples of critical performance assurance
functionality offered by Optimizeit include profiling and memory debugging,
which eliminates
15
performance bottlenecks and loitering objects in Java code; thread debugging,
which detects code deadlocks, stalls and race conditions; and code coverage,
which locates and measures untested Java code and identifies and removes dead
code. The highly scalable, easy-to-use assurance suite also integrates with the
Borland Enterprise Server and other leading Java application servers and
development environments, including the J2EE, J2SE, and J2ME platforms. In
addition to selling Optimizeit separately, we intend to bundle Optimizeit with
Borland Enterprise Studio for Java.
Web Services Kit for Java. In 2001, we introduced our Web Services Kit for
Java as a plug-in to JBuilder, for SOAP, UDDI, and WSDL implementations. The
kit includes wizards to generate Java code from WSDL and to generate WSDL from
Java code, a UDDI Explorer, and deployment support to expose Web Services using
Tomcat and the Apache Axis implementation of the SOAP standard. The UDDI
Explorer allows developers to browse UDDI servers to find appropriate Web
Services to consume. The kit does not require a separate runtime environment.
JBuilder MobileSet. Fully integrated with JBuilder, JBuilder MobileSet is a
J2ME compliant environment supporting software development for Java-enabled
mobile and wireless devices. Together, JBuilder and JBuilder MobileSet include
visual design tools for creating mobile applications, device emulation and
debugging, as well as all of the standard features offered with JBuilder. The
MobileSet development environment facilitates the building of J2ME applications
using the Mobile Information Device Profile (MIDP) and Connected Limited Device
Configuration (CLDC) platforms. These platforms together provide a complete
J2ME application runtime environment targeted at mobile devices such as phones
and personal digital assistants (PDAs). In January 2002, we introduced JBuilder
MobileSet 2, which includes enhanced vendor device support, over the air (OTA)
provisioning and an enhanced MIDP designer. OTA provisioning capabilities allow
developers to upload files to an FTP server, as well as download, install and
remove MIDlet Suites.
Delphi, Kylix and C++Builder
Delphi. Delphi is a high-performance, rapid application development, or
RAD, tool used to build and deploy cross-platform Windows/Linux GUI, database,
Web server, and Web Services applications that simplify e-business integration
across diverse platforms among customers, suppliers, business partners and
employees worldwide. The Delphi product combines visual productivity tools, a
component library and a high-performance compiler so that software developers
can build high performance software applications more quickly than with
conventional programming tools. Developers can build, customize and reuse
components, or choose from over 200 different components in the Delphi Visual
Component Library (VCL). Delphi also includes over 20 ready-to-use Internet
components to build Internet functions such as Web, ftp, mail and newsgroups
into an application. In May 2001, we began shipping Delphi 6. Selected features
of Delphi 6 include:
. XML/SOAP Web Services capabilities;
. support of leading Web application servers, including Apache, Netscape
and Microsoft Internet Information Services (IIS); and
. connections with major databases, such as Oracle, Microsoft SQL Server,
IBM DB2 and Informix, Sybase and our own InterBase, through industry
standard Web Services and XML, DCOM, or CORBA.
Borland Enterprise Studio for Windows. Delphi is the core technology in our
Borland Enterprise Studio for Windows offering, an enterprise-focused suite
combining capabilities for modeling, development and deployment of business and
e-commerce solutions. Borland Enterprise Studio for Windows combines Delphi
with the design and modeling capabilities of Rational Rose and the team
productivity and software best-practices framework of Rational Unified Process.
Bold for Delphi, from Boldsoft, links these technologies, completing the Model
Driven Architecture (MDA) of Borland Enterprise Studio for Windows.
Kylix. Kylix is the number one Linux IDE according to Evans Data Developer
Survey 2001 for building rapid application development solutions for the Linux
operating environment. The implementation mirrors our
16
Delphi and C++Builder development paradigms, but is implemented to generate
native code and native look-and-feel applications for the Linux operating
environment. A pioneering product, Kylix was announced in January 2001, and, in
October 2001, we began shipping Kylix 2. When paired with Delphi 6, Kylix users
can build single-source applications for both Windows and Linux; Kylix's
Component Library for Cross-platform development (CLX) allows applications to
compile as easily for Windows (using Delphi 6) as for Linux (using Kylix 2).
