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KAHN MAKES HIS MARK French 'teddy bear' has moved Borland to forefront of software industry

THE BALTIMORE SUN

Scotts Valley, Calif. A few years ago, he was the zesty French teddy bear who peddled a couple of fast computer language programs and a nifty executive organizer -- and whose dreams of software grandeur were met with amusement and occasional condescension from the rest of the industry.

No more. Today, Philippe Kahn, the 39-year-old founder, president and chairman of Borland International Inc. in Scotts Valley, is near the top of the industry's very short list of People Who Matter.

With its purchase last week of Ashton-Tate Corp., Borland became a $500 million company, one of the largest in the personal computer software industry and one of the few capable of influencing its direction.

Behind Mr. Kahn, Borland has achieved remarkable success in three of software's four major product categories by marrying pioneering technology with eye-popping marketing. Think of it as a cross between Xerox PARC and Nintendo.

The Borland formula is simple: Develop a hot product and then use "Go for it, dude!" as your main sales strategy, mixing discount prices, boast-filled advertisements, (which Mr. Kahn often writes), mass mailings and boiler-room phone operations.

And if the market leader you're going after has an "unbeatable position" -- well, so much the better. Torrance, Calif.-based Ashton-Tate found that out at the cost of its corporate life, and as Lotus Development Corp. of Cambridge, Mass., is finding out at the cost of its dominance of the spreadsheet marketplace.

Along the way, Mr. Kahn, a former mathematics teacher, stumbled upon Kahn's Corollary: that the defense against becoming fat and happy is staying purposefully trim. It's a modus operandi that brings with it enough strategic freedom to make archrival Bill Gates downright apoplectic, as the Microsoft chairman confided in a once-confidential memo to his top staff in May.

Borland has spent all of its eight years competing against firms such as Microsoft and Lotus in the world of personal computer software, dividing sales about equally among its language systems for computer programmers, its Quattro Pro spreadsheet and its Paradox database package.

Now, though, Borland has set out on the toughest corporate challenge of its life.

It is undertaking a major expansion of its database line not only by swallowing Ashton-Tate and its huge installed base but also by targeting the world outside the personal computer: the huge, profitable corporate database market, which runs on minicomputers and similar machines and which is dominated by such firms as Oracle Systems Corp. of Redwood City, Calif.

To enter that world, Borland needs to develop new technologies and new marketing skills, all the while holding onto its current franchise and managing the problem of reducing Ashton-Tate's 1,700-person work force and absorbing what's left into Borland.

Taking out Ashton-Tate, its one-time rival, cost Borland about $440 million in stock -- and drew mixed reviews.

Analysts said that with its momentum in the database marketplace, Borland was buying what it would soon own anyway. Picking up all of Ashton-Tate for some of its subsidiary companies -- a Borland claim -- was like buying a car to get a front seat, they added. And some predicted the buyout would swamp Borland's top management with acquisition-related diversions from the main corporate mission.

"Yeah, I've heard all that," Mr. Kahn said. "Everything. Even that we're committing euthanasia with Ashton-Tate."

In high technology, he explained, timing is everything, and Borland couldn't afford two more years of "blocking and tackling" with Ashton-Tate while facing a real battle over "downsizing." That involves the move by corporate data keepers away from the minicomputers where Oracle gets much of its $1 billion in revenues and toward Borland's home turf: desktop personal computers and new generations of machines, like the one the IBM-Apple joint venture plans to build.

Mr. Kahn said Ashton-Tate's Interbase subsidiary, which has some of the complex technology that Borland will need to compete with Oracle, was the "crown jewel" of the purchase, and there will be enough fallout from the rest of the purchase, such as overseas distribution, to justify its cost.

As to Borland becoming unfocused, Mr. Kahn said, "I just won't let it happen," adding that he has heard reservations about his management skills since Borland was a $10 million company.

Another explanation for the Ashton-Tate purchase was that Borland wasn't at all concerned about Oracle's world but instead wanted to solidify its position in anticipation of whatever database product Microsoft was preparing.

"You have to be worried about Microsoft," Mr. Kahn said. "Anything they want, they can get. Microsoft wants to be a billion-dollar database company. Well, we'll fight to keep that from happening."

Borland has other fights on its hands, too. Lotus has sued, claiming Borland improperly borrowed the menu command system of its 1-2-3 spreadsheet program. An adverse ruling could severely complicate the remarkable ascent of Borland's Quattro Pro, which since its introduction has defied all initial expectations and continues to expand its presence in the spreadsheet market.

Borland also must navigate the technical, marketing and cultural shifts necessary for a personal computer-based company to sell into the far more complex corporate database world.

Borland, though, has a lot going for it, such as its mastery of "object-oriented" programming, an increasingly important software development technique that has been a Borland specialty for several years. The company also can gain comfort because its sales per employee are among the highest in the industry. Along with profits per employee, those are the only business ratios that Mr. Kahn says he worries much about.

It seems to work. Mr. Gates, in his memo, talked enviously of how Borland's low-cost structure would allow it to build free word-processing capabilities into the upcoming Windows version of its Quattro Pro spreadsheet -- something Mr. Gates said Microsoft could never afford to do.

Because that product plan was a closely held secret at Borland,

Mr. Kahn said, Mr. Gates' knowledge of it was a serious violation of business ethics.

"I was furious. I called him up. I asked him how he got hold of our trade secrets. He just mumbled. I asked him if he deliberately leaked it. He just mumbled. He had three lawyers with him in the room at the time. I said, 'I won't sue you, but this just shows your true colors.' "

Mr. Kahn wondered if the Gates memo had been deliberately planted, in part to foil Borland. And he persisted in speculating that it had been, even when told the definitive story of how it hadn't been.

"Do you know who Gates' hero is?" Kahn asked. "Yes. Napoleon. Precisely. And Napoleon did things like that all the time."

Asked about Mr. Kahn's remarks, a Microsoft spokeswoman said Mr. Gates considered him "an honorable competitor," and added, "Philippe is just being Philippe."

As they contemplate the coming months and years, Borland spouses no doubt hope that Philippe was just being Philippe when he talked about how Borland wouldn't be making the same mistakes of the companies it has vanquished.

"Borland people used to work 12 hours a day, six days a week," he said. "But we've gotten a lot of adrenalin from this acquisition. Now, it's going to be 15 hours a day and seven days a week."

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