Inprise in play after Yocam splits?

Last week's abrupt resignation of Del Yocam as CEO of Inprise (or Borland, as it was when he took over two years ago) still remains a mystery. CFO Kathleen Fisher also resigned at the same time. There are as usual two schools of thought - that he was pushed, or he jumped - but neither fits the facts well. The CFO resignation at the same time would appear to favour the push theory, and suggest there are bad results about to be announced for the quarter that has just closed. The board said it was surprised by the resignations, but this could be part of some private agreement to keep Yocam's reputation as intact as possible, although a prepared resignation statement would be more normal in such circumstances. Forced resignations are more usual when the share price is disappointing. Yocam was previously COO at Apple, and turned Tektronix around. He went to Borland in late 1996 when the financial problems were severe. He stabilised the company with major restructuring and shifted direction towards enterprise software and away from developers and desktop customers. Yocam acquired Visigenic in November 1997, paying $150 million for it, probably using money from an out-of-court settlement with Microsoft because the Redmond gorilla had been poaching key Borland staff by offering considerable golden hellos. It was thought at the time that Gates was getting his revenge on Borland for having humiliated Microsoft with TurboPascal and better Basic in Philippe Kahn's days. In addition, Microsoft was keen that the company's successful Delphi product did not succeed, and that Inprise would not gain market share for its C++. As part of an effort to revitalise the company, Yocam changed the name to Inprise in April 1998, and split the company into two separately-located operations in January this year - Inprise, based in San Mateo and focussing on enterprise software, and borland.com, a Web tools and services operation in Scotts Valley. The name change to Inprise was not very successful, but it is too soon to assess whether the new operational divisions will solve other problems. The splitting move was considered to be a solution to infighting at the company, where morale was lowered by bickering between those working on the traditional products and the new Java-Corba direction. The old hands did not take well to a server-centric world. There were disincentives for Yocam to leave without six months notice. His present contract expired in 2000, with renewal options for up to a further 30 months, with six months notice. He received $2 million on joining Borland and a $2 million housing loan (subsequently waived) to buy a house in Palo Alto. His salary was $360,000 and he had stock options for four per cent of Borland's outstanding stock. Without an agreement with the board, he could lose a great deal if he jumped. It is most unlikely that he was fired for cause. Inprise has a management committee running things at present, which does not look capable of gaining industry credibility in its own right. There seems to be no suitor around at the moment to snatch up the company's intellectual capital, although the share price must make this an attractive possibility. As is usual, the board is denying any intention to seek a suitor. Names that have been mentioned include Sun, but Sun's present need for Inprise does not seem to be very great, especially in view of its role in the AOL-Netscape deal. Nevertheless, at the right price the company could attract the attention of Sun's board. Inprise's more recent Corba area of expertise is likely to attract a suitor that wished to gain a credible entry to the object world. On the other hand, there have been rumours (officially denied) that the company was seeking a buyer for Delphi, its Windows-based development environment, for around $90 million. Certainly financial results have been disappointing, and the share price is languishing at $3.28 after a period around $8 nine months earlier. The fall of 8 per cent in the share price 12 hours before the news hit the wires was probably a profit-taking reaction to a 14 per cent rise the previous day, and unrelated. The immediate future cannot be good: poor results are likely to be announced later this month because of restructuring costs following a 20 per cent reduction of staff in January after the reorganisation, and a write-down of assets to reflect the fair market value. A further bad quarter following the present management upheaval is also likely. The last quarter reported (1998 Q4) showed earnings of $3.5 million on revenue of $48.1 million, although there were several exceptional items, including the sales of some shares in Starfish, Kahn's subsequent company that was sold to Motorola last year. However, the medium term looks good, with a growing middleware market and Inprise well-positioned to take advantage of this. The company is one of the few software developers with Windows, Java and Corba experience. It its true that its future at present is linked to the success of Java, but the company has a strong position as a Java developer. The board has said it is immediately seeking a new CFO, but a decision has not yet been made about whether or how to replace Yocam. In many ways, Inprise looks to be in a similar state to Novell when Frankenberg left. The surgery has been done, and the future could be good again. Looking at Inprise's senior staff lineup, what is missing is an inspirational technology leader. Richard LeFaivre is at present the CTO and has the right technical background (he was previously at Apple as VP in charge of research, strategy and architecture) and the board will no doubt be assessing whether he has the personal qualities to be the new CEO. He would need to give up his extra-curricular activities as a writer and expert witness if he were offered the top job. The Register's take on all this is that Yocam decided, while he was on vacation for several weeks recently, that Borland had reached an inflection point and that a younger technologist was needed to inspire the company. Although this took the board by surprise, the logic of such a decision would have been apparent. It is quite likely that Yocam is not interested in a new full-time position, and would prefer to be on a number of boards as a non-executive director. It also appears that he prefers living in Oregon, as he had been commuting to Palo Alto. As with Frankenberg's resignation, there could also be personal health or family circumstances that are quite independent of the company - an explanation that appears to fit the fact best, especially as it appears that his departure terms are not yet determined. The CFO defection could then be seen as her taking advantage of the opportunity to avoid being there when the bad financial news strikes. ®