"After much consideration, we made the decision to establish CodeGear as a separate subsidiary," Nielsen said in a prepared statement released by the company. "We have always stated our intention to find the right buyer for this business -- one who was committed to our developer community, who would continue innovation in our products, and who would offer a sum that matched the value of the business. After a lengthy due diligence process with several serious bidders, we feel the CodeGear decision is in the best interests of our customers, shareholders and employees."

"We believe by creating two separate operations, Borland and CodeGear can both obtain the necessary focus and dedicated resources to serve two important but distinct markets," Nielsen said. "We will continue to partner and share a mutual view of customer success. However, going forward Borland will be completely focused on leading the ALM (application lifecycle management) market, while CodeGear will be focused on the software developer."

CodeGear will be led by Ben Smith, who was appointed Tuesday as chief executive officer. Smith has been working with the tools group for the past 12 months. The spinoff is expected to be completed by early 2007.

Borland's taking the spinoff route may not be the best option, said analyst Theresa Lanowitz, founder and CEO of Voke. The time for spinoffs was a few years ago, she said. The market would have been better served by having the code for the tools offered via an open source format or by having an Indian offshore company pick up the tools, Lanowitz said.

"Borland has made some tremendous development tools," Lanowitz, a former Borland product manager for the C++ and JBuilder tools in the mid-1990s, added. But the time for creating interesting, independent IDEs "has passed us," she said.