A Bruised Borland Is Up And SwingingKathy Rebello
New Year's Eve was lead-heavy with symbolism for Philippe Kahn, Borland International Inc.'s chief executive. He snapped on skis and a backpack and, with a party of skiers, trudged his way up to the 14,000-foot level of an Aspen ski slope. It took two grueling hours. But at the top, Kahn ushered in midnight with a glass of champagne, then put on his lighted headgear and swooshed down through the Colorado white powder. "It was perfect," Kahn says. "I had all the uphill stuff in 1992. And I'll have all the downhill stuff in 1993. This year is going to be great for Borland. No problem."
But it may not be the done deal Kahn predicts. In 1992, Borland, the No. 5 maker of personal-computer software, was plagued by product delays and hit-and-miss profits. Topping it all was the layoff of 15% of the company's 2,200-person work force in December. These days, Borland's stock is trading around 19, near its 52-week low, as investors anticipate the company's Jan. 18 announcement of an $11 million operating loss for the quarter ended Dec. 31.
Wall Street figures Kahn will wrap up fiscal 1993, ending Mar. 31, by breaking even on $475 million in revenues. That would be an improvement over the company's 1992 loss of $110 million on sales of $482.5 million. The profit comeback is part of Kahn's recovery plan, one that could be as tricky to execute as maneuvering a double black diamond ski run.
MORE BLOOD. The idea: return to Borland's roots with aggressive prices on top-notch products. Borland will fire its first salvo on Jan. 15, when it is set to announce 90-day promotional prices on two key products: Paradox for Windows, a new data base that will sell for $139.95 instead of the $795 Borland charges for other Paradox versions, and Quattro Pro for Windows, a spreadsheet that has sold poorly since its September debut. That program will go for $99.95, down from $495. The lowball prices will undercut rivals by as much as six times--a move sure to draw more blood in the ongoing PC software price wars.And that's the rub. While Borland has built itself up from a no-name to the top tier with bare-knuckled pricing on quality products, this time could be different. In the past, Borland was the underdog with nothing to lose. Now, Borland holds 64% of the $450 million data-base market (chart)--and it has plenty at stake. By weighing in with a rock-bottom price tag on its new data base, the company could permanently lower prices on data-base software. And that could forever cut Borland's revenues. Notes analyst Terence Quinn of Kidder, Peabody & Co.: "Borland has, without a doubt, the most to lose here."
But Kahn points out that early versions of Paradox for Windows, which will ship on Feb. 1 after 12 months of delays, have won technical praise. He figures the solid reviews and low promotional price will combine to ignite huge sales volume. The fight will be tough. As Borland piled up delays with its Windows product, its chief rival moved in for the kill. Microsoft Corp. beat Borland to market by shipping its Windows data base last November and stole a page from Borland's book on pricing. It has launched its own 90-day promotion, selling Access for just $99. The result? "It's going like gangbusters," says Charles Stevens, Microsoft's data-base general manager. He says Microsoft has sold 500,000 copies of Access--nearly five times more than projections. "I think we've got the advantage of going first and soaking up the pent-up demand," says Stevens.
COUNTERSTRIKE. Kahn begs to differ. He says Microsoft rushed Access to market too soon, as evidenced by reports of bugs in the product. Microsoft concedes that Access has about 20 bugs, none of which, it claims, are serious. And John Eroszonak, director of vendor relations at software seller PC Connection Inc. in Marlow, N. H., says his company has been surprised by the few calls it has received for technical support--a rarity for high-selling new software.
There's more. Just as Borland is about to launch Paradox for Windows, Microsoft is preparing a counterstrike. In late January, Microsoft plans to ship its second Windows data base, FoxPro. That will go head-to-head with Borland's dBase for Windows, which won't hit stores until the second half of 1993. Says Goldman, Sachs & Co. analyst Rick G. Sherlund: "Maybe Borland put their finger in one hole in the dike. But Microsoft will poke another. Microsoft has them on the defensive."
Being on the defensive is just where Kahn and company have been most successful--a point of history even Microsoft acknowledges. "I certainly can't count Borland out," Stevens concedes. Kahn figures his strategy guarantees him an awesome run. If he's wrong, 1993 will be one long, slippery slope.