Friday, March 3, 2006

From my perspective, a lot has happened in the past week since my last post.  Yesterday, I finished with the second “Board meeting” this week.  The first meeting was centered around fleshing out the DevCo operating organization, from development through marketing and sales.  We also discussed budgets and expenses.  Throughout a lot of these meetings you hear terms about “R&D spend,” “revenue/expense models,”  “growth strategies,” and several others.  I just sit and listen to the discussions that ensue around these various “terms.”  There was also some discussion about the team that would take on marketing and manage sales.  There’s a couple of terms you may recognize… although they may be strange in the “Delphi” context ;-).

 

The second meeting was far more interesting.  In this meeting we began to present and articulate the overall DevCo growth strategy.  It was actually rather interesting to watch the DevCo board throughout this presentation.  The first part was simply laying out ideas to further invigorate the Delphi, C++Builder, JBuilder, and Interbase markets.  While these were showing solid growth numbers, the board seemed a little apprehensive. 

They were saying, “That looks good, but to really attract the type of investor you’d like, we need to see some growth strategies.  You need to be solid and confident as you present these to the investors.” 

We, the DevCo leadership, smiled. 

Michael then said, “It’s coming.  You’ll see it on the next slide.”  

That was when Tod began looking ahead in the copy of the presentation and exclaimed with excitement in his voice, “How do you get to that number?!”

As we proceeded to present the ideas, the board began to perk up.  They shifted in their chairs, leaned forward and immediately the tone of the meeting began to brighten.  Suddenly, ideas on how to better organize and present these ideas began to take shape as the board started to provide even more feedback.

One board member said, “One of my buddies heads up company XXXX, and you guys should really talk with him for some advice.”

Then other board members chimed in and said things like, “You should also look at company XXXX since they did something very similar in the XXXX space!”

It continued like this throughout the rest of the meeting.  Once the formal part of the meeting was over, we had some lunch served since the meeting was over the lunch hour.   As we were sitting down to eat, Tod comes over to Michael and myself and says, “One of the things we did at XXXX was….  You might want to think about incorporating that kind of model into this.”

It was great to see that we'd engaged the execs at that level.  We now need to continue to define and refine the ideas to present as compelling of a story to the investors as possible.  Listening to the advice and guidance from the DevCo BoD will be critical in making this all happen.

 

Just to re-iterrate that one of my intentions is to keep the community informed that we're still running full tilt to make this work.  Another reason is to continue to highlight that and express that the existing Borland management is committed to make sure this is a win-win scenario.  Of course Borland wants to maximize their return in this.  I want folks to understand that in order to do that we have to make this business as attractive as possible for the type of investor we're looking for.  I think that is a key point.  It is in the best interest of all involved that we get the right buyer, in whatever form they take.

25 comments:

  1. Robert Horbry-SmithMarch 3, 2006 at 6:32 AM

    Always good to hear news of any kind on the progress Allen. Many thanks for taking the time to keep us informed.


    Robert

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  2. Sounds more like you are all wasting a lot of time. Whoever invests the money is going to want to drive. They may take your ideas as a general suggestion, but they will already have their own ideas. It will be what motivated them to invest in the first place. That said, investors like to see you have a plan too, even if they do plan on ignoring it.


    “How do you get to that number?!” -> echos of statistical voodoo or cash-cow-isms again.


    "Of course Borland wants to maximize their return in this." -> Being a publicly traded company, the board has a legal obligation to its shareholders to maximize value and could well face legal sanction if they don't. Which is why I find the concept that borland is looking for the "best fit" rather than the highest bid. Since borland is totally divesting, failing to take the highest bid could well result in legal action from the shareholders. Still claiming to have the best intentions makes better sounding rhetoric than openly admitting it is all about the money (hey, it is business, it is automatically about business - and a public business at that, there is a LEGAL obligation to maximize shareholder value)


    "I want folks to understand that in order to do that we have to make this business as attractive as possible for the type of investor we're looking for."


    The job of an investor is to look past the BS through to the truth. It is way to late to put a spin on it to attract a type of investor, the spin was built over the past decade. Now you just gotta hope that the type of investor you want also has the most money.


    I'm still betting on high-speed trainwreck if MS doesn't buy it tho. Shame really.

