Back to GetFilings.com

Table of Contents

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

For the fiscal year ended December 31, 2003

Commission File No. 001-10824

BORLAND SOFTWARE CORPORATION

(Exact name of Registrant as Specified in Its Charter)

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

RIGHTS TO PURCHASE SERIES D JUNIOR PARTICIPATING PREFERRED STOCK

(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    ¨

Indicate by check mark whether registrant is an accelerated filer.    Yes  x    No  ¨

The aggregate market value of the common stock held by non-affiliates of the registrant, based upon the closing sale price of our common stock on June 30, 2003 was approximately $656,233,206. Shares held by each executive officer and director of the registrant and by each person who owns ten percent or more of the outstanding common stock have been excluded from this computation because such persons may be deemed affiliates of the registrant. This determination of affiliate status for this purpose 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 29, 2004 was 81,074,866.

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 therein from our Proxy Statement for our 2003 Annual Meeting of Stockholders (“Proxy Statement”), to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after our fiscal year ended December 31, 2003.

Table of Contents

BORLAND SOFTWARE CORPORATION

FORM 10-K

For the Fiscal Year Ended December 31, 2003

TABLE OF CONTENTS

i

Table of Contents

A CAUTION ABOUT FORWARD-LOOKING STATEMENTS

The statements made throughout this Annual Report on Form 10-K, or 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, 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. Generally, you 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 Part I, Item 1, entitled “Business,” 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 SEC, or in materials incorporated by reference herein or therein. 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 website on the Internet at www.borland.com and a community site at http://bdn.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 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 Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers (including us) at its website www.sec.gov. Through our Internet website located at www.borland.com, we make our SEC filings on Forms 10-K, 10-Q and 8-K and any amendments to those filings available free of charge as soon as reasonably practicable after electronic filing with the SEC.

1

Table of Contents

PART I

ITEM 1.    BUSINESS

Overview

We are a leading global provider of software development and deployment solutions that are designed to accelerate the application development lifecycle. We provide our customers solutions that help them deliver better software faster and manage software development projects from beginning to end. By connecting managers, testers, designers and developers, our solutions are designed to improve software quality, accelerate the delivery of software, lower the cost of ownership and reduce risk. We have an installed base of over three million global users that includes leading high technology, telecommunications, government contracting and financial services enterprises.

Businesses use technology to maximize their productivity, and thereby increase the enterprise’s profitability. Enterprises are increasingly demanding more speed, more reliability and a higher return on investment from the software that facilitates their businesses. In this environment of heightened expectations, existing “point solutions” that help developers only with a particular aspect of the application development lifecycle or solutions that rely exclusively on one technology platform are proving inadequate for the complex needs of development teams. We believe enterprises are turning to integrated development solutions that help development teams deliver high quality software quickly.

We believe that our customers turn to us because our products and services offer the following benefits:

2

Table of Contents

Our goal is to become the leading provider of technology solutions for the rapid and effective creation and implementation of software applications. Key elements of our strategy to achieve this goal include:

Industry Background

Businesses use technology to maximize productivity, and thereby increase profitability. As a result, operational success can depend on the strength of a business’s information technology assets, particularly its software. In such an environment, the ability to develop and deploy software efficiently and effectively becomes increasingly important. To assist in the development process, developers initially turned to multiple, non-integrated development tools that helped with discrete aspects of the definition, design, development, testing, change management and deployment of software. Software application development is growing increasingly complex due to shifting standards and increasing requirements, and businesses are more frequently operating in heterogeneous computing environments. As a result, businesses are demanding development software that simplifies the application development lifecycle, reduces the time-to-market of deploying applications, facilitates deployment across multiple platforms and causes minimal disruption to the enterprise.

In addition, enterprises are focused on maximizing their investment in existing information technology. To do so, developers must integrate and enhance the scalability, reliability and manageability of existing information technology and utilize it when introducing new technology platforms. However, this process is among the most complex and costly parts of the software deployment. As a result, development teams are seeking application development software that re-purposes existing software code for deployment to new platforms and uses existing software and hardware in the deployment. Technology facilitating interoperability between new platforms and functioning legacy systems helps enterprises overcome this challenge.

