Interbasae spinoff appears unlikely say execs

Inprise/Borland Corp.’s, of Scotts Valley, Calif., commitment to spin off its InterBase database business to new entity InterBase Software Corp. (ISC) has yet to go ahead. The spinoff deal is appearing less and less likely to take place, the heads of both the U.S. tools developer and ISC have confirmed.

Back in February, Inprise/Borland announced the formation of a new company – at that time known simply as InterBase – to support the forthcoming first open-source version of the vendor’s SQL (structured query language) RDBMS (relational database management system), InterBase 6.0. The spinoff operation was tasked to provide service, support and hosting for the open-source software.

Although, earlier this week, Inprise/Borland did release InterBase 6.0, somewhat shy of its previously stated June 30 deadline, the spinoff company has yet to materialize.

So, what happened?

“We were going down a path of negotiation with another entity (ISC) to do something,” Dale Fuller, Inprise/Borland interim president and CEO, said in a phone interview late Thursday. “We fully expected to consummate a deal. We haven’t negotiated terms good enough for Inprise shareholders.”

Fuller added that ISC is “not a spinoff from Inprise” and that the two companies have “no relationship.”

“We had a verbal agreement on the general outlines of the deal in February,” Ann Harrison, ISC president, said in a phone interview Friday. “In April, early May, we finally got the terms sheet, we basically agreed on all the major terms and expected the deal to close in two and a half to three weeks. The deal has been about to close in two and a half to three weeks since early May.”

Part of the holdup in negotiations was due to the two parties uncovering areas that weren’t covered in the terms sheet, as well as the appointment of a new general counsel at Inprise/Borland whose views on the spinoff deal differed from those of his predecessor, Harrison said.

However, it appeared as though the spinoff was finally on track and ISC got ready to launch itself June 19, Harrison explained. But a week before the launch time, another obstacle in negotiations emerged, and the launch was delayed.

ISC hoped the deal might close at the Borland Developers’ conference in San Diego, California, earlier this month, “but no one had time to deal with it,” Harrison said. Then, the deal seemed to quickly crumble, she’s not sure exactly why. The number of legal documents relating to the proposed InterBase spinoff from ISC were piling up on Inprise/Borland’s side and no one was getting back to ISC, she added.

Then, “for whatever reason,” the board of Inprise decided that to go ahead with the spinoff was not in the financial interests of the company’s shareholders, she said. Fuller did talk to ISC about finding some way to keep the spinoff going forward and the two parties signed a letter of intent to negotiate it, but “it’s fairly clear that’s not happening,” Harrison added.

Of the three leading executives at ISC, Harrison is currently a contractor for Inprise/Borland, but the other two – Paul Beach and Matt Larsen – “have been working without salary for the last few months,” she said. “We’re not in a position to continue.”

As to why the spinoff deal with Inprise/Borland fell apart, Harrison has her own theory. “It’s pure speculation (on my part), but there’s been a decline in the market value of open-source companies between then (February) and now,” she said. “It’s more difficult to project a huge IPO (initial public offering) now than six months ago.”

Although the pulling back from a spinoff of InterBase might give rise to fears about the database’s continued importance to Inprise/Borland, Fuller described the software as “a core product for development.” While, less than “a dozen” staff are working on the upkeep of InterBase 6.0, the embedded database is a key part of other Inprise/Borland software such as Delphi and the firm’s Java products, he said. Fuller mentioned that InterBase will form “a very important component” of one of the vendor’s future initiatives, although he won’t provide any further details concerning the mystery software.

Since it kicked off the beta release of InterBase 6.0 four or five months ago, Inprise/Borland has seen between 160,000 and 200,000 downloads of the open-source database, Fuller said.

Copies of InterBase 6.0 source code and binary versions for Linux, Microsoft Corp.’s Windows NT and Sun Microsystems Inc.’s Solaris operating systems are now available free of charge from Inprise/Borland’s Web site.

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