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  3. C Johnson -


    Can you explain why you think the "highest price" means best value for BORL shareholders?


    Given that Borland stands to make a lot of money in licensing agreements from DevCo products, I'm not sure that a company that would pay the most money and then just destroy, say, Delphi, is the best thing for Borland shareholders. Seems to me a buyer that would maximize the long term value of the licensing agreements would be worth much more than the cash you might get up front by selling to the "highest bidder".


    Nick

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  4. Nick -> Since the discussion I've heard about technology licensing involves a two way licensing of technologies (please, correct me if I am wrong, this point is important as you've astutely observed), a cross licensing deal is likely going to result in a SINGLE, one time lump payment between licensees with exchange of rights. This follows a trend reported frequently about technology companies. Perhaps we're only getting half the news and I am being naive, but it certain seems to be the way of cross licensing deals.


    As such, I have ruled licensing fees out as a significant factor in my thoughts.


    At best, in my mind, the licensing fee would merely be part of the initial purchase fee, thus leading me to believe that borland's shareholders would ONLY be best served by the highest purchase price.


    If you assume that there was a long term, ongoing licensing fee arrangement which resulted in NewCo paying Borland in perpetuity (or however long the patents last), that would actually DETRACT from the attractiveness of NewCo to an investor -who wants to buy a business which continually has to pay out licensing fees? No, in my mind, any good investor would negotiate a one time fee even in the absence of a cross patenting deal. Borland wants NewCo to appear attractive, and a 1 time lump sum fee is certainly more attractive than the death of a thousand cuts.


    Such is my line of thought, leading me inexoribly to the conclusion that the purchase price (including the one time licensing fees) are the sole renumeration and value that borland shareholders can expect from NewCo.


    Again, if you find a flaw in my premise or reasoning, I would be interested in discussing the ramifications on my conclusions.


    Don't get me wrong, personally, I would like to see NewCo succeed. I would LOVE to hear that massive amounts of R&D money are pouring in to let the Delphi team once again soar to the heights it once achieved rather than once again tripping over the bottom line. However, I am a pessimist at heart, and I find expecting the worst usually looks like optimism in retrospect.


    I believe that the concept of NewCo has been a valuable exercise already, shaking the tree and changing attitudes already, all for the good. I do, however, find the climate of fear towards Microsoft to be a negative thing, festering like the irrational hate of many linux users- Poorly founded and based on emotion rather than good business sense. I suspect that the round the wagons attitude that was created when MS when hunting for quality employee's out of Borland's talent pool plays an even larger role than MS being a competitor here.


    Honestly, NewCo could do significantly worse that finding itself a division of Microsoft.


    You, as a Borland employee have a pretty good idea (better than 99% of those outside the company I suspect) what kind of expenses are going to be involved in both buying and operating NewCo. When you sit down and think about the REAL numbers involved (ignore the propoganda to make things look good, look at what is realistic), ask yourself what an investor is going to want for investing that kind of money. Time frames, return on investment, control issues.


    Where does it lead you?

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  5. Allen,


    Thanks for the update. I don't suppose there's any chance we can see that slide? :)

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  6. Brion L. WebsterMarch 4, 2006 at 2:59 AM

    You've referred to the DevCo board quite a few times. I wonder how likely it is that the current board survives the sale. If nothing else, the new owners would be obligated to appoint their own representatives to the board to protect their interests. Fingers crossed on this one. Any chance the current board member list is public?


    If there's this much excitement at the Borland board level, why in the world aren't you just being spun off as a separate division, or even wholly owned subsidiary? It's done all the time, in nearly every industry. If you've got such exciting growth potential, with strategems for backing it up that make BoD members perk up, I can't believe they'd turn that cash away. On the one hand it's exciting to hear, on the other hand it's disturbing as all get out, because nobody is that altruistic. If all you need is an infusion of cash, that can happen too. Here's one way to get cash without selling the business: http://www.hansen.com/news/press-release/02-21-2006.asp . May not be relevant, last I checked they were privately held.


    No one said I have to understand why this particular strategy was chosen, thank goodness. <g> I still think a more independent Delphi Division, or DevCo, or whatever it ends up being, is a good thing.


