Borland Reports Strong Financial Results for Second Quarter 2004; Company Achieves $76.5 Million in Revenue, GAAP Earnings of $0.03 per share and Non-GAAP Earnings of $0.08 per share

Business Wire, July 22, 2004

SCOTTS VALLEY, Calif. -- Borland Software Corporation (Nasdaq:BORL) today announced financial results for its second quarter of 2004.

Revenues for the second quarter of 2004 were $76.5 million, and GAAP net income for the second quarter of 2004 was $2.8 million, or $0.03 per diluted share. This compares to revenues of $72.9 million and GAAP net income of $713,000, or $0.01 per diluted share, reported in the prior quarter and revenues of $76.3 million and a GAAP net loss of $5.0 million, or $(0.06) per diluted share, reported in the second quarter of 2003.

Non-GAAP net income for the second quarter of 2004 was $6.5 million, or $0.08 per diluted share, which compares to Non-GAAP net income of $4.8 million, or $0.06 per diluted share, reported in the prior quarter, and Non-GAAP net income of $3.5 million, or $0.04 per diluted share, reported in the second quarter of 2003.

Borland generated $12.8 million in cash flow from operations and closed the second quarter of 2004 with $213.5 million in cash, cash equivalents and short-term investments.

"While we are pleased to report strong financial performance and execution across our business in the quarter, we believe there is still much opportunity for improvement," said Borland's president and chief executive officer, Dale L. Fuller. "I'm proud of our continued success at converting design wins into major, multi-product ALM engagements. The British Telecommunications relationship announced today is a good example of our success at strategically aligning with our customers, enabling them to capture new opportunities faster. Our ALM strategy is playing out in many of the ways we had envisioned and we are excited about the opportunities ahead."

"We achieved solid operating income and cash flow in the quarter as a result of our relentless focus on managing costs and increasing leverage in our sales model," said Borland's senior vice president and chief financial officer, Kenneth R. Hahn. "We have taken the right steps to improve our operating model and will continue to balance those improvements with opportunities to increase revenue. We believe our sales strategies and broader product suites are starting to take hold in the market and we remain confident in the long-term prospects for our business."

In calculating Non-GAAP net income, Borland utilizes a financial measure of net income (loss) that excludes restructuring, amortization of intangible assets, acquisition-related expenses, in-process research and development and the related tax effect ("Non-GAAP Net Income"). Investors are encouraged to review the reconciliation of Non-GAAP financial measures to the most directly comparable GAAP measures as provided below.

Business Outlook

Management provided the following financial guidance:

For the quarter ending September 30, 2004, on a GAAP basis:

--The company expects revenues will be in the range of $75 - $78 million.

--Forecast earnings per share should be in the range of $0.00 to $0.02

For the quarter ending September 30, 2004, on a non-GAAP basis:

--Forecast earnings per share should be in the range of $0.05 to $0.07.

The following table shows our Non-GAAP anticipated results for the quarter ending September 30, 2004 reconciled to the GAAP anticipated results. Our Non-GAAP anticipated results exclude amortization of intangible assets and acquisition-related expenses.

Estimated per Share
                                                 ---------------------
                                                    Low        High
                                                 --------    ---------
                                                     (unaudited)

GAAP net income                                    $0.00       $0.02

Aggregate amortization of intangible assets and
 acquisition-related expenses(1)                    0.05        0.05
                                                 ---------------------

Non-GAAP net income                                $0.05       $0.07
                                                 ========    =========


(1) Includes $0.04 for amortization of intangible assets and $0.01
for acquisition-related expenses.

Earnings Conference Call Information

Borland Software Corporation second quarter 2004 teleconference and simultaneous Webcast is scheduled to begin at 2:30 p.m. PT, on Thursday, July 22, 2004. To access the live Webcast, please visit www.corporate-ir.net/ireye/ir_site.zhtml?ticker=BORL&script=2100 or the main page of the investor relations section of Borland's web site at least 30 minutes prior to the scheduled time to download any necessary audio or plug-in software. A replay will be available approximately two hours after the conference call ends and will be available through midnight August 5, 2004. The replay number is (800) 405-2236 or (303) 590-3000, with passcode 11002376. Separately, the archived Webcast will be available on our website.

Non-GAAP Financial Measures

Borland provides all information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures. Internally, Borland uses calculations of Non-GAAP net income and net income per share, each of which excludes restructuring, amortization of intangible assets, acquisition-related expenses, in-process research and development, and the related tax effect, to evaluate its ongoing operations and to allocate resources within the organization.