MCAD Industry View – A March 2010 Update
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MCAD Industry View – A March 2010 Update


Commentary:

MCAD Industry View – A March 2010 Update

by Dr. Russ Henke
Henke Associates

Introduction

This March 2010 issue of the MCAD Industry Commentary recounts the financial performances of a selected group-of-five MCAD/PLM/MCAE vendors (G5) for the nominal Fourth Quarter of 2009.

In the first MCAD Industry Commentary published May 2003 in MCADCafé.com, then-recent yearly and quarterly financial performances of a selected group of public Mechanical Computer Aided Design (MCAD) vendor companies were analyzed and compared. Expectations of future financial performances of these same MCAD entities were documented.

The May 2003 MCAD Commentary was followed by twenty-six quarterly updates in MCADCafé.com, one for each subsequent calendar quarter. URL's on all past articles are available. The entities initially covered were ANSYS, Autodesk, Dassault Systèmes, UGS PLM, ESI Group, Moldflow, MSC.Software, PTC and Tecnomatix.

As a result of the acquisition of Tecnomatix by UGS that closed April 1, 2005, Tecnomatix was eliminated from coverage thereafter as a separate entity.

On May 7, 2007 UGS announced the close of its acquisition by Siemens AG effective May 4. Thereafter, the business went to market as UGS PLM Software (and later as Siemens PLM Software), a global division of the Siemens Automation and Drives (A&D) Group. Over the years UGS itself had bounced back and forth between being a public company and a private company under different ownerships. Regrettably, we have been able to gain very little insight into UGS' financial performance itself from public Siemens' corporate reports after the Siemens acquisition. Occasionally we will include Siemens PLM Software news items that bear on the industry as a whole.

Then on June 25, 2008 Autodesk completed its acquisition of Moldflow Corporation, so thereafter Moldflow was eliminated here from separate coverage.

On July 07, 2009 MSC.Software announced that it had entered into a definitive agreement with affiliates of Symphony Technology Group (STG) under which a company controlled by STG would acquire all of MSC's outstanding shares in a one-step cash merger transaction. This acquisition of MSC.Software by STG was finally consummated on October 14, 2009. No financial results for MSC.Software were published for Q3 2009. Unless and until such data are subsequently made available, MSC.Software has been dropped from coverage herein, although occasionally MSC.Software news items that bear on the industry as a whole will be mentioned.

Accordingly, this twenty-eighth MCAD Industry article in the sequel recounts mainly the financial performances of the remaining group-of-five (G5) MCAD/PLM entities for the nominal fourth quarter of 2009:

ANSYS
Autodesk
Dassault Systèmes
ESI Group
PTC


Recent MCAD News Highlights




On February 17, 2010 ANSYS announced that it has been named as the only engineering simulation software provider on this year's Oliver Wyman Shareholder Performance IndexSM (SPI). This international ranking assesses the performance of firms in the communications, media and technology (CMT) industries. With an overall SPI score of 235, ANSYS placed 13th in the software and services sector. This is the second consecutive year that ANSYS has made the list. "Despite the uncertainties that persisted and customers' continued caution due to the state of the economy, ANSYS found opportunity throughout 2009. Our commitment to a long-term investment in technology and a strong financial base served the Company well -- a philosophy that has special value as we enter our 40th year of business, Such commitment to deliver the industry's most comprehensive and advanced simulation solutions has secured us a place on this prestigious list." said Jim Cashman, president and CEO of ANSYS:





On February 23, 2010 Autodesk announced that two of its executives were named CRN Channel Chiefs for 2010: Ken Bado, executive vice president of Sales and Services, and Steve Blum, senior vice president, Americas Sales. CRN, the flagship publication of CMP Channel, selected the Autodesk executives because of their investment in partner success and innovative channel partner programs. This year, Bado and Blum continued to expand Autodesk channel partner programs, which now encompass 1,900 partners across the globe. “Autodesk has been committed to the channel since the beginning -- it's part of our DNA, For 27 years we've been working closely with our partners to ensure they always have the best training and resources possible,” said Ken Bado:


