Thursday, March 16, 2006

Things you always wanted to know..

But didn't know who to ask...

Saturday, March 11th, was an interesting day for the “DevCo” leadership team.  That morning we had a chance to sit down with one of the “board” members.  This particular member has been involved with many different companies doing exactly what Borland is currently trying to do with its IDE/Dev-tool business.  This person has many contacts in the Valley and has helped Borland and many other companies with acquisitions and/or divestitures.  In other words, this guy “has been around the block” more than a few times.  Since I'm not sure he wants his identity revealed, I'll simply refer to him has “Ed.“

I have to say that I probably share far more in common with the folks that read this blog than with this “business builder” guy.  Ed's from a different world with a very unique perspective.  In reading a lot of the various comments folks have made to this blog, I have to say that in many ways I share some of their concerns.  However, in light of all these concerns, issues, and “unknowns” I still choose to be positive.  So part of this Saturday meeting was also a chance to actually get the straight story on a couple of burning questions I know many of you have had. I have had those same questions on my mind as well.  There are several main questions folks have been asking surrounding the whole spin-off idea.  I'll try and articulate what this person said as best as I can.

“Why did Borland announce the plans to spin-off its IDE/Dev-tool business before it had a buyer?”

I know you've all had this question on your mind.  Ed's response was that it was simply a matter of practicality and Borland needing to steer clear of running afoul of anything within the new Sarbanes-Oxley (SOX) rules that govern public corporations.  Then on the practical side, trying to do something this big and involving this many people (that's hundreds of people) in secrecy is just a recipe for disaster.  The mis-information, leaks, speculation, and overall exposure to the SOX rules was too great a risk.  In other words, it was far less risky to announce the intentions and work on the details, more or less, out in the open, than trying to keep it out of the press.  Imagine trying to explain both internally and externally why the management is having people work on drawing arbitrary lines between different parts of the business and identifying dependencies.  How do you do that without raising all kinds of embarrassing questions? 

The corollary to the above question is “I've never heard of things being done this way before.  Isn't this unprecedented?”  Ed's answer was a little more vehement .  Of course not!  This kind of thing is done all the time!  There's been a lot of companies that have pre-announced their intention to divest or spin-out a portion of their business.  This kind of thing has been done in the railroad company sector, and other kinds of shipping companies.  The consumer commodities sector is another place where this is also done.  In the tech sector, one such example is expedia.com.  Here's an example of a company, Crown Media Holdings, Inc., owner of the Hallmark cable channel, doing exactly what Borland is doing right now.

“What if there are no buyers?  I've heard that there is no interest.”

Ed's response was even more concise than for the previous question.  Quite simply, if the exec team had not thought there was any value in this business and that it just needed some focused investment, they'd have never even tried to do this.  As far as there being no interest in the business, that was just not true.  There are a number of investors currently going through the NDA signing process as we speak.

“How can you possibly justify accepting anything other than the highest bidder?”

Here is where Ed used selling one's house as an example.  Suppose you have several bona-fide bids in your house.  Say two of those bids were slightly above asking price and one was slightly below.  However, the first two bids had several contingencies in the proposed contract (things like securing financing, escrow periods, sale of another home, etc...) and the lowest bid was a cash offer with no contingencies.  Which one would you take?  If you could afford to wait and weren't needing to sell the home ASAP, you might take one of the first two.  However, you are also taking a risk that the deal may not close and by then the third cash buyer may have moved on and bought another property.  Suppose you wanted the deal to close with minimum hiccups?  You may take the lower bid because of the much firmer chance of the deal actually closing.

A corollary to this question is “How would a lower bid be in Borland's best interest?”  Ed also put this in economical terms;  What if Borland were to retain a minority stake in this new venture?  Wouldn't it now be in Borland's best interest as well to ensure that the absolute best match be found and the proper investments made to better guarantee its chance of success?  Ed also said that he can easily make the case that given the proper buyer and investments along with the retention of a minority stake, Borland could stand to gain more in a few years than with the initial sale!

Those were very frank questions and very frank answers.  Sure, Ed is a financial guy, which is exactly why we need him.  We need someone to help us put together the best business plan and make the best pitch to the investors.  The best way to do that is to consult with someone who knows their stuff.  As an engineer, I tend to not be easily impressed, but I must say that when Ed was explaining all of this to us, I immediately became aware of how little I actually knew.  I was also equally surprised by how much I actually did know!  Much of it is simply common sense.  I was also far more comfortable about this deal because there were folks involved that did know what they were doing.  There are always going to be horror stories and folks who've been damaged by unscrupulous investors.  Generalities will be made.  However, from my purely analytical point of view is that, if the idea of using venture capital or equity investments were, in general, so bad, why is it done so much?  I mean, there has to be an overriding upside to counter all the negatives, right?  Focusing on the negative and fringe horror stories is just like saying that childbirth is a potential deadly and dangerous thing, yet there are millions of successful births every year.  Likewise, jumping in your car and driving to work could be the deadliest thing you ever do, yet millions do it every day.  So, for every failed investment there has to be some larger number of successful ones.  If investing was that risky why do we even have an economy built around creating and obtaining wealth both through hard work and supporting investment?

