BORL Borland Software (MM)

Borland Software Corporation (NASDAQ: BORL), the global leader in Open Application Lifecycle Management (ALM), today announced preliminary financial results for the first quarter ended March 31, 2009. All results should be considered preliminary pending the Company�s filing of its quarterly report on Form 10-Q.

For the first quarter of 2009, Borland reported total revenue of $35.1 million and GAAP net income of $1.9 million, or $0.03 per share. The GAAP net income included $0.5 million in stock-based compensation, $1.4 million in restructuring expenses, $2.0 million in amortization of intangible assets, a net gain of $0.3 million from discontinued operations associated with the CodeGear divestiture completed on June 30, 2008, a net gain of $9.9 million from the early retirement of debt, and non-cash interest expense of $1.6 million related to the adoption of FSP APB 14-1 as described below. Non-GAAP net loss was $2.8 million, or $0.04 per share.

Revenue for ALM products and services for the first quarter of 2009 was $27.8 million and revenue for Deployment (DPG) products and services was $7.3 million. In Q1 2009, the company signed a multi-product deal with one customer for $17.8 million in license and maintenance revenues. The revenue will be recognized as follows: $6.6 million in Q1 2009, $6.6 million in Q2 and the balance in Q3, with the potential for recurring maintenance revenues thereafter.

During the first quarter of 2009, the company repurchased $44.3 million face value of convertible debt for $27.5 million in cash, leaving $115.0 million face value outstanding.

�In the first quarter we exceeded our guidance, achieved GAAP profitability, and continued to strengthen our balance sheet,� said Erik Prusch, president and CEO of Borland. �We are pleased with our year-to-date progress, and our accomplishments represent tangible evidence of Borland�s continued commitment to execution, innovation and customer value.�

Effective Jan. 1, 2009, the Company adopted Financial Accounting Standards Board's Staff Position No. APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"), which changed the method of accounting for the Company's convertible notes. As required by the literature, the Company revised its previously reported financial statements to apply this change in accounting to prior periods. Under this new accounting method, the Company's EPS and net (loss) income calculated in accordance with GAAP have been reduced as a result of recognizing incremental non-cash interest expense. In connection with adopting FSP APB 14-1, the Company recorded $1.6 million and $2.0 million of additional non-cash interest expense in the three months ended March 31, 2009 and 2008, respectively.

Proposed Acquisition by Micro Focus

As previously announced by the Company on May 6, 2009, the Company entered into an agreement with Micro Focus International plc (�Micro Focus�) pursuant to which Micro Focus will acquire all the outstanding shares of Borland in a cash merger transaction. All parties desiring details regarding the transaction are urged to review the definitive agreement as filed by Borland on May 6, 2009 in a Current Report on Form 8-K, which is available on the Securities and Exchange Commission�s website at http://www.sec.gov. In connection with the proposed transaction, Borland will file with the SEC a proxy statement, and Borland plans to file with the SEC other documents regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER FILED DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION . Shareholders will be able to obtain a free-of-charge copy of the proxy statement (when available) and other relevant documents filed with the SEC from the SEC�s website at http://www.sec.gov. Shareholders will also be able to obtain a free-of-charge copy of the proxy statement and other relevant documents (when available) by directing a request by mail or telephone to Borland, 8310 North Capital of Texas Highway, Building 2 Suite�100, Austin, TX 78731, Attention: Investor Relations, Telephone: (512)�340-1364, or from Borland�s website, http://www.borland.com. Borland and certain of its directors, executive officers and other members of management and employees may, under the rules of the SEC, be deemed to be �participants� in the solicitation of proxies from shareholders of Borland in favor of the proposed merger. Information regarding Borland�s directors and executive officers is contained in Borland�s annual proxy statement filed with the SEC on April�8, 2009. Additional information regarding the interests of such potential participants will be included in the proxy statement and the other relevant documents filed with the SEC (when available).

About Borland

Founded in 1983, Borland (NASDAQ:BORL) is the leading vendor of Open Application Lifecycle Management (ALM) solutions - open to customers' processes, tools and platforms - providing the flexibility to manage, measure and improve the software delivery process. To learn more about maximizing the business value of software, visit http://www.borland.com.

Borland and all other Borland brand and product names are service marks, trademarks or registered trademarks of Borland Software Corporation or its subsidiaries in the United States and other countries. All other marks are the property of their respective owners.