    -Brion

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  7. Gregra -> 50 million is a pittance against what the expected sales price is going to be, I can assure you.


    While your idea is interesting, the buy in for each "share holding developer" would have to be significantly higher.


    I suspect that the day to day operational costs are higher than you expect as well. We're not talking about a steno pool working for 10$ an hour, but rather a large group of programmers with appropriate saleries AND the steno pool, receptionists, sales people, support staff etc. Then you need to keep your staff well trained, furnished, equipt and housed with power, water, plumbing.


    I keep harping that the buyout is not the only expensive part, but the ongoing expenses of the company are going to have to be covered for the first few years without an expectation of return (just good sense, you can't bleed a company dry the second you get it).


    As for the million copies, I strong suspect that the numbers were "exagerated" by combining multiple versions of Delphi, including upgrades, complimentary versions etc etc. 100,000 does sound like a more reasonable number to me. Even borland couldn't tell you for sure based on sales, since many people have stayed with D7 due to its relative stability compared to D2k5. D2K6 sales are too soon to be an indicator, again thanks to D2k5 making many of us unwilling to invest in the newest version of Delphi. I can tell you, however, that Delphi tours do not draw even a fraction of the crowd that an technet or msdn tour does. I've also noticed, when I last went to a borland event (they started turning too much in to actual sales pitches, negating their technicaly value for me a few years ago) that the numbers of people attending borland events was ever dwindling.


    Maybe my city is an aberation, but it bodes poorly by my mind for the ability to convince 100,000 or more people to pony up thousands of dollars to have to pay more money every year to get a copy of the compiler.


    Still, as utopian concepts go, it WAS interesting. (I suspect I'm just rambling at this point however)

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  8. I have owned Borland shares since '93 and have since lost all of my investment in Zenith Electronics (Old Zenith Radio, inventor of High Definition T.V. and "Flat Monitors) What criteria can you or anyone use when you invest in The American Stock Market? If Borland or Zenith should develope a Gold Mine in their fields the first thing self serving insiders will do will try to find a way to keep it all, and avoid shareing it with Firemans Pennsions, and whoever else they can rub-out like stock market Tony Soporanos. (See MelroseZenith on BORL Yahoo Msg Board)If employees who think, "Find the right buyer for us, in What-Ever Form they take". come before "The Rights of Stock-holders" then your parents should suffer in retirement as I am. Calpers( Biggest Pennsion Fund manager in U.S. voted away all our rights in Zenith to South Koreas L.G.E. the current world leader and 100% Owner of H.D.T.V. Thanks Bill

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  9. I appreciate your posts Allen. I have very important projects developed in Delphi and I'm worried about Delphi future. Please give to Delphi a great future. I will support DevCo with one Delphi Architect license for every major/year release ;-) Delphi Forever!

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  10. Bill Quinn's message helped crystalize my thoughts a bit better.


    Ultimately, the rights of the stock holders are protected by law, and "looking for the right buyer" is usually rhetoric for "more money". After all, in spite of openly admitting that its a capitalist economy which is profit driven, flat out asking for more money is still seen a gauche, or perhaps just amateur negotiating.


    If the board was really interested in the best buyer, they would look around and then put it to a vote of the shareholders, thereby alieviating the board of many legal obligations they have when acting on the shareholder's behalf. However, the speed with which the board wishes this deal to be completed pretty much precludes going to the shareholders - which would require notification, information packets, time for review, and then probably a mail in reply, and considering the nature of the deal, this would likely take several rounds to develop proper consensus. Hardly likely to be accomplished in total by the of Q2 this year, after all, they are supposedly only in the flirting stage (it can go faster with only 1 suiter, esp. if they arrive uninvited to buy everything).


    Nah, its all about the money. It is ALWAYS about the money. It is business after all, and a public business at that.

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  11. Nick: "Can you explain why you think the "highest price" means best value for BORL shareholders?"


    There are a lot of shareholders that have no interest at all in the long run, because they are simply traders looking to make a short-term profit, and have bought the stock because a technical analysis program indicated it might be good for a short-term gain. To them BORL is nothing more than a ticker signal with a certain time series characteristic associated with it. Nothing more. For these investors (such as hedge funds), price is all they even look at.

