In what must have been one of his last interviews before he resigned under the cloud of a profit warning, Borland’s CEO Dale Fuller gave some insight into the turn of events to come when I caught up with him around two weeks before he left his post.
On July 7 application development tools and methodologies player Borland issued a profit warning, saying it now expects quarterly revenue in the region of $65m to $67m, and a much wider than expected net loss of between 24 to 26 cents per share. The company had previously issued guidance of $70 to $73m revenue and a loss of 19 to 21 cents per share. Without even issuing a separate press release, the company announced also that Dale Fuller was stepping down from the CEO post but staying on for the time being as a director.
Speaking to me on a rare UK visit two weeks earlier, Fuller gave little hint that he was about to lose his CEO position.
Prior to being headhunted to lead Borland, Fuller by his own admission was lounging by his pool considering his options, even a rather early retirement. Asked whether, now that he has pretty much turned Borland around since he was made CEO in 1999 (give or take the recent profit warning) he may be ready to return to the poolside, Fuller replied: "I still love what I am doing. As long as the board want me to keep doing what I am doing then I will stay doing it."
But he did give some veiled forewarning of the imminent sales miss: "We are now more reliant on very large deals – last quarter we had eight multi-million dollar deals," he said. While it is good to have multi-million dollar deals, they also mean that one or two deals being pushed out to the next quarter or not closing at all can have a serious impact on the company’s quarterly results.
He continued: "The sales organisation needs to be better at managing those big deals," before adding that, "IT spending is still very precarious. We think it’s still at 2002-2003 levels. Seasonality is moving from being something that effects the third and fourth quarter to something that effects the second, third and fourth quarter."
His plan though was to "be profitable, and keep doing what we are doing. We’re not going to throw things to the wind. Are we executing? Yes. We’re not going to change drastically. I have no doubt as long as we keep doing what we are doing we will be successful."
In another ominous statement regarding the impact of Sarbanes Oxley on US companies, Fuller said: "One of the impacts has been that research has shown that the rate of CEOs leaving their posts is now 300% higher than it was before Sarbanes – there’s so much more pressure on the CEO today."
Fuller will continue on Borland’s board of directors for the time being. The company named Scott Arnold, chief operating officer, as an interim CEO until a permanent replacement is found.
Fuller must be some given credit for growing Borland consistently year after year. Before he joined, the former CEO had changed the company name to Inprise, doing away with years of trusted mind share Borland held among the developer community. The company was also somewhat stalled, and its strategy of targeting senior IT managers instead of developers – without having very much to sell to them – was a mistake. Fuller put the house in order, changed the name back to Borland, and refocused on its core competencies.
He’s not got everything right, however. The company’s proposed merger with Corel announced in February 2000, on the premise that the two would create a ‘Linux powerhouse’ looked ludicrous from the outset. As Corel’s stock plummeted the merger was abandoned in May of that year, perhaps a lucky escape for both Fuller and Borland. There was also a who-ha over the company’s ‘open sourcing’ of the Interbase database. Despite allegedly being open source, external developers were not able to contribute, prompting a group of enthusiasts to start the Firebird project at SourceForge instead, and harming Borland’s open source credentials.
But since joining Fuller has consistently grown sales on an annual basis, with total sales for 2004 up at $310m and net income at $11.4m. Back in fiscal 1999 sales came to just $175m. His most recent strategy, centred on the concept of ‘Software Delivery Optimization’ looks to have been well executed so far (again, apart from the most recent sales miss).
To enable that vision Borland acquired TeraQuest Metrics in January this year, and in so doing took charge of Bill Curtis and Charlie Webber, co-authors of the Capability Maturity Model (CMM) that is the basis for many of today’s software development best practices, including Carnegie Mellon Software Engineering Institute’s stringent Capability Maturity Model Integration (CMMI). A shrewd acquisition, and one that may well pay dividends in future quarters.
It’s not known how long Fuller intends to act as a director, or whether he will only hold that post until a permanent CEO can be found. But despite the recent troubles with Borland’s quarterly results, if he were judged on his performance since he was made CEO, Fuller would still have a pretty enviable track record.