”We were laser focused on partner health this past year, and we worked very closely with our partners to ensure that they maintained their selling and services capabilities during the economic crisis,” added Steve Blum:






On February 16, 2010 Dassault Systèmes (DS) launched Release 20 of its collaborative V5 PLM portfolio, including CATIA, ENOVIA, SIMULIA, and DELMIA. The launch of V5R20 was said to include enhancements to DS' ENOVIA SmarTeam multi-CAD collaboration software, integration of SIMULIA's nonlinear and thermal realistic simulation capabilities into the V5 platform, as well as unique composites design and simulation capabilities in the CATIA and SIMULIA brand portfolios. V5R20 also features various enhancements across the entire product portfolio, including digital manufacturing, furthering support for production deployments and overall usability. V5's openness is advanced in Release 20 with updated multi-CAD integrations and a new 3D viewer available directly within ENOVIA SmarTeam. In addition, V5R20 introduces a new product, CATIA Extended STEP Interface. It enhances large assembly archiving with nested assembly support and in V5R20's Q2 2010 update will feature unique comprehensive support for composites design attributes and functional tolerancing & annotation data. Q2 2010's update to the entire V5 portfolio will also include support for Windows 7.

“My guiding philosophy is that Dassault Systèmes never rests. Our commitment is to deliver not only the grand innovations that enable tomorrow's industrial processes, but also constant, unwavering improvements to our customers' deployments; it is the innovations in the details that frequently make the difference for our customers,” said Dominique Florack, senior executive vice president, Research & Development, Dassault Systèmes:







On February 16, 2010 the ESI Group announced the release of VA One 2009. VA One is said to be a complete solution for simulating noise and vibration across the full frequency range and seamlessly combines Finite Elements, Boundary Elements, and Statistical Energy Analysis (SEA) in a single model. This new release significantly enhances the functionality for modeling foams and fibers in VA One.


Poroelastic materials such as foams and fibers are an important part of the design of quiet products with superior noise and vibration performance. VA One claims to be the only code on the market that includes methods for optimizing poroelastic materials across the full frequency spectrum. The VA One 2009 release includes an advanced “foam finite element” solver that is ideal for modeling the low frequency response of foams and fibers. Originally developed as part of a long term research project between ESI Group and several leading universities, this solver is now fully integrated within the VA One environment. “Modeling the vibro-acoustic response of poroelastic materials is one of our core areas of research”, said Pr. Noureddine Atalla, Acoustic Department at the University of Sherbrooke. “Our ongoing collaboration with ESI Group on the research, development and implementation of these methods has proven to be fruitful as shown in VA One latest release”.


On February 8, 2010 PTC announced it has extended its InSightTM Product Analytics solution with technology to help manufacturers analyze carbon and other key environmental impacts during product development and manufacturing. The core of PTC's InSight Product Analytics solution is built upon delivering a suite of capabilities to enable bill of material (BOM) analysis for environmental performance, cost, and reliability throughout the product lifecycle. Extending the environmental analytics capabilities of InSight, PTC has acquired leading technology from Planet Metrics, Inc., said to be a leader in environmental impact analysis technology. This new technology enables manufacturers and retailers to model, analyze and optimize carbon emissions and energy use throughout the entire value chain, from concept to end-of-life. The Planet Metrics software includes an exhaustive, normalized database of environmental profiles and combines both analytics and intuitive heat map displays that make it easy to identify high-impact "hot spots" in materials, packaging, supply chain, transportation, and disposal. "The process of predicting, measuring, and improving a product's environmental performance is becoming increasingly important to the success of manufacturers across all industries," said Howard Heppelmann, Vice President of Product Analytics solutions at PTC:


"The acquisition of this technology is an important step in the execution of our product analytics strategy and overall differentiation in PLM. We are excited to expand our Product Analytics capabilities to further enable manufacturers to analyze the environmental footprint of products early in the product development cycle, helping them make informed design and supply chain decisions that can lower risk and cost."