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  12. C.Johnson. I refer to your statement..." Ultimately, the rights of the Stock Holders are protected by law." After taking that much for granted you proceeded while I stopped. I was trying to tell the Zenith Radio story and how there WAS NO LAW to protect share Holders. Senator Campbell of Colorado, ignored my letters. In this Representative Form of Government, I found my Representative (Musgrave) entirely insulated from whom she Represents. After 2 month of E-Mail Correspondence, some dopey clerk tells me on the phone, " What was that about?" and "We have no record of that." The best of all is the S.E.C. I bet you think their protecting you too. Their reply was a form letter that says, "We may or may not, already be acting on this Company (Zenith)and we won't say either way in case so our ass is protected" When any of us now buy a High Definition T.V. or a "Flat Monitor Phone the Profit goes to L.G.E. of South Korea and that tax base educates their children and fixes their potholes. As a Mathematically oriented person you can see all this has made America poorer. H.D.T.V. was invented in Chicago by Americans and funded with all our tax money and supported by fools like me who felt that, Ultimately the right of the share holders are protected by law. When it was time to Reap the Profits from H.D.T.V. it was owned 100% by L.G. When they first wedged into Zenith, "We were all partners in this Cutting Edge Future" I hung on for years, like my 13 years with Borland. If you want to know if Stock-holders are protected try asking your Representative (Unless you live in Larimer County, CO.) Please ask... Can a Foreign Corporation suck my investment dry against my will? Now that Developer Studio and Delphi have hit a Gold Vein, This Last of the Little share holders (me)will be parted from it as the fool and his money always are. Thank you Bill

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  13. Bill -> It doesn't sound like you are familiar with what the rights of stockholder are. And government is always loath to get involved unless their is a clear case of fraud or malfeasance.

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  14. Mr. Johnson, I thought when Zenith struck Gold that I would share in the good times, after 20 years of waiting. L.G. called themselves a partner in Zenith with the share holders. I thought all shareholders were in the same boat. Suffer the hard times together and share the rewards together. I have 4000 Shares of Zenith as Bathroom Wall-paper and L.G.E. of South Korea owns all of Zeniths Patents on H.D.T.V. and much of the cutting edge in Consumer Electronics. This all happened in the night while I slept, sinc this Crime couldn't bare the light of day and my Congress-woman and my State Senator and even my Local D.A. will not acknowledge it. Maybe a smart guy like you will explain it to me. Thanks Bill

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  15. Any News from Nashville? Does DevCo care about the Conference there and C.M.M.I.? Are there any other Small Share-Holders in Borland? Is there a free and un-manipulated Forum for the Borland Share-Holders that does not brook Non-Share-Holders?

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  16. Christian ConradMarch 6, 2006 at 6:40 AM

    But all this enthusiastic talk about a "NewCo" sounds VERY familiar... To those of us who remember the hoopla around the supposed open-sourcing of Interbase.


    It would behoove Borland to finally finish that, first, before blithely expecting to be taken seriously on stuff of this kind.


    And all you guys at Borland who are -- or at least claim to be -- sostoked about all this: Weren't you around when Dale Fuller reneged on his word, or are you just suppressing the memory?


    What makes you think you won't get screwed over just like Ann Harrison and her gang were?

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  17. C Johnson --


    "I am a pessimist at heart"


    Really? I hadn't noticed.


    Nick

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  18. It's nice that we're hearing something, but I'm not hearing enough to make me comfortable. I want to hear about planned product directions. I want to hear about how DevCo is going to undo the mess that is Delphi 2005. I want to hear what DevCo is going to do to keep me from getting screwed by a large codebase for an unsupported product if/when they crash and burn.


    If I build an application with C++ I'm not that worried if my compiler maker goes out of business. If Microsoft decided tomorrow that they weren't ever going to produce another C++ compiler again, it would just be a matter of switching to another vendor's compiler and my code would probably still work. If DevCo decides that Pascal is passe I'm screwed, because they're the only game in town. There's no significant commerical competition and the open-source efforts are immature at best.


    So what are our remedies? What's DevCo going to do to make their products a safe, reliable course to follow in the future? I like the product, but I don't want to find out two years from now that there's no path going forward with my code.