In this environment, we believe enterprises value application development solutions that:

3

Table of Contents

Our Integrated Suite of Products

Our integrated suite of products is designed to assist in the rapid and effective development and deployment of software applications critical to our customers’ businesses. Our integrated development solutions are designed to address the various dimensions of an application’s lifecycle—definition, design, development, testing and deployment—and to provide valuable software configuration management capabilities. We believe our integrated suite enhances development team productivity, ensures higher-quality code and reduces the total cost of ownership.

Definition Products.    CaliberRM is our web-based requirements management system that manages the evolution of software requirements as well as the relationship between requirements and documentation, tests, models and code. Once the requirements are captured in CaliberRM, the development, documentation, test creation and project management processes can begin in parallel. With CaliberRM, requirements volatility is made evident, teams can avoid working from stale requirements, developers avoid costly and time-consuming rework, and as a result, developers can build the desired features to meet business needs.

Design Products.    Our Together family of products provides modeling capabilities to help create and communicate better software architecture throughout the application development lifecycle. The Together family of products includes live synchronization between the UML model and the application code to ensure that changes made to the application code are immediately reflected in visual model designs. This enables developers to collaborate across modeling and code development disciplines, and consequently enables improved developer productivity, reduced development time and higher quality applications. Supporting most leading Java 2 Enterprise Edition, or J2EE, platform environments, including IBM WebSphere, BEA WebLogic, Sun, Apple and Jboss, Together products also perform integrated model-to-code audits that assist developers in building maintainable and higher-quality code.

Development Products.    For the development phase, we offer integrated development environments, or IDEs, for the following platforms: Java, Windows/.NET, Linux and C++. Our IDEs are designed to provide easy-to-use aides, templates and utilities for developers to rapidly build and troubleshoot complex software applications.

Java Solutions.    JBuilder is a leading cross-platform environment for building industrial-strength Java applications. JBuilder is designed to speed the development of Java applications, deliver web applications faster, increase code reliability and develop applications for deployment on Windows, Linux, Solaris or Mac OS X platforms.

Windows/.NET Solutions.    We provide a number of IDEs designed to support the rapid delivery of high quality Windows applications as well as applications designed for the .NET Framework. Delphi is

4

Table of Contents

designed to allow developers to deliver high quality Windows applications quickly and to port those applications to the .NET Framework. C++Builder is our C++ language development environment that is designed to provide American National Standards Institute, or ANSI, standard development of high-quality Windows applications. C#Builder is our IDE focused on the needs of developers designing software for the emerging .NET Framework.

Linux Solutions.    Kylix is our Linux IDE that is equipped with C++ and Delphi languages to assist developers in building rapid application development solutions and to port those applications cross-platform to Linux.

Testing Products.    Our Optimizeit family of performance management solutions is designed to improve the quality of the code developed by providing profiling and memory debugging to help eliminate performance bottlenecks, thread debugging to detect code deadlocks, and code coverage to locate untested code and identify dead code. Our Optimizeit family of solutions includes Optimizeit Suite, which is designed to identify performance and testing problems in Java applications; Optimizeit Enterprise Suite, which is designed to isolate performance hazards during the development of J2EE applications; Optimizeit ServerTrace, our pre-deployment phase testing solution designed to help customers identify performance hazards before they deploy J2EE applications; and Optimizeit Profiler for .NET, which is designed to provide performance management capabilities such as CPU and memory usage analysis for .NET managed code.

Software Configuration Management, or SCM, Products.    To manage the particular tasks of the application development lifecycle, we offer our customers StarTeam, a leading SCM and change management solution that puts control of the development process in the hands of project teams. By providing users with access to all project assets through a central repository, StarTeam allows teams to manage development projects by providing them with a single repository for managing requirements, resources and changes, tracking defects and threaded discussions, and managing the tasks required for effective project management. With its web-based architecture, data encryption and compression capabilities, we believe StarTeam is a particularly well suited for managing increasingly dispersed development teams.