Forward-Looking Statements

Statements made in this release that are not historical facts are �forward-looking statements� and accordingly involve risk and uncertainties that could cause actual results to differ materially from those described in this release. Forward-looking statements include, for example, all statements relating to projected financial performance (including statements involving projection of revenue, income including income (loss), earnings including earnings (loss) per share, capital expenditures, dividends, capital structure, or other financial items), the plans and objectives of management for future operations, products or services; and future performance in economic terms or other any other measures. These factors include, but are not limited to, (1)�the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with Micro Focus; (2)�the outcome of any legal proceedings that may be instituted against Borland and others following announcement of the transaction or the merger agreement; (3)�the inability to complete the merger due to the failure to satisfy conditions to completion of the merger; (4)�the risk that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the merger; and (5)�other risks, including our ability to predict revenue and control expenses, our ability to grow our ALM business or achieve profitability as planned and the continued decline in global economic conditions, and those risks that are set forth in the �Risk Factors,� �Legal Proceedings� and �Management Discussion and Analysis of Results of Operations and Financial Condition� sections of Borland�s SEC filings. Many of the factors that will determine the outcome of the proposed merger with Micro Focus are beyond Borland�s ability to control or predict. Borland does not intend to update this information to reflect future events or circumstances unless required by law.

Non-GAAP Financial Measures

The attached press release and tables include non-GAAP financial measures. Borland�s management uses non-GAAP financial measures in assessing the performance of Borland�s ability to develop, sell and market products and services (�Ongoing Operations�). They are also used for planning and forecasting in future periods. Non-GAAP financial measures also facilitate internal comparisons to Borland's historical operating results. Borland has historically reported similar non-GAAP financial measures and believes that the inclusion of comparative results provides consistency in its financial reporting that benefits investors. Non-GAAP financial measures are computed using consistent methods from quarter to quarter and year to year. These non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures. They should be viewed in conjunction with the consolidated financial statements prepared in accordance with GAAP.

In presenting non-GAAP financial measures, Borland has excluded the following items:

A. Restructuring and severance charges. Borland has incurred restructuring charges eliminating certain duplicative activities, focusing Borland's resources on future growth opportunities and reducing Borland's cost structure. In connection with its restructuring, Borland has recognized costs related to termination benefits for former Borland employees whose positions were eliminated and for the closure of Borland facilities. Borland excludes these items because these expenses are not reflective of Ongoing Operations and Borland believes excluding these items from its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share facilitates comparisons with prior and subsequent reporting periods as well as comparisons to the operating results of competitors in Borland's industry. Expenses related to severance and restructuring have, in some cases, had a significant cash impact and effect on Borland's results of operations, including its net income (loss) as measured in accordance with GAAP.

B. Goodwill impairment charge and discontinued operations. Borland recorded a non-cash goodwill impairment charge in the first quarter of 2008 relating to its CodeGear segment due to business performance, market conditions and expected purchase price for the sale of this business. Following the sale of Borland�s CodeGear division on June 30, 2008, Borland classified its CodeGear segment as discontinued operations. Impairment charges are not cash items and have not been frequent or consistently recurring. Borland believes that excluding these items will provide investors with a basis to compare the Company�s core operating results in different periods without such variability.

C. Stock compensation impact of SFAS 123R. These expenses consist of expenses for employee stock options and employee stock purchases under SFAS 123R. Prior to the adoption of SFAS 123R in fiscal 2006, Borland did not include expenses related to employee stock options and employee stock purchases directly in its financial statements, but elected, as permitted by SFAS 123R, to disclose such expenses in the footnotes to its financial statements. As Borland applies SFAS 123R, Borland believes that it is useful to investors to understand the impact of the application of SFAS 123R to Borland's operational performance in comparison to prior periods in which such expense was not included directly in its financial statements. In addition, while stock-based compensation expense calculated in accordance with SFAS 123R constitutes an ongoing and recurring expense, such expense is excluded from its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share because it is not an expense that typically requires or will require cash settlement by Borland and consequently is not used by management to assess the core profitability of Borland's Ongoing Operations. Borland believes it is useful to investors to understand the impact of the application of SFAS 123R to Borland's liquidity and its ability to invest in research and development and fund acquisitions and capital expenditures. Borland further believes its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share excluding this item are useful to investors in that excluding this item facilitates comparisons to the operating results of competitors in Borland's industry that may have different patterns of activity associated with equity compensation.