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  19. Luigi -> MS didn't go against Delphi in the pascal arena because of legal action between the companies involving MS headhunting Borland employees. Anders was unable to push a pascal option as part of the terms of leaving borland for MS. A sale to MS would relieve them of all those burdens.


    MS already has access to most of Borland's patent portfolio, they paid a 100 million dollars back around D3/D4 era for it as part of a "settlement" for patents which were laughable on their face. (a child could have defeated the procedural variable patent in court, a patent review would have tossed it out. It maps 1:1 to machine code instructions, so unless they are going after intel for register indirection calls...)


    Linq is not just about databases, it allows you to treat ANY data that way. Got a list of objects? Use SQL syntax without needing a database. YOu could easily create objects representing your filesystem objects, linq again would let you quickly filter those objects. It works on XML, objects, lists, ANY object that exposes IEnumerable, meaning ANYTHING collection that works in a foreach. Time you did some research. Linq will allow for some truely powerful datamining in your app with a relatively simple syntax which is designed to do exact that. The fact that it can act as a type safe gateway to your database is a PLUS, but not the main feature of Linq.


    VS's IDE is fully extensible, and coderush exists for Delphi (only to 7) and VS. I have a GREAT book about writing extensions to VS's IDE. The people at RemObjects have added their own version of Pascal to the VS IDE. You can't even do that with Delphi. Borland might, but we can't. The last book about extending Delphi IDE was back in the Delphi 2/3 days, and it is out of print. The VS ide has macros AND fully configurable keybiddings. Yes, you can spend HOURS writing a keybinding module in Delphi, or you can spend 2 minutes in a dialog with VS.


    Extend VS? The first thing I install is USysWare's DPack which brings in stuff I find missing from my Delphi experience, and then I can change the keybindings for IT the same way because I like my accelerator keys to be slightly different than the people at USysWare.


    As for DevCo going a different direction? Where exactly do you envision them going? Linux? That failed. VisualCLX? Failed - completely. Mac maybe? fight for room in less than 5% of the market? Bad investment choice, in fact, they already did it, and it died a horrible death. Turbo Pascal for the MAC never made it out of Germany.


    I think you DO have an anti-microsoft prejudice that doesn't reflect the current realities, and I think you should do a LOT of research. In fact, you can do most of it for free since MS is so pro-developer that the excellent MSDN site is overburdened with docucmentation, videos, presentations on demand.


    Borland can't even write a manual without putting in some fundamental flaws, and it gets worse every year, just like the software (cross your fingers that D2K6 isn't the exception the proves the rule, because it is the first good sign we've seen in years, even if most of the improvements are thanks to third party open source code)

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  20. Good to hear of the progress. Just wanted to say I fully support the direction that is being taken here and I look forward to supporting the new DevCo by purchasing their first release. We are proud to use Delphi and look forward to it's continued success.

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  21. A correction: the post under the name "Marco Borsellino" is mine. IE (yes, I am so anti-MS I use IE) filled the field with a colleague's name.

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  22. I think that the lack of a buyer could be the best news. Then rather than get nothing, Borland might settle for a buyout over time by a combination of Developers and Employees. There were last time I checked tax advantages offered to firms bought out by their employees. For working capital and IPO + VC capital.

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  23. Perhaps ALL of you are missing the boat because NONE of you seem to be looking "outside the Microsoft Windows box." Maybe there is a REAL competitor out there which is eating the lunch of Microsoft and Borland alike ... Linux, OS/X, or more properly, GNU.


    If you develop a software product using proprietary tools that "only work on Windows," then you are left with a product that .. only works on Windows. If you want your product to run on any other platform -- such as the OS/X that was magically ported from PPC to x86 in a matter of months, on-schedule -- you can't do it.


    On the other hand, if you switch your development to the Linux environment, you can hit three platforms with one code base; one development effort. The tools needed to do this don't cost anything at all, and they are updated far more frequently.


    So, maybe we are really just "at the end of an era," and Borland is just another casualty and (gasp!) Microsoft Is Also Hurting Badly.

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  24. I'd buy DevCo shares for 500€ + 500€ per year subscription, as an individual (taxes included). One of my best buys, I believe!

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