Swan Song For No. 5 Starbase
By ANDREW SIMONS
Last year it was the fastest-growing company in Orange County.
This year it’s No. 5.
But don’t look for Santa Ana-based Starbase Corp. to appear on next year’s list of OC’s fastest-growing companies.
Scotts Valley-based Borland Software Corp. made a $24 million bid to buy Starbase earlier this month and is in the process of buying up its shares for 2.75 each. The deal is expected to close during the fourth quarter.
The acquisition comes at a down time for Starbase, which has seen sales slump after a couple of years of heady growth.
Revenue at the software tools developer is up 362% to $42.4 million in the past three years ended June 30.
But the tech downturn has hit the company more recently. In its June quarter, Starbase posted a $3.3 million operating loss on a 25% decline in revenue to $9.1 million vs. a year ago.
Prior to the Borland deal, Starbase said it had secured a $12 million equity financing, which it since has shelved.
Starbase’s stock lagged this year, declining by 88% to the 80-cent-a-share level before rebounding to 2.70,near the buyout price,after the Borland deal was announced.
Starbase became a publicly traded company a year after it was founded in 1991. The company’s development tools allow geographically dispersed software developers to work as teams over corporate intranets and the Internet.
Starbase had struggled with the acquisition strategy it pursued throughout most of 2000 and the first part of 2001.
Acquisitions of companies such as worldweb.net and Technology Builders Inc. gave Starbase some key engineering talent, company executives said. And that increase in staff, coupled with other recruiting efforts, resulted in the company expanding its OC headquarters, where it has about 150 workers.
But the company cut 43% of its staff in the past 12 months, giving it about 235 workers at the time of the Borland deal.
Starbase recently said it planned to undergo a 1-for-10 reverse stock split to keep its share price about the 1 level required to stay listed on the Nasdaq exchange.
Stabilizing Balance Sheet
Following its June-quarter earnings announcement, Starbase Chief Executive Jim Harrer said the company had stabilized its balance sheet and lowered expenses.
“We are still very much in the midst of a turnaround and believe that the positive steps we are taking to streamline and improve our operations are paying off,” he said.
In July, Starbase released an addendum to its flagship product, StarTeam. The addition, called StarTeam Replication Manager, allows software developers to speed and improve the development process by synchronizing all project data between multiple servers.
“As Borland integrates Starbase’s complementary technologies, we will enable software development teams to enhance productivity across all phases of the application lifecycle,” Harrer said.
For its part, Borland said the acquisition could add $30 million to $35 million of revenue and be accretive to earnings if the deal closes in the fourth quarter.
Borland is taking a charge of $7 million to $12 million to close the deal.