Also, if existing legacy applications have been developed with the Visual
Component Library (VCL) of Delphi, minimal redevelopment is required to move
applications to CLX. Selected features of Kylix 2 include:
. XML/SOAP Web Services capabilities;
. interoperability with e-business solutions, such as Oracle, IBM DB2 and
Informix, MySQL, PostgreSQL/Red Hat Database, and InterBase, through
industry standard Web Services and XML, DCOM or CORBA; and
. CORBA support for building high-performance, rich GUI clients for Borland
VisiBroker.
C++Builder. C++Builder delivers REAL ANSI/ISO C++ for the power and
performance developers need to build and deploy cross-platform-ready
Windows/Linux GUI, database, Web server, and Web Services applications that
simplify e-business integration across diverse platforms among customers,
suppliers, business partners, and employees worldwide. The C++Builder product
combines visual productivity tools, a component library and a high performance
compiler so that software developers can build e-business applications more
quickly than with conventional programming tools. As part of our partnership
with Nokia, in 2002 we will be releasing C++Builder MobileSet, a C++
development environment for Nokia's Series 60 Symbian OS-based mobile platform.
Selected features of C++Builder include:
. XML/SOAP Web Services capabilities;
. support of leading Web application servers, including Apache, Netscape
and Microsoft Internet Information Services (IIS); and
. connections with major databases, such as Oracle, MS-SQL Server, IBM DB2
and Informix, Sybase and InterBase, through industry standard Web
Services and XML, DCOM, or CORBA.
Developer Services Platform
TeamSource DSP. Introduced in November 2001, TeamSource DSP is our hosted
developer services platform, intended to speed application development by
bridging teams distributed across functions, locations and companies.
TeamSource DSP enables development teams to save time and money as they
collaborate on enterprise applications while worrying less about security and
overhead costs. TeamSource fully integrates with our award-winning development
and infrastructure solutions.
Deployment and Integration
Borland Enterprise Server. Our Borland Enterprise Server family of
application servers offers a range of functionality to effectively and reliably
manage e-business application implementations. The Borland Enterprise Server
family includes our AppServer Edition for the large-scale EJB-centric
application deployments, as well as our mid-level VisiBroker Edition and entry
level Web Edition. The Borland Enterprise Server family integrates tightly with
JBuilder, our market leading IDE for Java.
Borland Enterprise Server, AppServer Edition. The core of Borland
Enterprise Server is an application server we formerly marketed as Borland
AppServer. Borland AppServer was the industry's first application server
product to combine the benefits of J2EE, EJB and COBRA. The highly scalable
product provides a strong foundation for deploying enterprise grade
applications. It includes support for distributed transactions, security, and
messaging, in combination with clustering, load-balancing, and fail-over
capabilities. Unique features include advanced Application Server Partitioning
technology that enables a server to run multiple programs
17
while optimizing the resources to run each program individually, and an
innovative EJB container. Based on COBRA, Borland Enterprise Server, AppServer
Edition, integrates heterogeneous back-office systems comprised of ERP, supply
chain, database management and legacy systems. In February 2001, we began
shipping Borland AppServer 4.5, the latest version of this product.
In November 2001, we announced the availability of the Borland Software
Platform for J2EE, an enterprise-targeted implementation solution combining
Borland Enterprise Studio, JBuilder and Borland Enterprise Server. The Borland
Software Platform for J2EE provides our customers with a complete solution for
the development and the deployment of large-scale enterprise and e-business
applications.
Borland Enterprise Server, VisiBroker Edition. Borland Enterprise Server,
VisiBroker Edition, is a complete COBRA runtime and supporting environment for
developing, deploying and managing distributed, interoperable enterprise
applications. The product is founded on VisiBroker, our award-winning Object
Request Broker (ORB), and is based on COBRA, which is intended to facilitate
development and deployment of distributed enterprise applications that are
scalable, flexible and easily maintained. Borland Enterprise Server, VisiBroker
Edition, enables Web clients to communicate with software modules, known as
objects, written in different programming languages running on different
platforms no matter where they reside. Using the product, developers can
develop in either the C++ or Java programming language, and all product
features are compliant with COBRA 2.4. VisiBroker Edition provides the option
to license advanced security features based on industry standards. VisiBroker
Edition includes the functionality of our Web Edition with additional COBRA
connectivity.
Borland Enterprise Server, Web Edition. The Web Edition is our Web
application server based on the Apache 1.3 Web Server, for effective and
reliable development on Servlet and JSP applications. It includes
Borland-enhanced versions of the Apache Web Server and the Tomcat Web
container, as well as our own JDataStore, a Java database, for caching, session
management, and general database needs. Web Server's Web Engine, which
integrates the Borland Web Server and Borland Web Container, is also built on
VisiBroker. This provides industry-proven load balancing and fault tolerance in
a development environment for JSP/servlets, Web applications, and Web Services
developed with Delphi.