Deployment Products.    We provide our customers with solutions that help them deploy and manage their e-business applications by providing them with embedded databases and allowing personal digital assistants, or PDAs, and other devices that incorporate embedded computers to be integrated with enterprise applications. Our deployment solutions include VisiBroker, our common object request broker architecture (CORBA) solution for distributed object computing; Borland Enterprise Server/AppServer Edition, our J2EE 1.3 compliant application server; VisiBroker–RT, our CORBA solution for embedded devices; Janeva, which provides customers with secure, high performance interoperability between .NET and CORBA/J2EE technologies; and Deployment OpCenter, a deployment solution designed to provide the bridge between development and deployment in the complex, distributed production environment.

Professional Services

In addition to our award winning products, we offer consulting, training and certification services, as well as comprehensive technical support capabilities. Services provided by our Professional Services 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. In addition, we work with third-party consulting firms and systems integrators that provide reengineering, technology assessments, customization, project management and implementation services.

5

Table of Contents

Training services.    We offer education and training services to assist customers in learning about current technology trends and our products. These programs range from introductory sessions to highly advanced seminars.

Support services.    We provide a range of support services covering application development, deployment and integration issues. We offer such services on site or remotely from our support centers in the U.S., Singapore and the Netherlands. Customers can choose the level of support—from personalized support for large corporations to minimum assistance levels for small businesses.

Certification services.    Our certification program permits individuals and companies to become Borland Product Certified or a Certified Borland Instructor. The product certification exam tests for knowledge of a Borland product’s features and associated technologies and its use in developing software applications.

Customers

Our customers range from leading Fortune 1000 and Global 2000 companies to individual developers. We are increasingly targeting enterprise customers and count as our customers leading financial services, high technology, government contractors and telecommunications enterprises. No customer accounted for more than 10% of our total revenue for the year ended December 31, 2003. Ingram Micro, a reseller, accounted for approximately 12% and 13% of our total revenue for the years ended December 31, 2002 and 2001, respectively. We have a number of separate agreements with various regional Ingram Micro distributors to act as a distributor of our products to resellers. Each agreement is non-exclusive. The agreements generally renew on an annual basis unless prior notice is given.

As we generally ship products upon receipt of orders, our backlog is not significant.

Sales and Marketing

Our sales strategy combines a direct sales organization with an established indirect sales channel. We have recently reorganized our sales and marketing organizations. Sales resources have been allocated to one of three sectors according to opportunity:

We also market our products through our own e-commerce Internet site. This balanced effort allows us to target both large enterprises with our comprehensive solutions and small-to-medium size businesses and individuals with our discrete products.

We permit our distributors to balance their inventories by periodically returning unsold Borland products in exchange for other Borland products. Accordingly, we maintain allowances for product returns to cover their entire reported inventory.

We conduct operations and sell a substantial portion of our products outside the U.S. In support of those efforts, we maintain overseas offices in a number of foreign countries: Australia, Brazil, Canada, China, Czech Republic, France, Finland, Germany, Hong Kong, India, Italy, Japan, Mexico, Netherlands, New Zealand, Russia, Singapore, South Korea, Spain, Sweden, Taiwan and the United Kingdom. International sales accounted for 56%, 62% and 61% of our total revenues in the years ended December 31, 2003, 2002 and 2001, respectively. Additionally, we market and sell our products in international territories not covered by any of our foreign offices through independent distributors and sales agents, VARs and ISVs.

6

Table of Contents

Our activities in support of our direct and indirect sales efforts, both domestically and internationally, and our ongoing efforts to improve the visibility of our brand include, among other things:

Research and Development

Our competitive position has developed to a large extent because of our emphasis on research and development, and 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. Current research and development efforts are directed at enhancing our current technology and products and on developing new products. Research and development expenses for the years ended December 31, 2003, 2002 and 2001 were $64.3 million, $50.8 million and $46.1 million, respectively, representing 22%, 21% and 21% of our net total revenues in those years.