With a total of 1000 people employed in 23 countries, MSC.Software on February 9. 2010 announced the formation of a new business unit to focus on its recognized position in Simulation Data and Process Management (SDPM). Albrecht Pfaff, Vice President SimManager Business Unit, MSC.Software, said, “We are very pleased to be recognized as the thought leader in Simulation Data and Process Management by the recent assessment performed by the PLM business analyst group, Collaborative Product Development Associates (CPDA).”

“We have successfully deployed SimManager in the High-Lift System test department at Airbus Bremen and benefit from a tight connection between Physical Test and Virtual Test correlation. SimManager will help us to tremendously improve the testing procedure of the new A350 aircraft - we expect to reduce lead-time and cost for system certification while increasing aircraft maturity”, explained Thomas Krüger, project leader for Virtual Testing at Airbus.

“Manufacturers are looking for a force multiplier to better predict real world behaviors for their products during design. SimManager uniquely delivers this”, said Dominic Gallello, President and CEO, MSC.Software:



Siemens PLM Software


On February 3, 2010 Siemens PLM Software announced that its software solutions have been used as important enablers in the development of the award winning Ford Motor Company vehicles. The Ford Fusion™ Hybrid and Ford Transit Connect™ were named 2010 North American Car of the Year and Truck of the Year, respectively. This was only the third time in 17 years that one automaker has won both awards.


Separately, the entire Ford Fusion lineup captured the acclaimed MOTOR TREND® Car of the Year award for 2010.

“Siemens PLM Software is proud to be a key partner in delivering PLM solutions that support Ford Motor Company's delivery of outstanding vehicles and congratulates Ford on its award winning car and truck of the year,” said Chuck Grindstaff, executive vice president, Products and Chief Technology Officer, Siemens PLM Software. “The automotive industry understands the need to streamline product development and create efficiencies across entire organizations, and leading OEMs like Ford are increasingly relying on PLM software to bring quality, efficient vehicles to market in a timely manner.”


Headquartered in Plano, Texas, Siemens PLM Software is a global provider of product lifecycle management (PLM) software and services with 6.7 million licensed seats and 63,000 customers worldwide. It is a part of the Siemens Industry Automation Division (Nuremberg, Germany), a worldwide leader in the fields of automation systems, industrial controls and industrial software. With around 39,000 employees, Siemens Industry Automation achieved sales of €7.0 billion in fiscal year 2009.

The G5 MCAD Vendors' Financial Performances in Q4 2009



Measured in $US, Table 1 below reveals that the combined total revenue of the G5 recovered in Q4 2009 to the point of being virtually even with Q4 2008, a feat that required a massive $158 million or thirteen percent increase in total revenue from the just-prior Q3 2009. The “Great Recession”, as the worldwide economic downturn is now being called in some circles, is still affecting the MCAD marketplace, although signs of gradual recovery are beginning to show around the edges.

ANSYS and DASSAULT enjoyed the largest percentage sequential revenue increases in the teens, but both AUTODESK and PTC also reported significant single digit sequential percentage improvements.

On a year-over-year basis, however, only ANSYS managed a double digit percentage revenue boost, although PTC turned in a high single digit growth percentage. Neither AUTODESK nor DASSAULT is yet back to even with its Q4 2008 revenue level,


Turning to earnings in Table 2 below, it is a relief to see that the four MCAD vendors reporting earnings achieved a handsome total of US$219.6 million in net income in Q4 2009, quite a surprising return on sales (ROS) of 16.1%. (It's worth mentioning that Dassault's results in $US were helped in Q4 2009 by the then-weakening dollar vs. the euro). In Q4 2008 the total combined profit of the reporting G4 barely broke into black ink, mostly due to the dismal Q4 2008 losses at Autodesk.

Dassault led the profit improvement parade sequentially, with 47 million euros positive difference in Q4 2009 over Q3 2009.