InterBase. InterBase is a powerful, high-performance SQL database designed
to be embedded into applications running on the Windows, Linux and Solaris
platforms. InterBase provides robust relational database solutions to meet the
business-critical embedded database needs for value-added resellers and
application developers. In July 2000, we open-sourced InterBase software
version 6.0. In March 2001, we released commercial versions of InterBase 6, for
Linux, Windows and Solaris environments, and in December 2001, released
InterBase 6.5. Selected new features on InterBase 6.5 include a security
feature that protects the metadata from modification by unauthorized users,
VLDB (Very Large Database) support, and a feature which allows InterBase
developers to generate XML documents directly from InterBase. InterBase 6.5
also adds IBConsole, an integrated GUI front-end for InterBase command line
tools. InterBase 6.5 comes bundled with our IDEs, and is also available in
commercial server, desktop and open-source versions.
JDataStore. JDataStore is a Database Management System written entirely in
Java offering true platform independence and scalability in a fully integrated
development environment. JDataStore features replication/synchronization with
any database, SQL and direct navigational access, as well as transaction
management and crash recovery. Delivering high performance, a small footprint
and virtually zero administration, JDataStore is suitable for embedded, Web and
mobile database applications.
Management
Borland AppCenter. Borland AppCenter is our management solution designed to
enable customers to model, monitor and manage component-based application
servers, including managing complex applications down to the component level.
Borland AppCenter's application-centric model allows the monitoring of the
various interactions between objects and components and understands
relationships such as dependency,
18
containment, grouping, scalability and fault tolerance. Borland AppCenter can
perform actions on objects, such as remote start, stop and ping, and can start
up all of an applications' various components on all the necessary machines in
the network in the correct order, with only one command. Borland AppCenter
provides robust management capabilities for CORBA- and EJB-based applications,
including fail-over, auto-recovery and load-balancing support and performance
metrics. Borland AppCenter tightly integrates with Borland Enterprise Server,
AppServer Edition.
Product Awards and Honors
The following are some of the awards and honors we have received for our
products over the last three years:
JBuilder
Reader Award 2001, Visual Systems Journal
Reader's Choice 2001, Java Pro
Editors' Choice 2001, Java World
Excellence Awards 2001, eWeek
Reader's Choice 2000, Java Pro
Editor's Choice Award, 1999, Java Developers Journal
Readers' Choice 1999, Java World
Borland AppServer
World Class Award for Borland AppServer 4.5, April 2001, Java Developers Journal
Delphi
Award for Excellence 1999, Application Development Tool, Quality Award, Data
News
C++Builder
Best Development Tool 1999 for C++Builder 4, PC Plus
Kylix
Best Developer Tool, LinuxWorld Expo, 2002
Show Favorite Award for Best Development Tool, LinuxWorld Expo, 2001
VisiBroker
Reader's Choice Award 2000, Java Developers Journal
Software Development Product Excellence Award 2000
Optimizeit
Java Report 4 Cup Rating 2001
Editor's Choice Award 2001, Java Developers Journal
Reader's Choice Award 2001(runner up), Java Developers Journal
A more comprehensive list of our awards and honors can be found on our web
site at www.borland.com.
Professional Services
In addition to our award winning products, we offer expert consulting and
training services, as well as comprehensive technical support capabilities. We
also offer certification services. Service offerings provided by our
Professional Sales Organization include:
Consulting services. We offer a variety of both packaged and custom
consulting services that include architectural assessment, prototyping, legacy
migration, application integration, performance evaluation, application
deployment and data conversions. We work closely with third party consulting
firms and systems integrators who provide reengineering, technology
assessments, customization, project management and implementation services.
Training services. We offer education and training services to assist
customers in learning about our products and current technology trends. These
programs range from introductory sessions to highly advanced seminars. Training
services are offered at either customer sites or locations designated by us and
are led by our employees or consultants.
Support services. We provide a wide range of support services covering
application development, deployment and integration issues. We offer such
services on-site or through the telephone or the Internet from our three major
worldwide support centers in the U.S., Singapore and the Netherlands. A
comprehensive range of support programs allow customers to choose the adequate
level of support for their business, from personalized
19
support for corporate needs to minimum assistance levels for small businesses.