In addition to domestic research and development facilities in Cupertino, California; Scotts Valley, California; Santa Ana, California; Atlanta, Georgia; and Raleigh, North Carolina, we also maintain research and development facilities internationally in St. Petersburg, Russia; Prague, Czech Republic; and Singapore.

7

Table of Contents

Competition

The market for application development technologies is intensely competitive and is characterized by rapid change due to new and emerging technologies. We face intense competition in the development and marketing of our software products and services. Following is a brief summary of our major products and their main competitors:

Some of our competitors, particularly those that are primarily hardware vendors or platform providers, generate a substantially greater proportion of their sales in markets in which we do not directly compete. We believe a number of these competitors view sales of software development technologies as important for enhancing the functionality of, and demand for, their core products. As a result, some companies may bundle software development products that compete with our offerings with their other products, such as application servers, work stations, personal computers, operating systems and databases. When competitors do so, the effective price for software development products that compete with our products may be heavily discounted, nominal or free.

However, we believe that our product quality, performance, price, Borland brand, vendor and product reputation, and product architecture make us competitive. 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 many 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 is 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

8

Table of Contents

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 also deliver some of our products directly to our customers via electronic download from the Internet.

We have final quality control tests performed internally on our products that we believe effectively accomplish our product quality assurance goals.

Intellectual Property

Our success depends upon our intellectual property. We rely on a combination of patent, copyright, trademark, trade secret laws and non-disclosure and other contractual agreements to protect our intellectual property. 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 in our industry increase, the functionality of products overlap and industry participants become more aggressive in using patents offensively.

Our product development depends, in part, on licenses received from third parties. Our Java products require proprietary technology made available by Sun Microsystems, Inc. We license the J2SE, J2EE and J2ME specifications from Sun Microsystems under a license agreement that provides for a five-year term and that expires on December 28, 2005. Our Together Java products require proprietary technology made available to us under a separate J2EE commercial use license agreement, which provides for a three-year term expiring on May 21, 2004. In addition, our C++Builder and C#Builder products require proprietary technology made available by Microsoft Corporation, and we license the Open Tools software, Windows Platform SDK, and related technology from Microsoft Corporation under one or more license agreements, one of which expires on May 2, 2004. While we would expect to renew these agreements, neither Sun nor Microsoft is obligated to do so. Upon expiration of these licenses, we will continue to have the right to distribute our software products containing the version of Java technology incorporated at the time of expiration (in the case of the Sun agreements), and to distribute those versions of our software products containing the Microsoft technology that we distributed prior to expiration (in the case of the Microsoft agreement). However, in the event of termination of the Sun license due to 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. Similarly, in the event of termination of the Microsoft license due to a material breach of its terms (or termination in the event that our insolvency or bankruptcy becomes likely), we are required to return or destroy all full or partial copies of the Microsoft technology in our possession or under our control. If either Sun Microsystems or Microsoft Corporation 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 substantially harmed.

9

Table of Contents

Employees

As of February 29, 2004, we employed approximately 1,358 employees, of which 485 are engaged in research and development. From time to time, we have also engaged temporary contract employees both in foreign countries and within the United States. 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 our Board of Directors, or the Board, and serve at the discretion of the Board. Set forth below is certain information regarding our current executive officers:

Dale L. Fuller.    Mr. Fuller has served as our 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., which was a leading Internet site. 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.

Scott Arnold.    Mr. Arnold joined Borland in November 2003 as Executive Vice President and Chief Operating Officer. From 1988 to October 2003, Mr. Arnold served as a partner with McKinsey and Company, a leading business management consulting firm. At McKinsey, Mr. Arnold gained broad experience in operations and strategy through his fifteen years of service to senior technology executives including sustained work with leading enterprise software companies. Most recently, he led the firm’s Technology practice on the West Coast and previously held several leadership roles in the Global High Tech and Telecommunications practices. Mr. Arnold holds an M.B.A. from the Stanford Graduate School of Business and a bachelor’s degree in Electrical Engineering from Duke University.

