When they are in danger of being consumed by a rapidly spreading forest blaze, firefighters often light a second fire parallel to the first. If all goes as planned, the secondary fire will destroy the fuel for the oncoming blaze and deprive it of oxygen. It is a very risky maneuver, because firefighters must also survive their own flames.
And that is the position of Borland International Inc., which decided late last month to sell its new Quattro Pro for Windows 5.0 spreadsheet for less than $50. Trapped between not one but two onrushing infernos, in the form of Lotus 1-2-3 and Microsoft Excel, Borland chose to light a fire under its own spreadsheet.
Until Jan. 15, anyone can buy the individual version of Quattro Pro for Windows 5.0 for $49.95, and the price falls to $39.95 for anyone who owns a rival program or is upgrading from an earlier version. A version of Quattro Pro designed for use on local area networks retains the conventional spreadsheet price of $495, but current owners can upgrade to it for $79.
Borland executives have set ambitious goals: to sell 500,000 copies of Quattro Pro for Windows 5.0 by Jan. 15 and to overtake either Lotus 1-2-3 or Excel, or both, in the Windows spreadsheet category.
If nothing else, Borland's fire-sale strategy shines some light on the issue of pricing software. More and more software makers are following the lead of personal-computer companies, which have cut hardware prices in the battle for market share.
"We wanted to do what Compaq has done, to restructure and rethink the business, to become a lean and mean organization that can make money in any competitive environment," said Borland's chief executive, Philippe Kahn. "Compaq became aggressive, and we need to get very aggressive and get customers to see our product."
A price war?
It remains to be seen whether Borland has the clout, as Compaq has in hardware, to start a software price war. Hardware and software are different, of course, and business software is different from consumer software.
The purchase price of software is relatively insignificant when measured against other costs, especially for training workers to use it and the added administrative burdens of installation and support.
When software training takes many productive workers out of the loop for a couple of days or more, it's no wonder businesses are reluctant to change programs.
With new versions of Lotus 1-2-3 and Microsoft Excel closing in, Borland -- a distant third in the spreadsheet race -- had to try something extraordinary.
Several billion-dollar giants have tried to buy their way into new software categories. Microsoft Corp. introduced its Access data-base program for Windows last year for $99. International Business Machines Corp. has been sending out the OS/2 operating system for as little as $50. Computer Associates rocked the industry a few months ago by introducing its Simply Money personal financial management program for only a $6.95 shipping and handling fee.
The strategy has impressed smaller companies as well. Central Computer Products of Filmore, Calif., said last week that it would give out 100,000 copies of its Do-It-Yourself Accounting for Windows program for $6.95.
"Holy smoke," said Ann C. Stephens, president of PC Data, a software research company in Reston, Va. "These are programs that used to cost $350. Pretty soon they're going to be free with a $5 purchase."
"And the interesting thing is that it's only with business 'u software," Ms. Stephens said. "All the consumer software is going up. The top three best-selling computer games in June all sold for $50 or more, street price; Quattro Pro is cheaper. It's lunacy."
Consumer software prices are rising because games are getting more complex and require more development costs.
But it is hard to believe it can take more developers to produce a game like "X-Wing Fighters" than an object-oriented, feature-rich, graphical spreadsheet like Quattro Pro.
It is unlikely that Borland can make a profit at current prices. The physical cost of the software package alone, including documentation, diskettes and the box, is estimated at $10 to $14. Dealers will buy the program from Borland at discount, and there are big distribution costs. The profit margin is thin even before the much larger costs of research and development, testing and customer service.
Computer Associates was delighted to "give away" a couple of million copies of its program, which is less complex to produce and easier to distribute, because every copy generated the name and vital statistics of a potential buyer of other Computer Associates programs. It was in effect buying its way into a market category dominated by established players.
A mature category
Borland, on the other hand, is trying to buy its way up in a mature category, spreadsheets, in which it already has customers.
For Borland, however, the spreadsheet business has been pure hell. Quattro Pro rarely receives the technical appreciation it deserves. The new version was much harder to develop than Borland anticipated.
To top it off, Lotus sued Borland for copyright infringement based on a feature that converts Lotus 1-2-3 "macro" commands to work with Quattro Pro. Lotus won, with potential damages of $100 million or more. Borland was forced to remove the Lotus conversion feature.
And now, it's out of the frying pan and into the fire.
"Borland has made the product irrelevant to themselves financially," said Jeffrey Tarter, editor of the newsletter Soft-Letter. "Even if they sell a million copies, it generates maybe $25 million in revenue. That's insignificant to a company Borland's size." Borland had 1992 calendar year sales of $464 million, far below Microsoft's $3.2 billion and Lotus's $900 million.
"And if their ambition is to seed the market with a Borland product and then capture these people and upgrade them to Borland's data-base products and programming languages," Tarter continued, "well, the people who buy spreadsheets are not typically the type who buy data bases and languages."
Customers hoping that Borland's move will start a software price war, like the one that halved hardware prices over the past year, are likely to be disappointed. Executives at Lotus and Microsoft said there were no plans to reduce their $495 suggested retail prices.
Frank Ingari, Lotus's vice president for marketing, dismissed Borland as a "fringe player" in the spreadsheet business and said the $49 price was a "last-gasp move."
"It would be very different if it was Excel," Ingari said. "Borland doesn't have the presence across the market to affect the pricing structure."
There are other issues involved in Borland's move. Spreadsheets are complex and require customer support, which is expensive. Some companies figure the average cost at $10 a call. With the new pricing, it appears that Borland will have to start charging customers for help, a competitive disadvantage if rivals do not follow suit.
The thin margins also strain the company's ability to develop new products and features. Corporate customers want to know that a product is not a dead end.
And, once customers embrace the idea of paying $49.95 for Quattro Pro, it becomes difficult to raise prices again. So Borland's long-term challenge is to get lean enough to survive on reduced rations and little sleep. That's the "barbarian" philosophy espoused by Kahn, Borland's chieftain, as key to winning the battle with Lotus and Microsoft.
L But in history, critics note, the barbarians became extinct.
"A lot of Borland's competitors say that because they live by the sword, they'll die by the sword," said Ms. Stephens of PC Data. "They may be right."
(Peter Lewis works out of the New York Times' Austin, Texas, bureau:  328-8258.)