Qualified technical support engineers are prepared to handle support needs on a
case-by-case basis or in an ongoing partnership with our customers.
Certification services. Our certification program permits individuals and
companies to become Borland Product Certified or a Certified Borland
Instructor. The Borland Product Certification Exam tests for knowledge of a
Borland product's advanced features and their use in developing software
applications. The exam concentrates on the advanced features of the product's
core language, integrated development environment, visual components, debugging
techniques and deployment products.
Customers
Our customers range from leading Fortune 1000 companies worldwide to
individual developers. We have for some time targeted the enterprise markets of
financial services, high technology and telecommunications. We believe that our
products have been widely adopted in these markets because their performance
benefits, including their scalability, extensibility and reliability, are
particularly important for these customers. Also, in the fourth quarter of
2001, we were added to the United States General Services Administration
schedule. As a result, we are now specifically targeting the public sector
vertical, where we believe the market opportunity for our products is
significant. We also intend to target other vertical markets where our
extensive relationships and partnerships can be leveraged effectively.
As we generally ship products upon receipt of orders, backlog is neither
significant nor should it be detrimental to our future revenues. Ingram Micro,
a reseller, accounted for approximately 13%, 12% and 11% of our total revenue
for the years ended December 31, 2001, 2000 and 1999, respectively. No other
customer accounted for over 10% of revenue in 2001, 2000 or 1999.
Strategic Alliances and Technology Partnerships
We have strategic alliances and technology partnerships with many leading
technology companies, including co-marketing, licensing, bundling and OEM
arrangements. In addition to providing us direct revenue, these relationships
open up additional sales channels for us and give us access to valuable
technology and expertise. Besides leading technology companies, we also
maintain relationships with systems integrators and with channel partners.
Integrators and channel partners help bolster our service capabilities, provide
additional expertise to our customers, and open up new revenue opportunities
for us. We anticipate increasing our focus on developing and expanding
strategic relationships, particularly those, such as technology vendors with
large installed bases and systems integrators, that will enable us to penetrate
broader and more lucrative customer markets.
The following represent several of our more significant strategic alliances
and technology partnerships:
Nokia. In 2001, we announced a technology partnership with Nokia, a leading
wireless device company. Under our partnership with Nokia, JBuilder is being
recommended by Nokia as the preferred IDE for the development of wireless Java
applications. In return, JBuilder MobileSet provides support for development to
Nokia wireless platforms, including the Nokia Series 60 Platform--a Symbian
operating system-based mobile platform licensable to other device
manufacturers. In addition, it is currently planned that our C++Builder
MobileSet, if released as anticipated in 2002, will support Nokia Series 60.
Borland and Nokia together also announced the release of JBuilder MobileSet
which includes customized support for the Nokia Developer's Suite for J2ME and
is fully integrated with JBuilder 5 and 6 to support software development for
Nokia's Java-enabled phones, including the Nokia 9210 Communicator. Together,
JBuilder 5 and 6 and JBuilder MobileSet, include visual design tools for
creating mobile applications, device emulation and debugging, as well as all
the other standard features offered with JBuilder. Available for download
through the Forum Nokia Web site, JBuilder MobileSet, Nokia Edition, is being
distributed to other manufacturers, enabling developers to standardize on one
20
environment for the development and deployment of Java applications across
wireless and mobile devices from multiple manufacturers.
Sun Microsystems. Close collaboration with Sun Microsystems continues to be
a key element of our Java strategy and our efforts to keep our Java-based
products, including JBuilder and Borland Enterprise Server, at the cutting edge
of Java development and deployment. In addition to our licensing arrangements
with Sun for Java technologies, we participate with Sun in a number of industry
groups and consortia. For example, along with Sun, we are an Executive Member
of the Java Community Process (JCP), a consortium of J2EE server vendors and an
important standards setting body for the Java platform. In October 2001, in
conjunction with our JCP role, we became the first company to publish results
for ECperf, the new JCP benchmark to measure the performance and scalability of
J2EE application servers. The primary goal of the ECperf benchmark is to model
the workload of a real-world system that would include manufacturing, supply
chain management and order/inventory. We conducted successful ECperf tests of
the Borland Enterprise Server at Sun Microsystems benchmarking facility and
were instrumental in providing these results for the launch of Sun's new 8 Way
Sun Fire V880 server. In addition to our close technological and industry
collaboration, we have also worked closely with Sun on a number of customer
opportunities.