But by improving its year-over-year profit in nominal Q4 2009 over Q4 2008 by 155.4 million dollars, Autodesk takes that medal easily.

All four reporting vendors improved their profit amounts sequentially and year-over-year.


* Note: ESI Group reported a loss of 0.8 million euros for the six month period ending July 31, 2009, on 31.2 million euros of revenue.

Details on Individual G5 Vendors' Q4 2009 Performances




On February 25, 2010 ANSYS, Inc. (NASDAQ: ANSS) reported its fiscal fourth quarter and full year 2009 results, the periods ending December 31, 2009. (ANSYS was the last member of the G5 to report its financial results for 2009 (February 25, 2010)).

Comparing quarterly results, the company achieved total revenue of $150 million Q4 2009, some 11% higher than the $135 million in Q4 2008, and 17% higher than the sequential $128 million in Q3 2009. The $150 million in Q4 revenue was some 6% above the top of the range given as Q4 guidance last quarter.

On the earnings front, ANSYS generated net income of $37.6 million in Q4 2009, 18% more than the net income of $31.9 million in Q4 2008 and 23% more than the sequential $30.5 million in Q3 2009.

These earnings figures produced GAAP diluted earnings per share of $0.41 in Q4 2009, as compared to $0.34 in Q4 2008 and $0.33 in Q3 2009.

For the entire 12 months of 2009, ANSYS grew revenue to $517 million, or a modest 8% more than the $478 million recognized in 2008. The $517 million for the year was ~2% above the top of the forecast range given as guidance just three months ago.

GAAP net income for the 2009 year was $116 million in 2009, only 4% more than the $112 million in 2008. This resulted in GAAP diluted earnings per share of $1.27 for the entire year 2009; in fact 2 cents lower than the GAAP diluted earnings per share of $1.29 for the 2008 year.

ANSYS President & CEO Jim Cashman said, “In addition to the financial results, there were three encouraging aspects to a very chaotic 2009. Foremost, the core thesis of ANSYS was validated and amplified as simulation not only provided transformational advantage to our customers in difficult times, but also aided in the survival of companies during increasingly competitive times. Secondly, the business model that supports this mission continued to prove high resiliency over a wide range of economic environments over the past decade. And lastly, ANSYS demonstrated agility with its nimble response to the tumult in the market. The fourth quarter presented us with a combination of both challenges and opportunities. ANSYS' ability to deliver solid financial results was driven by our tight alignment with our customers' research and product development priorities, our broad portfolio of product solutions, and solid execution by our global workforce and channel partners.”

“During 2009 we further strengthened our infrastructure, our organization and our technology offerings, while still being able to deliver profitable growth. Looking ahead, all of the factors driving simulation remain in full force as companies strive to compete with next generation products, and with smarter products that are increasingly energy efficient and productive. While we anticipate ongoing pressure on customer capital spending and some prolonged sales cycles, our long-term enthusiasm for the future remains. With the prospects of global recovery that should strengthen with time, we continue to focus on our vision while operating a business that has demonstrated a fair amount of resiliency to economic uncertainty,” concluded Cashman.

On February 23, 2010 Autodesk, Inc. (NASDAQ:ADSK) reported financial results for its fourth quarter and full fiscal year 2010, the periods ending January 31, 2010,.

Total Q4 revenue was $456 million, an increase of 9% sequentially from the $417 million in Q3, but a decrease of 7% compared to the $490 million in Q4 of fiscal 2009. The $456 million in Q4 revenue easily exceeded the $440 million top-of-the-range guidance given last quarter.

Net income for Q4 was $50.1 million, up 70% from the net income of $29.5 million in sequential Q3, and certainly more agreeable than the loss of $105.3 million in Q4 last year.

Diluted earnings per share in Q4 were $0.21, compared to diluted earnings per share of $0.13 in the sequential Q3, and compared to the diluted loss per share of $0.47 in Q4 of fiscal 2009.

