Borland to Acquire Ashton-Tate in a $439-Million Deal
Ashton-Tate, the personal computer software pioneer that stumbled badly in recent years, will be acquired by fast-growing Borland International in a stock swap valued at $439 million, the two companies announced Wednesday.
The deal, expected to be final within three months, probably will result in further cuts at Ashton-Tate’s Torrance headquarters--now home to less than a third of the company’s 1,600 worldwide work force--as employees are reassigned to Borland facilities in the Silicon Valley or laid off.
As the latest in a series of linkups in the personal computer software industry in recent weeks, the Ashton-Tate acquisition underscores an increasing move among software publishers to “bulk up” and broaden their offerings as the software industry matures and faces the inevitable pressures to consolidate.
The deal also offers a poignant reminder of the severe penalty that even market-leading technology companies are often forced to pay for their marketing mistakes and failure to offer innovative technology.
For Ashton-Tate, the deal signals the end of a 12-year run that saw it rise meteorically to become the world’s third-largest PC software publisher and then suddenly crash nearly three years ago under the weight of a flawed update to its flagship dBase product and a subsequent series of marketing missteps.
In the wake of those problems, the company lost more than $50 million, dumped its chairman, Edward M. Esber Jr., and suffered a mass exodus of engineers. That weakened its already thin technical staff and left it particularly vulnerable to harder-charging competitors such as Borland.
Founded eight years ago by Philippe Kahn, a flamboyant but technically savvy engineer, Borland will emerge from the acquisition as the fifth-largest software publisher. Analysts said the deal gives Borland additional growth momentum and puts it in a far stronger position to battle with market leader Microsoft Corp.
“The competition for (Microsoft Chairman) Bill Gates is getting heavy,” said Jeffrey Tarter, publisher of a software industry newsletter. “Now there is another strong competitor in an area where he’s weak: database software.”
According to Esber, Borland has been after Ashton-Tate for the past 15 months and was prepared to begin negotiations in March, 1990, that could have led to a merger of the two companies, rather than the outright acquisition announced Wednesday.
However, Esber said, the Ashton-Tate board declined to consider any merger offer, setting the stage for the showdown that ultimately led to his leaving the company the following month. “The deal announced today is good,” said Esber, who still controls about 1 million Ashton-Tate shares. “But a better deal was offered before.”
In addition to Borland, Esber said Lotus Development Corp. and Microsoft at various times in the past several years investigated the possibility of acquiring Ashton-Tate.
Borland’s price represents a premium of about 50% over what Ashton-Tate shares were trading for over the past several days. Ashton-Tate stock rocketed $4.625 per share to close at $15.875 on volume of 12.9 million shares--more than half the company’s outstanding stock. Borland, meanwhile, tumbled $2.25 per share to finish at $47.375.
The deal essentially gives Borland access to the more than 3 million users of Ashton-Tate’s premier product, dBase, which still commands about one-third of the market for database programs used to index, sort and retrieve vast quantities of information on personal computers.
When combined with the nearly 12% database market share owned by Borland’s rival Paradox program, the combined company will have a dominant 44% market share, according to figures from Digital Information Group in Stamford, Conn.
Kahn said the deal will allow Borland to provide a wider range of software, from spreadsheets and databases to graphics and programming languages.
But questions remain on how Borland will market and support the rival and incompatible products. Kahn repeatedly told skeptical analysts Wednesday that Borland will support and enhance both products and provide future products to link the two.
However, analysts said, customers are initially likely to be confused by the rival offerings and may delay purchases until the strategy of the combined company becomes more clear.
Still, analysts generally praised the long-term prospects for the acquisition.
Merger Partners at a Glance
Borland International
Headquarters: Scotts Valley, Calif.
Revenue for fiscal year ended March 31: $226.7 million
Profit for fiscal year:
$26.8 million
Employees: 1,000
Best-known software: Paradox database, Quattro Pro spreadsheet, Pascal programming language.
Ashton-Tate
Headquarters: Torrance
Revenue for fiscal year ended Dec. 31: $230.5 million
Profit (loss) for fiscal year:
($18 million)
Employees: 1,600
Best-known software: dBase database
Source: Company annual reports
Database Software Market Leaders Ranked by sales
1990 1989 sales Percent sales Percent (millions) of market (millions) of market Ashton-Tate $172.9 32.9% $196.3 45.2% Oracle 85.0 16.2% 60.0 13.8% Borland 60.7 11.5% 37.5 8.7%
Source: Digital Information Group