Microsoft. In June 1999, we entered into a strategic alliance with
Microsoft Corporation. As part of that arrangement, Microsoft paid us $100
million for the rights to use certain Borland-patented technology in Microsoft
products and to settle a number of long-standing patent and technology
licensing issues with us. As part of this arrangement, we agreed to:
. support the Microsoft Windows 2000 operating system, including the COM+
and the Windows Distributed interNet Applications (Windows DNA)
architecture;
. enhance our development products for Windows to support this Windows 2000
as well as the Windows-based DNA architecture, and to conform to the
Windows 2000 Application Specification;
. license Microsoft Foundation Classes (MFC), the standard C++ class
library for developing applications for Windows, for shipment with our
C++Builder; and
. license the latest version of the Windows platform software development
kit (SDK) through the Microsoft Open Tools licensing program.
In addition to licensing arrangements, we also work closely with Microsoft
on key initiatives, including most recently with the Microsoft .NET Frameworks
group to support .NET applications through our development products.
Sales and Marketing
Our sales strategy combines a strong indirect sales channel with a growing
direct sales organization. This balanced effort allows us to target both
small-to-medium size businesses and individuals with our existing products, as
well as large enterprises with our comprehensive solutions. In 2001, our direct
sales force closed nine revenue transactions of $1 million or greater. In
addition to direct sales, we market and distribute products worldwide through a
strong network of independent distributors, dealers, value-added resellers, or
VARs, specialty catalogue vendors and independent software vendors, or ISVs.
Our VARs include 20 major independent software vendors such as Siebel, Oracle
and i2. We also market our products through our own e-commerce Internet site.
We permit our distributors to balance their inventories by periodically
returning contractually limited amounts of products in exchange for other
products from us. Accordingly, we include an estimate for returns in our
reserves for the amount of product that may be exchanged in accordance with
this policy.
We conduct operations and sell products outside the U.S. and maintain
overseas offices in a number of foreign countries: Australia, Brazil, Canada,
China, France, Germany, Hong Kong, India, Italy, Japan,
21
Netherlands, Russia, Singapore, South Korea, Spain, Sweden, Taiwan and the
United Kingdom. As part of our on-going global expansion, we opened up new
offices in China, India, Italy and South Korea in 2001. All of these foreign
offices license and support our products both within their local jurisdictions
and other foreign countries where we do not directly operate. Additionally, we
market and sell our products in international territories not covered by any of
our foreign offices through independent distributors, VARs and ISVs.
Our activities in support of our direct and indirect sales efforts both
domestically and internationally and our on-going efforts to improve the
visibility of our brand include, among other things:
. creation of sales brochures and other marketing materials;
. extensive sales training;
. user conferences, including our own Borland Users' Conference (BorCon);
. appearances at industry trade shows such as Comdex and JavaOne;
. technical seminars;
. cooperative marketing programs;
. advertising in trade and technical publications;
. public relations, including with general interest, financial and
technical press;
. industry analyst briefings;
. trade and industry association activities, including active participation
in both the Business Software Alliance (BSA) and the Software and
Information Industry Association (SIIA);
. anti-piracy enforcement efforts;
. sales promotions;
. targeted mailings to current and potential customers;
. trade missions; and
. book publishing arrangements, which may include book evaluation copies of
our software products.
Product Licensing
Our software licenses are generally perpetual, fully paid-up named user or
machine per processor licenses. Our IDE products are generally licensed on a
named user basis. A named user means one named individual for whom the product
was licensed. The total number of named users may not exceed the total number
of licenses acquired. Only named users may access the product over a network.
Our enterprise products are generally licensed on a named user basis for
development purposes and licensed on a machine per processor basis for
deployment purposes. Machine per processor means a specific hardware system, on
which the enterprise product is running and is licensed according to the number
of processors in the machine.
We also offer a support program with several options. Customers may choose a
support program that entitles a licensee to receive either (i) all enhancements
and upgrades to the licensed product that are released in the succeeding
12-month period, (ii) certain other support services, or both (i) and (ii).
Our packaged training courses are offered in the form of open-enrollment
public courses and in-house courses at customer facilities. Additionally, we
offer consulting services that are generally priced on a time-and-materials
basis.
22
Research and Development
We believe that our success will continue to depend heavily on our ability
to develop new products and upgrades to meet the requirements of our customers
and the market. We pride ourselves on the depth, quality and consistency of our
research and development effort and will continue to place significant focus
and spend significant resources on this effort. Current research and
development efforts are directed at enhancing our current technology and
products, developing new products, testing, quality assurance and
documentation. Research and development expenses for the years ended December
31, 2001, 2000 and 1999 were $47.0 million, $42.5 million, and $42.3 million,
representing 21%, 22% and 24% of our total revenues in those years.