Important to the Q4 performance in Autodesk revenue and profitability were sequential increases in revenue from commercial new seat licenses, revenue from every geography, revenue from each product type, as well as revenue from Autodesk's Manufacturing, AEC, and Platform Solutions and Emerging Business segments.

EMEA revenue increased 18% sequentially as reported and 15% on a constant currency basis to $188 million. EMEA revenue decreased 14% compared to Q4 of fiscal 2009 as reported and 22% on a constant currency basis. Revenue in the Americas increased 3% sequentially to $168 million and decreased 2% compared to Q4 of fiscal 2009. Revenue in Asia Pacific was $100 million, an increase of 6% sequentially as reported and 4% on a constant currency basis. Revenue in Asia Pacific increased 1% compared to Q4 of fiscal 2009 as reported and decreased 4% on a constant currency basis.

Revenue from emerging economies was $73 million, an increase of 18% sequentially as reported and 16% on a constant currency basis. Revenue from emerging economies decreased 8% compared to Q4 of fiscal 2009 as reported and 12% on a constant currency basis. Revenue from emerging economies represented 16% of total revenue in Q4.

Combined revenue from Autodesk's 3D model-based design solutions was $134 million, an increase of 10% sequentially and a decline of 7% compared to Q4 of fiscal 2009. Revenue from 2D horizontal and 2D vertical products was $213 million, a 13% increase sequentially and 8% decrease compared to Q4 of fiscal 2009. Combined revenue from AutoCAD and AutoCAD LT products increased 9% sequentially and decreased 9% compared to Q4 last year.

For the Full Year Fiscal 2010, Total Revenue was $1.7 billion, a decrease of 26% compared to the $2.3 billion of fiscal 2009. The $1.7 billion was right at the top of the guidance range provided last quarter.

With 86% of it earned in Q4, net income for this year was $58 million, only 32% of the net income of $184 million last year.

This resulted, on a GAAP basis, in diluted earnings per share of only $0.25 in fiscal 2010, compared to diluted earnings per share of $0.80 in fiscal 2009.

“We finished the year with better than anticipated revenue and profitability in the fourth quarter,” said Carl Bass, Autodesk president and CEO. “These (Q4) results were driven by a sequentially improving demand environment and continued competitive displacements. In addition to our focus on growth, cost containment contributed to our performance.”

“Fiscal 2010 was a challenging year by any measure,” continued Bass. “We took action to significantly reduce our cost structure and increase our efficiency. As a result, we greatly exceeded our initial goal of pre-tax cost savings of $250 million. Those actions, and our continued investments in essential parts of our business, helped strengthen Autodesk and position the company for long-term growth and success. Going forward, we will continue to build on our foundation as a world leader in design, engineering, and entertainment software.”


On February 11, 2010 Dassault Systèmes (DS) (Euronext Paris: #13065, DSY.PA) reported its IFRS unaudited financial results for Q4 2009 and year 2009, the periods ending December 31, 2009.

DS total revenue for Q4 2009 was 339.1 million euros (US$ 501.7 million), compared to 382.9 million euros in Q4 2008 (US$ 505.4 million), a year over year decrease of 11.5% in euros and a decrease of 0.7% in US dollars. However, Q4 2009 revenue of 339 million euros (US $501.7 million) was a sequential euros-increase of 16.3% over the 291.6 euros (US$ 417 million) in Q3 2009 (and a sequential increase of 20.3% in $US).

Q4 2009 net income was 77.0 million euros ($US114.0 million) vs. 56.3 million euros in Q4 2008 (US$74.3 million). This is a 36.8% improvement in Q4 2009 over Q4 2008 in euros, and an improvement of 53.4% in Q4 2009 over Q4 2008 in $US).

EPS for Q4 2009 was 0.68 euros, up 3% from Q4 2008.