Brian “Boz” Elloy.    Mr. Elloy joined Borland in October 2002 as Vice President and General Manager of the Enterprise Business Unit. In August 2003, he was promoted to Senior Vice President of Software Products, and is responsible for all product and solutions development for the company. From July 2001 to October 2002, Mr. Elloy served as Senior Vice President Product Development for diCarta Inc., a provider of enterprise contract management software solutions. From March 1999 to July 2001, Mr. Elloy was a Vice President of Applications Product Development for Oracle Corporation, a leading software provider, prior to which he served as Oracle’s Senior Director of Technology from January 1996. Mr. Elloy holds a bachelor’s degree in Information Systems from the Curtin University of Technology, Perth, Western Australia.

Kenneth R. Hahn.    Mr. Hahn joined Borland in October 2002 as Senior Vice President and Chief Financial Officer. Prior to joining Borland, Mr. Hahn was Senior Vice President, Chief Financial Officer and Secretary of

10

Table of Contents

Extensity, Inc., which was then a publicly-traded enterprise software company in the employee relationship management space and which was acquired by Geac Computer Corporation Limited. He also held the positions of Vice President of Finance and Corporate Controller during his employment at Extensity from January 1998 to September 2002. Prior to Extensity, Mr. Hahn was a strategy consultant with the Boston Consulting Group, providing advisory services to Fortune 500 and high technology companies from October 1995 to December 1997. He began his career with PricewaterhouseCoopers LLP, where he completed his five year tenure in the position of audit manager. Mr. Hahn holds an M.B.A. from the Stanford Graduate School of Business, where he was named an Arjay Miller Scholar. He received a bachelor of arts, summa cum laude, in business administration from California State University, Fullerton. Mr. Hahn is a Certified Public Accountant and a Certified Management Accountant.

Timothy J. Stevens.    Mr. Stevens joined Borland in October 2003 as Senior Vice President, General Counsel and Secretary. From 1997 to 2003, Mr. Stevens worked at Inktomi Corporation, a network infrastructure software provider, in a variety of legal and business roles, including General Counsel, General Manager and Senior Vice President of Business Development. From 1991 to 1997, Mr. Stevens was a corporate attorney at Wilson Sonsini Goodrich & Rosati, P.C. Mr. Stevens serves as a member of the board of directors of privately-held Fios, Inc., a leading provider of electronic discovery and litigation readiness services. Mr. Stevens holds a law degree, graduating order of the coif, from the University of California, Davis School of Law. He received bachelor of science degrees in finance and management, summa cum laude, from the University of Oregon.

Matthew A. Thompson.    Mr. Thompson joined Borland in October 2003 as Senior Vice President of Worldwide Sales. Prior to joining Borland, Mr. Thompson was Vice President of Worldwide Sales and Field Operations for Marimba, Inc., a provider of products and services for software change and configuration management, from February 2001 to January 2003. From July 2000 to January 2001, Mr. Thompson was Vice President of Worldwide Sales for Calico Commerce, Inc., a provider of eBusiness applications. Prior to joining Calico, Mr. Thompson spent six years at Cadence Design Systems, a provider of electronics design technologies. While at Cadence, from January 1998 to June 2000, Mr. Thompson served as Senior Vice President, Worldwide Sales and Field Operations and from April 1994 to January 1998 as Vice President, Worldwide Professional Services. Mr. Thompson holds a bachelor of science degree in marketing from Northern Illinois University, DeKalb.

11

Table of Contents

ITEM 2.    PROPERTIES

The following table sets forth the location, approximate square footage and use of each of the principal properties used by us. We lease or sublease all these properties. The leases expire at various times through 2010.