Our research and development activities are organized principally by product
group, with each of our respective product groups assuming responsibility for
development efforts. The approaches within each group tend to be highly
collaborative, with developers acting collectively to advance promising,
commercially viable technologies that extend the range and breadth of our
lifecycle solutions. Close communication with a talented installed base of
customers also gives us access to new ideas, concepts and technologies as well.
We also use our customer base to derive critical feedback on product
development and new release efforts, including feedback we gain through our
professional services engagements. We are paying particular attention to
research and development efforts in promising growth markets, including Java,
Linux, Web Services and wireless, as those markets impact our traditional
development business and our emerging application infrastructure business. The
principal products we use for our development efforts are our own products.
In addition to research and development facilities in Scotts Valley,
California, San Mateo, California and Chicago, Illinois, we currently maintain
research and development facilities in Japan and Singapore.
Competition
The software industry is an intensely competitive industry characterized by
rapid change, new and emerging technologies and fierce competition. The pace of
change has accelerated due to the emergence of the Internet, corporate
Intranets and new programming languages. We face intense competition in the
development and marketing of our software products and services.
With respect to JBuilder, we compete primarily with the IDEs offered by IBM
and Sun and, to a lesser extent, those offered by WebGain. With respect to our
Optimizeit performance assurance tools for Java, we compete primarily with
Sitraka and Rational. With respect to our Delphi and C++Builder products, we
compete primarily with Microsoft. With respect to our TeamSource service,
potential competitors may include Merant and Rational. With respect to Borland
Enterprise Server, AppServer Edition, we compete primarily with BEA, Oracle and
IBM. With respect to Borland Enterprise Server, VisiBroker Edition, we compete
primarily with Iona. With respect to Borland Enterprise Server, Web Edition, we
compete primarily with Microsoft, IBM, BEA and Sun. At this time, we have no
significant competitors to our Borland AppCenter and Kylix products.
All of our markets are intensely competitive. However, we believe that our
product quality, performance and price, Borland brand, vendor and product
reputation, product architecture, quality of technical support and 19-year
history make us competitive in all of our markets. In particular, we believe
that our platform independent positioning and interoperability capabilities,
including our ability to integrate with many existing technologies and systems
(including, in some cases, those of our competitors), give us an important
source of competitive strength.
Manufacturing
Our product development groups produce a set of master CD-ROMs or diskettes
and documentation for each of our products which are then sent to
manufacturing. All of our manufacturing and order fulfillment are performed by
outside contractors, under the supervision of our domestic logistics
organization, and includes replication of CD-ROMs or diskettes, printing and
production of documentation and packaging materials and
23
assembly of final product packages for shipment to customers. Our products are
principally sold in CD-ROM format together with user documentation. We believe
that there are adequate supplies and sources for the raw materials used in our
products and that there are multiple sources available for CD-ROM replication,
printing and production of packaging materials and printing of documentation.
We deliver some of our products directly to our customers via electronic
download from the Internet. Our TeamSource service is provided on a third-party
hosted server that is accessed by our customers via the Internet. While we are
dependent on having access to adequate bandwidth to deliver these downloads at
acceptable transmission speeds, we believe that there is adequate availability
of necessary bandwidth and multiple vendors available to us to purchase
necessary bandwidth or to deliver these downloads on our behalf.
We have final quality control tests performed internally on our products
that we believe effectively accomplish our product quality assurance goals.
Intellectual Property
We regard our software as proprietary. We rely on a combination of patent,
copyright, trademark, trade secret laws, non-disclosure and other contractual
agreements to protect our intellectual property. We have 98 issued U.S.
patents, 10 issued foreign patents and additional pending applications for U.S.
and foreign patents. Despite our efforts to protect our intellectual property
rights, it may be possible for an unauthorized third party to copy certain
portions of our products or to reverse-engineer or obtain and use technology or
other information that we regard as proprietary. In addition, the laws of many
foreign countries do not protect rights in intellectual property to the same
extent as do the laws of the United States. Accordingly, there can be no
assurance that we will be able to protect our intellectual property against
unauthorized third-party copying or use which could adversely affect our
competitive position.
