Is Borland In Microsoft's Sights?

By Gene G. Marcial

Not Much Progress
Borland Software (BORL ) has been an under-achiever. But this year, management's turnaround efforts may take hold, says Rodney Hathaway of Heartland Advisors, which owns shares. Borland's software simplifies writing applications to set up e-businesses using major computing systems, such as Sun Microsystems' (SUNW ) Java and Microsoft's (MSFT ) .Net platforms.

Hathaway says Microsoft may go after Borland. He explains that since most companies now are looking to do business over the Internet, demand for Borland's tools will be on the rise. Borland's software lets big corporate programmers use Sun's Java and Microsoft's Web-based .Net platform, which is more flexible, with multiple connection capabilities. And if Borland is owned by Microsoft, it could induce more programmers to use .Net. Hathaway doesn't think a Microsoft-Borland deal will bother regulators. Borland, he figures, is worth 14 based on his earnings estimate of 30 cents a share in 2004 and 50 cents in 2005.

Cheng Lim of Fulcrum Global Partners says Borland trades at 21.6 times 2005 estimates, with projected growth of 58% vs. its peer group's 28 times on projected growth of 43%. He rates it a buy. Borland didn't return calls. Microsoft declined comment.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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