We also own additional office space located at 1700-1800 Green Hills Road, Scotts Valley, California, and these facilities are leased to third parties and are held for use on our balance sheet. These facilities comprise approximately 150,000 square feet of space and were constructed in 1988. We lease office space in other cities in the United States as well as in Europe, Canada, Latin America and various countries in Asia Pacific. Our existing facilities are adequate to meet our current and projected needs. We presently have excess facilities under lease, and we are actively negotiating the termination of some of our lease commitments.

ITEM 3.    LEGAL PROCEEDINGS

On November 27, 2002, a stockholder class action and derivative lawsuit, Dieterich v. Harrer, et al., Case No. 02CC00350, was filed against Starbase Corporation, or Starbase, and five former directors of Starbase in the Superior Court of the State of California for Orange County, claiming that the former directors had breached fiduciary duties owed to Starbase and stockholders of Starbase. We are paying the costs of defending this litigation pursuant to indemnification obligations under the merger agreement relating to our acquisition of Starbase. Following a series of motions, the case was dismissed without prejudice on August 20, 2003. On October 28, 2003, a stockholder class action relating to the same matter, Dieterich v. Harrer, et al, Case No. 024-N, was filed against the former directors of Starbase in Chancery Court of the State of Delaware, alleging breach of fiduciary duties by the former directors of Starbase, Borland, Dale L. Fuller, Keith E. Gottfried, Frederick A. Ball, and Doug Barre. We have submitted a motion for summary judgment in the State of Delaware, and we intend to defend ourselves vigorously. There is no indication at present whether the lawsuit will have a material effect on our financial condition, results of operations or liquidity.

In the ordinary course of business, we are involved in other lawsuits, claims, investigations, proceedings, and threats of litigation consisting of intellectual property, commercial, employment and other matters. In accordance with Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS, No. 5, “Accounting for Contingencies,” we make a provision for a liability when it is both probable

12

Table of Contents

that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us, as well as adequate provisions for any probable and estimable losses. If an unfavorable ruling were to occur in any specific period, there exists the possibility of a material adverse impact on the results of operations for that period. We believe that, given our current liquidity and cash and investment balances, even were we to receive an adverse judgment with respect to litigation that we are currently a party to, it is likely that such a judgment would not have a material impact on our financial condition, results of operations or liquidity.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our stockholders, through a solicitation of proxies or otherwise, during the quarter ended December 31, 2003.

13

Table of Contents

PART II

Our common stock is traded on the Nasdaq National Market under the symbol “BORL.” According to the records of our transfer agent and registrar, Mellon Investor Services, L.L.C., we had approximately 2445 stockholders of record of our common stock as of February 29, 2003. Because many of such shares are held by brokers, institutions and other nominees on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these record holders. We have not paid dividends since 1988. We intend to retain future earnings for use in our business, and therefore, do not anticipate paying cash dividends in the foreseeable future.

The following table sets forth the high and low sales price per share of our common stock as reported on the Nasdaq National Market for the calendar quarters presented below:

As of March 11, 2004, the most recent practicable date prior to the filing of this Form 10-K, the closing sale price of a share of our common stock was $8.95.

On January 7, 2003, we reserved 395,149 shares of our common stock for issuance upon exercise of stock options as partial consideration for Starbase Corporation.

On January 24, 2003, we issued 7,817,043 shares of our common stock, and reserved an additional 1,181,585 shares for issuance upon exercise of options, as partial consideration for our acquisition of TogetherSoft Corporation, or TogetherSoft. On January 7, 2003, the Commissioner of Corporations of the State of California held a public hearing regarding the acquisition of TogetherSoft and issued a permit, pursuant to which the issuance of Borland securities to TogetherSoft security holders is exempt from registration with the SEC under Section 3(a)(10) of the Securities Act of 1933, as amended. Of the 8,998,628 shares issued in connection with this acquisition, 1,427,773 are subject to lock-up agreements.

14

Table of Contents

Equity Compensation Plan Information