From time to time we receive notices from third parties claiming
infringement by our products of third-party patent, trademark and other
intellectual property rights. Regardless of the merit of any such claim,
responding to these claims could be time consuming and expensive, and may
require us to enter into licensing or royalty agreements which may not be
offered or available on terms acceptable to us. If a successful claim is made
against us and we fail to develop or license a substitute technology, our
business could be materially and adversely affected. We expect that our
software products will increasingly be subject to such claims as the number of
products and competitors in our industry segment increases, the functionality
of products overlap and industry participants become more aggressive in using
patents offensively.
Our Java products require proprietary technology made available by Sun
Microsystems, Inc. We license the Java 2 Platform, Standard Edition
specification, the Java 2 Platform, Enterprise Edition specification and the
Java 2 Platform, Micro Edition specification from Sun Microsystems under a
license agreement that provides for a five-year term and that expires on
December 28, 2005. While we would expect to renew this agreement, Sun is not
obligated to do so. Upon expiration of this license, we will continue to have
the right to distribute our software products containing the version of Java
technology incorporated at the time of expiration. However, in the event of
termination of the license upon material breach of the terms of the license or
upon an action for infringement of intellectual property rights relating to the
Java technology by us against Sun Microsystems or any of its other licensees,
we are required to return or destroy all copies of the Java technology,
including derivative works. Furthermore, if Sun Microsystems stops making this
proprietary technology available to us on commercially reasonable terms, and we
are unable to develop or otherwise identify effective alternatives to licensing
this technology, our business could be harmed.
Seasonality
We do not consider our business as a whole to be seasonal to any significant
degree.
24
Employees
As of February 28, 2002, we employed approximately 1,158 employees,
approximately 575 in the United States and 583 in foreign countries. From time
to time, we have also engaged temporary contract employees both in foreign
countries and within the United States. As of February 28, 2002, we engaged
approximately 57 temporary contract employees, approximately 14 in the United
States and 43 in foreign countries. None of our U.S. employees are represented
by a labor union and we have experienced no work stoppages. Employees of some
of our foreign subsidiaries are represented by workers' councils or other
similar organizations as required by local law. We believe that relations with
our employees are good.
Executive Officers
Our executive officers are appointed annually by the Board of Directors of
Borland (the "Board") and serve at the discretion of the Board. Set forth below
is certain information regarding our current executive officers:
Name Position Age
- ---- -------- ---
Dale L. Fuller President and Chief Executive Officer 43
Frederick A. Ball Executive Vice President and Chief Financial Officer 39
Douglas W. Barre Senior Vice President and Chief Operating Officer 57
Keith E. Gottfried Senior Vice President-Law and Corporate Affairs, General
Counsel, Corporate Secretary and Chief Legal Officer 35
Edward M. Shelton Senior Vice President-Business Development and Chief
Strategy Officer 35
Roger A. Barney Senior Vice President-Corporate Services and Chief
Administrative Officer 62
Dale L. Fuller. Mr. Fuller has served as President and Chief Executive
Officer since December 2000, and as Interim President and Chief Executive
Officer from April 1999 to December 2000. He has been a director of Borland
since April 1999. Prior to joining Borland, Mr. Fuller was a private investor
from 1998 to 1999. From 1996 to 1998, Mr. Fuller served as Chief Executive
Officer at WhoWhere? Inc., a leading Internet site, which was sold to Lycos in
1998. From 1995 to 1996, Mr. Fuller served as General Manager and Vice
President of the PowerBooks Division at Apple Computer, Inc., a personal
computer manufacturer. Prior to joining Apple Computer, Mr. Fuller served as
General Manager and Vice President of the Portables Division at NEC
Corporation, a personal computer manufacturer, from 1993 to 1995. Mr. Fuller is
a member of the Board of Directors of the Software and Information Industry
Association, a trade association representing companies in the software and
information industries.
Frederick A. Ball. Mr. Ball joined Borland in September 1999 as Senior Vice
President and Chief Financial Officer. In June 2001, Mr. Ball was promoted to
Executive Vice President and Chief Financial Officer. Prior to joining Borland,
Mr. Ball served as the Vice President of Mergers and Acquisitions for
KLA-Tencor Corporation, the world's leading supplier of process control and
yield management solutions for the semiconductor industry, since June 1999.
Prior to his position in the M&A department at KLA-Tencor Corporation, Mr. Ball
was the Vice President of Finance for KLA-Tencor Corporation following the
merger with Tencor Instruments in 1997. Mr. Ball joined Tencor Instruments as
Corporate Controller in March 1995 and was promoted to Corporate Vice President
and appointed Corporate Secretary in January of 1996. Mr. Ball was employed
with PricewaterhouseCoopers LLP from September 1984 to March 1995.