26 comments:

  1. Frank is not the adjective I would use to describe those "answers".

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  2. That sounds like corporate spin to me. It's a shame Delphi has and continues to be held hostage by corporate politics. Release Delphi under an open source license.

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  3. Thank you Allen, this does make me feel better about the sale.

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  4. Bill Smith,


    That's a ridiculous idea, unless you want Delphi to die a slow and lingering death.


    Allen,


    Thanks for the posts keeping us up to date with what's going on (at least as best you can). Keep up the good work!

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  5. I thank you very much for your effords for publishing this info's. They are really appreciated. Really. The only great pity is that latelly less is spoken about Delphi itself... (I know it is normal... but it is still a pity).. Those nice comment's about gutters with line numbers, a pool for how the code editor should be closed, I miss all those things. But thinks are as they are and I wish all this ends in the best way for Delphi and us.

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  6. C Johnson --


    If that post is not frank, according to you, then /nothing/ will please you, dude.


    Nick

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  7. Bill --


    Open sourcing Delphi is the most colossally stupid idea I have /ever/ heard in my /entire/ life.


    Nick

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  8. >Frank is not the adjective I would use to describe those "answers".>


    If you have something to say with some substance behind it, please say it

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  9. Thanks for your effort to keep us informed. It looks like DevCo really is going to be focused on the things we like the most.

    There are (as usual with this kind of situations) many 'prophets' that seem to wait for moments like this to pronounce Delphi (and the other devtools) dead and use this as an opportunity to throw mud at something they do not really know. Anyone who REALLY does know Delphi never had any doubts about its future. Why? Because it is still the best RAD tool ever made to make native windows applications and the only one with almost 100% portablility to the .NET platform.

    VCL rocks and there is still no-one who could convince me why that would not be true. Just take a really close look at FCL en WinForms and you'll see that I am right.


    rgds,

    Unknown Identifier

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  10. Well...


    Everytime when i hear such "frank" speeches from top managers it has bad consequences...


    It might be just mine experience, but anyways, i have that feeling.


    One should be aware that to be fruity is part of management life... And you are right, they have different measurements.


    The only positive information I see here is that he described why this announcement was made. It's just shed some light on it...

    Rest sounds logical, but doesn't guaranied happy end.


    Remember "God father" movie - "It's strictly business" phrase?


    He clearly stated his vision. There was no product or customer base mentioned, just borland business... Am I wrong? Thought need admit he was probably not asked about that... ;-)

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  11. When I first heard Borland's announcement that they where going to divest their interests in development tools, it was shocking. Usually a company divests their stake then announces that part of the company has been sold off.


    "Ed's" explanation makes sense as described but Borland's announce has alienated the community that has stood by it loyally for many years.


    I cannot imagine many Delphi developers plan to stay with Delphi in the near future nor would I imagine that Borland's current Development team is waiting patiently for quick anticipated byout.


    I guess we will see what happens next....

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  12. "What if there are no buyers" doesn't sound like the the right question. I think the proper question is "What if there's no buyer willing to pay the price Borland wants?"


    Really, there are two possible answers to this - either the 'price' drops, or no sale takes place. If a sale 'must' take place, this implies there's no floor to your price. Not a good bargaining position to be in, even if you have many potential buyers.


    Obviously the price is a negotiated thing, and isn't necessarily pure cash, but - as "ed" implies, It's about maximizing the value (long and short term) to Borland, not necessarily about ensuring the future of the products or the future employment of the dev team. Hopefully - for ALL of us - those two go hand in hand, but I don't think it's a slam-dunk.


    Having previously been director of a company which was sold by it's owners, I know some of the things you guys may be going through, and I wish you good luck and STRENGTH.


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  13. This are nice metaphors from Ed to calm our damaged souls...


    I have also decided to be optimistic now - so I just bought a licence of C++Builder 2006 Professional.

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  14. Michael Swindell (Borland)March 17, 2006 at 11:11 AM

    something to keep in mind is that Allen is referring to and quoting from private conversations between "Ed", Allen and few others. It's not a corporate pitch, these are behind the scenes, real "off the record" answers between Borlander's involved in the spinout. Not a conversation intended for a blog post (though later graciously ok'd for Allen's). His post is as close as you can come to being there in the room.

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  15. Off the record or not, the information "Ed" provided Allen (and relayed to this blog) is suggestive of corporate spin to me. I've seen many people blow smoke in my time. I'm not saying thats what happened but it sure it suspicious to me.

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  16. Nick -> Real questions answered in the hypothetical haven't been answered at all, and you never even noticed it.


    And I believe I've weighed in on the whole open source concept elsewhere (for those who missed it, the short of my position is that we've all seen what a bang up job borland has done lately and we all see how clearly open source products like Linux are floundering in the market place inspite of the large tech savy audience trying to build it)

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  17. C Johnson,


    Linux is floundering?

