Borland Revenues Rise 20% in Second Quarter; Net Income Increases 60%.

Business Editors

SCOTTS VALLEY, Calif.--(BUSINESS WIRE)--July 19, 2001

Borland Software Corporation (Nasdaq:BORL) today announced its financial results for the second quarter and six-month period ended June 30, 2001.

For the second quarter, revenues increased 20 percent to $56.0 million from $46.7 million for the same quarter a year ago. Gross margins were 83.1 percent for the second quarter of 2001 versus 83.4 percent for the second quarter of 2000. Net income for the quarter advanced to $6.4 million, or $0.09 per diluted share, compared with net income of $2.0 million, or $0.03 per diluted share, for the second quarter of 2000. Net income for the second quarter rose 60 percent when compared to pro forma net income of $4.0 million for the second quarter of 2000, which excluded $2.0 million in expenses related to the terminated merger with Corel Corporation.

For the first six months of 2001, revenues increased 16 percent to $107.7 million from $93.2 million for the first six months of 2000. Gross margins for the period were 83.8 percent versus 82.0 percent in the first six months of 2000. Net income for the 2001 six-month period increased to $12.3 million, or $0.17 per diluted share, compared with net income of $856,000, or $0.01 per diluted share, for the same six-month period last year.

"We are pleased to report that we delivered a solid performance in our second quarter, increasing revenues, operating profits, and net income," stated Dale L. Fuller, Borland's president and chief executive officer. "Revenue growth was driven largely by our success as the leader in the Java(TM) development market, combined with our strong execution. Additionally, the shipment of Delphi(TM) 6 together with contributions from Kylix(TM) sales reinvigorated growth in our Rapid Application Development business unit, and new customer wins sustained our enterprise deployment business during an extremely difficult and challenging economic climate."

Borland continues to gain traction in the fast-growing Java development and enterprise deployment markets. Further extending its reach, Borland announced agreements with Nokia, the world's largest producer of mobile handsets, and SAP, the world's third largest software company and the leading enterprise resource planning provider. Working with Nokia, Borland delivered JBuilder(TM) MobileSet, Nokia Edition, which should accelerate the development and deployment of mobile and wireless applications. SAP selected JBuilder as its preferred Java development environment and will be recommending the JBuilder development environment to its customers around the world.

At the JavaOne(SM) Developer Conference, the company's leading Java products, Borland JBuilder and Borland(R) Enterprise Studio, swept the awards ceremony and won six awards, including Most Valuable Product.

"Borland's value proposition is simple," added Mr. Fuller. "Our leading-edge technologies help companies move into the future without abandoning the past. Using our development, deployment, and management products, companies are able to leverage their existing IT investments, improve productivity, and integrate legacy systems across all the leading enterprise platforms -- including the Internet."

Fred Ball, the company's executive vice president and chief financial officer, stated, "Borland's financial position continues to improve with cash, cash equivalents, and short-term investments of $274.4 million at June 30, 2001, while our debt continued to remain very low. After the quarter ended, we further reduced our debt when we used approximately $9 million of cash to pay off an existing fixed-rate mortgage.

"We added approximately $7.4 million in cashflow from operations during the quarter," continued Mr. Ball. "The strength of our balance sheet demonstrates our continued ability to execute and to exercise ongoing fiscal discipline. Furthermore, our financial strength helps to position us well to contest enterprise-level business and support our growth strategy."

"As we look toward the second half of this year, we expect to continue to grow revenues and remain profitable. While many corporate IT managers appear reluctant to plan long-term projects, we will continue to focus on leveraging our leadership position in the Java market, delivering new products across our business units, and maintaining our operational discipline," concluded Mr. Fuller.

Third Quarter 2001 Outlook

The company anticipates a 20-25 percent increase in revenues compared with the year-ago third quarter, gross margins to remain in the 83-85 percent range, operating margins to remain in the range of 7-9 percent, and earnings per diluted share to range from $0.08-$0.10. Depending on Borland's stock price performance, weighted average shares outstanding could range from 74 million to 76 million fully diluted shares as determined by the Treasury method and assuming no further stock increases except pursuant to currently outstanding stock options and warrants.

Conference Call Information

The Borland Software Corporation second quarter teleconference call and simultaneous Webcast is scheduled to begin at 2:00 p.m. Pacific Daylight Time, on Thursday, July 19, 2001. To access the live Webcast, please visit www.streetfusion.com or Borland's Website at www.borland.com/about/investor at least 30 minutes prior to the call to download any necessary audio or plug-in software.

Borland Software Corporation

Borland is a leading provider of high-performance e-business platform solutions designed to increase developer productivity and reduce time to market for software projects. E-business platform solutions consist of software products that allow businesses to develop, deploy, and manage e-business applications. Borland is the vendor of choice for professional e-business solution providers who demand a vendor-independent platform that supports rapid time to market, high productivity, performance and availability. Founded in 1983, Borland is headquartered in Scotts Valley, California, with operations worldwide. To learn more, visit Borland at http://www.borland.com, the community site at http://community.borland.com, or call Borland at 800/632-2864.