Douglas W. Barre. Mr. Barre joined Borland in May 2000 as Senior Vice
President and Chief Operating Officer. Prior to joining Borland, Mr. Barre was
Senior Vice President of Enterprise Software at Compuware Corporation since
April 1997, and prior to that position served as Vice President and General
Manager of Compuware Corporation's European Operations since October 1995.
Prior to Compuware Corporation, Mr. Barre was Vice President of Business
Transformation and Chief Information Officer of Bell Mobility since April 1994.
Mr. Barre has also held senior management positions at AT&T/Cantel, Imperial
Oil Ltd. and Texaco Canada Inc.
25
Keith E. Gottfried. Mr. Gottfried joined Borland in June 2000 and currently
serves as Senior Vice President-Law and Corporate Affairs, General Counsel,
Corporate Secretary and Chief Legal Officer. Prior to joining Borland, Mr.
Gottfried was a corporate attorney in the New York office of the law firm
Skadden, Arps, Slate, Meagher & Flom LLP where he advised public and private
companies on mergers and acquisitions, joint ventures, federal securities
registrations and compliance and general corporate matters. Mr. Gottfried holds
a law degree, cum laude, from Boston University's School of Law where he was
named an Edward F. Hennessey Distinguished Scholar of Law and a G. Joseph Tauro
Scholar of Law, an M.B.A. with high honors from Boston University's Graduate
School of Management, and a Bachelor of Science in Economics from the
University of Pennsylvania's Wharton School. Mr. Gottfried is also a Certified
Public Accountant and, prior to attending law school, was employed as an
accountant and auditor with the accounting firm of Arthur Young & Company, a
predecessor firm to Ernst & Young LLP. Mr. Gottfried is admitted to the
practice of law by the state bars of California, New York, Pennsylvania, New
Jersey and Massachusetts. Mr. Gottfried is a member of the Board of Directors
of the Business Software Alliance, a trade association of leading software
companies.
Edward M. Shelton. Mr. Shelton joined Borland in May 2000 as Senior Vice
President of Business Development and Chief Strategy Officer. Prior to joining
Borland, Mr. Shelton was Chief Executive Officer and co-founder of drspock.com,
Inc., a parenting web site, since August 1999. Prior to drspock.com, he was
Chief Executive Officer of Neta 4, Ltd., an e-commerce technology company,
since February 1999. Mr. Shelton has also held senior management positions at
WhoWhere? Inc., a leading Internet site which was sold to Lycos in 1998 (from
December 1996 to November 1998), CMP Media, a high-tech media company (from
March 1996 to December 1996), and IT Solutions, Inc., a systems integrator
(from January 1990 to March 1996).
Roger A. Barney. Mr. Barney joined Borland in June 2000 as Senior Vice
President-Corporate Services and Chief Administrative Officer. Prior to joining
Borland, Mr. Barney served as the Senior Vice President-Corporate Services for
Network Equipment Technologies, Inc. (NET), a worldwide supplier of
multi-service wide area networks, since 1985. Prior to his position at NET, Mr.
Barney spent several years as a management consultant for Roger A. Barney &
Associates, where he helped companies solve business issues ranging from real
estate and insurance to human resources. Prior to Roger A. Barney & Associates,
Mr. Barney served as president and co-owner of Peter James Coffee Ltd., a
wholesale gourmet coffee business. Barney holds a Bachelor of Science in
business administration from Shepherd College in Shepherdstown, West Virginia.
ITEM 2. PROPERTIES
Our headquarters, executive offices and primary research and development
facilities are located at 100 Enterprise Way, Scotts Valley, California. This
facility was constructed in 1993 and comprises approximately 495,000 square
feet of space. On December 30, 1999, we entered into an agreement to sell the
facility to the ScanlanKemperBard Companies for $47 million. The sale to
Enterprise Way Associates, LLC, as assignee of ScanlanKemperBard, closed on
March 17, 2000. We received approximately $44.1 million in consideration for
the facility. Consideration in the transaction was net of $2.5 million to cover
costs to improve the building and $0.4 million in other disposal costs. As part
of this agreement, we have entered into a long-term lease of approximately 44%
of the facility. On September 30, 2000, we entered into an amendment to our
lease with ScanlanKemperBard which decreased the space leased to us to
approximately 41% o