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  18. Bruce -> You mean Linux isn't floundering? I suppose next you'll suggest that borland hasn't distinguished itself with recent versions of Delphi...


    Sheeze, next you'll be suggesting that Nick's stance on open source is more about protectionism for his job than any real merit his opinion might have about open source as a viable option for Delphi.


    Next you'll be suggesting that other open source projects like Firefox are well managed and succeeeding too. I mean, really.

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  19. Open Sourcing of Delphi really is not a good option in keeping it a living product. The open source community simply lacks enough support for Pascal style languages. The FS/OSS community is just too dominated by C programmers who still see Pascal as some dead language that has not evolved in the last two decades. If Delphi was to be open sourced, I just do not see it getting the corporate backing and development effort that it would require. Now with that said, if Delphi was ever going to be shelfed, I would much rather see it open sourced than too just disappear. Borland/DevCo should also not under estimate competition from Free Pascal and Lazarus, as both projects are maturing (even if its slow), when it comes to native executables. Not all of us want to move to the .net.


    I also do not want to see Microsoft buy it either. Microsoft only interest would be to eliminate competition for there C products and to improve there IDE. Microsoft own lack of interest in VB tells me that they also would not have any serious interest in Delphi. I see them treating Delphi like they did Visio. They may put out one or two versions that amount to nothing more than bug fixes and after that, they show no real interest in the product.


    C Johnson,

    While open source is not the right model for every software program out there, and not all open source projects get large community and corporate backing, but to say Foxfire and Linux are floundering does not fit reality. They are not number one yet, but both are making steady head way in that direction. Neither project is going away any time soon, and support for them keeps growing. I would not describe that as floundering.

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  20. Hi Guyz,

    I'm eager to know, if there is a future for me like Delphi people? My personal view is that since Delphi is a stable Windows platform development environment, it can handle any type of Windows and .NET based stand-alone or distributed projects very efficiently within short time.

    My best regards to Delphi... Go Delphi!!!

    Bob.

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  21. hi-


    is paradox db going to die with corel or is there a possiblity of another buyer for that too? to be honest, i know other db products have left it in the dust by now with newer features. it is hard to justify pricing at the same tier as the others. it would be nice to see an infusion of modern stuff or see it open sourced or sold with a different company that doesnt milk it.

    thanks

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  22. 3rdshiftcoder -> you mean new features like stability? BDE (paradox) is fine for a while, but MANY of us have found that over time it definitely falls short with bugs and glitches that no-one can explain or solve. Every single person who has run across it has eventually ported their app to a client server model. Paradox is a dead-end, and if it dies and prevents people from making the mistake of using it, the sooner the better.



    That said, the DB controls are all designed around coding to BDE and paradox. Everything else seems like a kludge.


    J Doll -> Uh, no one is suggesting that the C camp would support Delphi, rather we are suggesting that the Delphi camp would support Delphi. Are you suggesting that the Delphi camp lacks the drive, motivation, and skills?


    As for MS, last I checked, VB.NET is strong, ever growing venture. MS has found that VB has too many limitations and mutated into VB.NET. The fact that most VB programmers can't make the jump says as much about vb programmers as the normal quality of their code. That said, if MS bought Delphi, it wouldn't be competition any more, now would it? Oh, and visio is also still being offered as part of the office suite, so the rumours of its demise might be overstated.

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  23. >>Paradox is a dead-end, and if it dies and >>prevents people from making the mistake of >>using it, the sooner the better.


    Hi-

    it is if it stays at corel. they got rid of the development team. thanks for your input. it helps to see different views. unless i hear devco will rescue it from corel and make improvements, i am going to start learning access again.

    thanks

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  24. C Johson:


    "That said, the DB controls are all designed around coding to BDE and paradox. Everything else seems like a kludge."


    Are you kidding? I wonder if you are a real Delphi developer. It's years I am not working with the BDE - and DB controls works far better than .NET ones.


    "That said, if MS bought Delphi, it wouldn't be competition any more". Of course. Delphi would disappear, and its some of its technology maybe merged into .NET. You are still believing in flying pigs...


    "visio is also still being offered". As a design tool Visio stinks. It's good at diagrams, nothing else.


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  25. Thanks for the post, Allen.


    While I understand the reason to preannounce the sale, it's still a risky strategy from my point of view.


    The prospect of a IDE division sale cast doubts on the future of Delphi. Consider that and along with the fact it does not look as if there is going to be a Delphi version supporting .NET v2.0 for a long time, and my firm has two very good reasons to look at MS products.


    We've been a 100% Paradox/Delphi shop for 15 years. We've now started a couple small projects in VS 2005 C# that are going quite smoothly.


    I doubt if we'll ever have a reason to return to Delphi for new projects.


    That's the other side of the "risk" equation from SOX.

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  26. No sale, no buyer - just as predicted. Meet the new boss: same as the old boss.

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