All Borland brand and product names are trademarks or registered trademarks of Borland Software Corporation, in the United States and other countries. Other names mentioned herein may be trademarks of the party using such names.

Forward-Looking Statement 

This release contains "forward-looking statements" as defined under the Federal Securities Laws, including the Private Securities Litigation Reform Act of 1995. All statements that are not historical are forward-looking. Forward-looking statements may relate to, but are not limited to, Borland's future financial performance, capital expenditures, revenues, gross margins, operating margins, days sales outstanding, acquisitions, earnings, earnings per share, costs, weighted average shares outstanding, product development plans, global expansion plans, estimated size of potential customer markets, demand for Borland's products, the projected acceptance by existing or potential customers of new technologies and the potential features of, or benefits to be derived from, the products developed, marketed or sold by Borland, market and technological trends in the software industry and various economic and business trends. Such forward-looking statements are based on current expectations that involve a number of uncertainties and risks that may cause actual events or results to differ materially. Factors that could cause actual events or results to differ materially include, among others, the following: general economic factors and capital market conditions, general industry trends, the potential effects on Borland of competition in computer software product and services markets, growth rates in the software and professional services markets that Borland participates in, rapid technological change that can adversely affect the demand for Borland's products, shifts in customer demand, market acceptance of new or enhanced products or services developed, marketed or sold by Borland, delays in scheduled product availability dates, actions or announcements by competitors, software errors, reduction in sales to or loss of any significant customers, the ability to successfully integrate acquisitions, any failure by Borland to protect its intellectual property rights, the dependence of certain of Borland's business units on licenses from third parties, Borland's ability to attract and retain qualified personnel and Borland's failure to reduce costs. These and other risks are detailed from time to time in Borland's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, its latest Annual Report on Form 10-K and its latest Quarterly Report on Form 10-Q, copies of which may be obtained from www.sec.gov. Borland is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

                     BORLAND SOFTWARE CORPORATION
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           (in thousands, except per share data, unaudited)

                                Three Months Ended  Six Months Ended
                                June 30, June 30,   June 30, June 30,
                                 2001     2000       2001     2000
                               -------- --------   -------- --------
Revenues
   Licenses and other          $ 47,538 $ 40,000   $ 89,945 $ 79,774
   Services                       8,474    6,716     17,763   13,442
                               -------- --------   -------- --------
Total revenues                   56,012   46,716    107,708   93,216

Cost of revenues
  Licenses and other              3,460    2,867      6,440    6,930
  Services                        6,019    4,880     11,051    9,816
                               -------- --------   -------- --------
Cost of revenues                  9,479    7,747     17,491   16,746

Gross profit                     46,533   38,969     90,217   76,470

Operating expenses
   Research and development      11,398   10,509     22,676   21,562
   Selling, general
    and administrative           30,246   25,447     58,785   52,668
                               -------- --------   -------- --------
Total continuing expenses        41,644   35,956     81,461   74,230

   Provision for restructuring
    and acquisition charges         ---    2,014        ---    3,556
                               -------- --------   -------- --------

Total operating expenses         41,644   37,970     81,461   77,786

Operating income (loss)           4,889      999      8,756   (1,316)
Interest income, net and other    3,160    2,392      6,608    4,607
                               -------- --------   -------- --------

Income before taxes               8,049    3,391     15,364    3,291

Provision for income taxes        1,635    1,389      3,098    2,435
                               -------- --------   -------- --------

Net income                      $ 6,414  $ 2,002   $ 12,266  $   856
                               ======== ========   ======== ========

Income per share - Basic (1)    $  0.10  $  0.03   $   0.19  $  0.01

Income per share - Diluted      $  0.09  $  0.03   $   0.17  $  0.01

Shares used in the calculation
 of basic income per share       62,577   61,464     62,405   61,209

Shares used in the calculation
 of diluted income per share     73,879   69,165     73,070   71,481

(1) The calculation of net income per share for the three and six
    months ended June 30, 2001 includes an accretion to the Preferred
    Stock Series C of approximately $178,000 and $397,000,
    respectively. The calculation of net income per share for the
    three and six months ended June 30, 2000 includes an accretion to
    the Preferred Stock Series C of approximately $219,000 and
    $438,000, respectively.


                     BORLAND SOFTWARE CORPORATION
                 CONDENSED CONSOLIDATED BALANCE SHEET
                            (in thousands)

                                           June 30,    December 31,
                                             2001         2000
                                          (Unaudited)   (Audited)
                                          ----------    ----------
ASSETS
Cash, cash equivalents
 and short-term investments               $  274,428    $  262,559
Accounts receivables, net                     42,994        33,495
Property and equipment, net                   20,489        20,438
Other assets                                  23,766        24,411
                                          ----------    ----------
Total assets                              $  361,677    $  340,903
                                          ==========    ==========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                       $   83,188    $   78,908
Long-term debt and other                      19,111        19,315

Stockholders' equity                         259,378       242,680
                                          ----------    ----------
Total liabilities
 and stockholders' equity                 $  361,677    $  340,903
                                          ==========    ==========