D. Amortization of purchased intangibles. In connection with its acquisitions, Borland has incurred amortization of purchased intangible assets. These purchased intangibles include: developed technology, customer lists and relationships, maintenance agreements, trade names, trademarks and service marks and non-compete agreements. For accounting purposes, Borland amortizes the fair value of the purchased intangibles based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated. Although these intangible assets generate revenue for Borland, Borland excludes the associated amortization expense because it is non-cash in nature and because Borland believes its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share excluding this item provides meaningful supplemental information regarding Borland's operational performance, liquidity and Borland's ability to invest in research and development and fund acquisitions and capital expenditures. In addition, excluding this item facilitates comparisons to Borland's historical operating results and comparisons to the operating results of competitors in Borland's industry which may have different acquisition histories.

E. Repurchase of Senior Convertible Notes. In March 2009, the Company used available cash to repurchase outstanding Senior Convertible Notes, which resulted in gains on debt retirement. Borland does not believe that these repurchases have any significant impact on its core operating results.

F. Impact of FSP APB 14-1. Non-GAAP adjusted net income excludes certain non-cash interest expense including portions related to our January 1, 2009 adoption of FSP APB 14-1, which changed the method of accounting for our convertible notes. In addition, as required, we revised our previously reported consolidated financial statements to retrospectively apply this change in accounting to prior periods. Under this new method of accounting, the debt and equity components of our convertible notes are bifurcated and accounted for separately. The equity components of our convertible notes are included in stockholders' equity in our Condensed Consolidated Balance Sheets with a corresponding reduction in the carrying values of our convertible notes as of the date of issuance or modification, as applicable. The reduced carrying values of our convertible notes are being accreted back to their principal amounts through the recognition of non-cash interest expense. This results in recognizing interest expense on these borrowings at effective rates approximating what we would have incurred had we issued nonconvertible debt with otherwise similar terms. Under this new accounting method, the Company's EPS and net (loss) income calculated in accordance with GAAP have been reduced as a result of recognizing incremental non-cash interest expense. We believe that excluding the non-cash portion of our interest expense allows management and investors an alternative view of our financial results "as if" our net income reflected only the cash portion of our interest expense.

Borland also excluded the common share equivalents that would have resulted from using the �if-converted� method of calculating the non-GAAP diluted income per share relating to the common shares issuable upon conversion of the convertible senior notes.

Borland believes that non-GAAP measures have significant limitations in that they do not reflect all of the amounts associated with Borland's financial results as determined in accordance with GAAP and that these measures should only be used to evaluate Borland's financial results in conjunction with the corresponding GAAP measures. In addition, the exclusion of the charges and expenses indicated above from the non-GAAP financial measures presented does not indicate an expectation by Borland management that similar charges and expenses will not be incurred in subsequent periods.

BORLAND SOFTWARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (In thousands, except par value and share amounts, unaudited) �

ASSETS

� March 31, 2009 �

RestatedDecember 31, 2008

Current assets: Cash and cash equivalents $ 93,942 $ 108,132 Investments, at fair value 40,653 59,575 Accounts receivable, net of allowance of $1,044 and $1,174, respectively 39,133 33,159 Prepaid expenses 5,643 7,642 Assets of discontinued operation 3,734 443 Other assets � 1,941 � � 2,098 � Total current assets � 185,046 � � 211,049 � Property and equipment, net 7,943 8,494 Intangible assets, net 22,452 24,520 Non current assets of discontinued operation - 3,734 Other assets � 3,676 � � 4,112 � Total assets $ 219,117 � $ 251,909 � �

LIABILITIES AND STOCKHOLDERS� EQUITY

Current liabilities: Accounts payable $ 3,997 $ 5,045 Accrued expenses 13,731 13,956 Accrued restructuring 2,707 3,990 Deferred revenue 50,583 40,720 Liabilities of discontinued operation 5,611 4,208 Other liabilities � 2,444 � � 5,371 � Total current liabilities � 79,073 � � 73,290 � � Long-term liabilities: Convertible senior notes, net of discount of $16,436, and $24,513, respectively 98,548 134,787 Accrued restructuring 576 911 Deferred revenue 2,038 2,298 Income taxes payable 16,532 17,157 Liabilities of discontinued operation - 2,382 Other liabilities � 5,751 � � 5,707 � Total liabilities � 202,518 � � 236,532 � � � Stockholders' equity: Preferred stock; $.01 par value; 1,000,000 shares authorized; 0 shares issued and outstanding - - Common stock, $.01 par value, 200,000,000 shares authorized (2009: 94,652,702 issued and 73,115,736 outstanding; 2008: 94,552,738 issued and 73,015,772 outstanding) 731 730 Additional paid-in capital 717,616 717,141 Accumulated deficit (567,527 ) (569,415 ) Accumulated other comprehensive income 6,188 7,330 Treasury stock at cost, (2009 and 2008: 21,536,966 shares) � (140,409 ) � (140,409 ) Total stockholders� equity � 16,599 � � 15,377 � Total liabilities and stockholders� equity $ 219,117 � $ 251,909 � BORLAND SOFTWARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts, unaudited) � Three Months Ended March 31, 2009 � 2008 (Restated) Revenues: License and other revenues $ 13,724 $ 18,537 Service revenues � 21,326 � � 27,522 � Total revenues � 35,050 � � 46,059 � � Costs of revenues: Cost of license and other revenues 945 677 Cost of service revenues 5,918 8,864 Amortization of acquired intangibles � 1,929 � � 2,100 � Cost of revenues � 8,792 � � 11,641 � Gross profit � 26,258 � � 34,418 � � Selling, general and administrative 20,128 33,061 Research and development 10,564 11,787 Restructuring and other charges � 1,544 � � 1,463 � Total operating expenses � 32,236 � � 46,311 � � Operating loss (5,978 ) (11,893 ) � Interest income 745 1,752 Interest expense (includes non-cash debt discount amortization of $1,627 for 2009 and $2,007 for 2008) (2,883 ) (3,658 ) Gain on debt repurchase 9,942 -

Other income, net

� 157 � � 582 �

Income (loss) from continuing operations before income taxes

� 1,983 � � (13,217 )

Income tax provision

� 385 � � 1,274 �

Income (loss) from continuing operations

$ 1,598 $ (14,491 ) � Discontinued operations: Income (loss) from operation of discontinued operations (net of applicable taxes of $0 for 2009 and $242 for 2008) $ 187 $ (10,728 )

Gain on disposal of discontinued operations (net of applicable tax of $0 for 2009)

� 103 � � - � Income (loss) from discontinued operations $ 290 $ (10,728 ) �

Net income (loss)

$ 1,888 � $ (25,219 ) � Net income (loss) per share - basic: Continuing operations $ 0.02 $ (0.20 )

Discontinued operations

� 0.01 � � (0.15 ) Net income (loss) per share $ 0.03 $ (0.35 ) � Shares used in computing basic net income (loss) per share � 72,953 � � 72,751 � � Net income (loss) per share - diluted: Continuing operations $ 0.02 $ (0.20 ) Discontinued operations � 0.01 � � (0.15 ) Net income (loss) per share $ 0.03 $ (0.35 ) � Shares used in computing diluted net income (loss) per share � 73,010 � � 72,751 � BORLAND SOFTWARE CORPORATION GAAP TO NON-GAAP RECONCILIATION (In thousands, except per share amounts, unaudited) � � Three Months Ended March 31, 2009 � 2008 � Net income (loss) on a GAAP basis $ 1,888 $ (25,219 ) Stock-based compensation expenses 477 1,537 Amortization of purchased intangibles 2,048 2,242 Restructuring expenses 1,397 1,249 Income (loss) from discontinued operations 290

�

(10,728 ) Amortization of debt discount 1,627 2,007 Gain on debt retirement � 9,942 � � - � Net income (loss) on a non-GAAP basis $ (2,795 ) $ (7,456 ) �

Statements of Operations Reconciliation per Share

� Basic net income (loss) on a GAAP basis $ 0.03 � $ (0.35 ) Shares used in computing basic net income (loss) per share � 72,953 � � 72,751 � � Diluted net income (loss) on a GAAP basis $ 0.03 � $ (0.35 ) Shares used in computing diluted net income (loss) per share � 73,010 � � 72,751 � � Basic and diluted net income (loss) per share on a non-GAAP basis $ (0.04 ) $ (0.10 ) Shares used in computing basic and diluted net income (loss) per share � 72,953 � � 72,751 