For the full year, DS total revenue was 1251.3 million euros in 2009 vs. 1334.8 million euros in 2008 (1739.3 million vs. 1962.2 million in $US). This represents a 2009 decrease of 6.2% in euros and a 2009 decrease of 11.7% in $US, vs. 2008. The 1.2513 billion euros achieved in the full year of 2009 was just above the bottom of the range figure for the year of 2.4 billion euros given as final guidance last quarter.

In constant currencies, in 2009 the Americas were down 11% in revenue vs. 2008, Europe down 6%, and Asia down 14%.

Net income for the full year 2009 was down to 170.0 million euros (US$236.3 million), vs. 200.9 million euros in 2008 (US$295.3 million). This is a 2009 net income decrease from 2008 of 15.3% in euros and a 2009 net income decrease from 2008 of 20.0% in $US.

EPS for 2009 was 1.86 euros, down 8% from 2008.

DS reports an interesting tidbit. Total headcount of DS in December 2009 was 7834, down only 41 persons since December 2008.

A French company, DS reports its financial results in euros but provides average conversion factors to US dollars for each quarter and year. These factors were used to calculate US dollar numbers in this Commentary.

“Dassault Systèmes made significant progress during 2009 to prepare for the future,” commented Bernard Charlès, Dassault Systèmes President and Chief Executive Officer. “We strengthened the leadership of each of our six brands, enhanced the quality and performance of our entire software portfolio, improved the global efficiency of our organization, and our global market share has grown as well. On top of this we are eager to integrate the IBM PLM organization. Our customers will benefit from closer relationships with our sales and support teams, as well as unique deployment capabilities thanks to our renewed partnership with IBM.”

“Looking forward, we have laid the ground-work for our growth over the next five years, thanks to the industry's largest sales capacity, our Version 6 platform and our wide applications portfolio. All this is coming at the right time to help our customers address their new challenges to advance sustainable innovation. As a result, we believe Dassault Systèmes will be very well positioned to leverage market conditions as they improve.”


Headquartered in Paris, the ESI Group will not report the results of its fiscal year until March 15, 2010, for the quarter and year ending January 31, 2010. However, the abridged results for the quarter ending October 31, 2009 were released by ESI Group on December 15, 2009, and are summarized below.

Revenue for the third fiscal quarter ending October 31, 2009 was 13.8 million euros, compared to 16.4 million euros in Q1 (ending April 30, 2009) and 14.8 million euros in Q2 (ending July 31, 2009). These revenue figures compare to 13.4, 14.7 and 14.6 million euros for equivalent quarters a year ago, respectively.

Repeating the above quarterly figures in US$, using average quarterly currency exchange rates, revenue for the third fiscal quarter ending October 31, 2009 was 19.7 million dollars, compared to 21.3 million dollars in Q1 (ending April 30, 2009) and 20.1 million dollars in Q2 (ending July 31, 2009). These revenue figures compare to 20.1, 22.0 and 22.8 million dollars for equivalent quarters a year ago, respectively.

So for the full nine months ending October 31, 2009, ESI Group's revenue was 45.0 million euros, up 5.4% from the equivalent 9 months a year ago. While license revenue of 29.3 million euros was down 3.6%, Services and other revenue increased 27.7% year-over-year to 15.7 million euros. Of the latter, Mindware, whose business recorded significant organic growth, contributed 4.2 million euros to sales. (Mindware was acquired on December 16, 2008).

Repeating the nine month figures just above, but in $US, ESI Group's revenue was 61.1 million dollars, down 5.8% from the equivalent 9 months a year ago.

On a geographic level, over the first 9 months of the current fiscal year the Americas accounted for 23% of sales, versus 15% a year earlier. This reflects the integration of Mindware, whose business is highly concentrated in the United States.

Alain de Rouvray, ESI Group's Chairman and CEO, said, “Our third quarter is traditionally the least significant, given the seasonality of our business. Nonetheless, these figures reveal a continuation of the trend observed since the start of the year, i.e. a wait-and-see attitude on behalf of clients in terms of new diversification orders, but a reaffirmation of the renewal of the installed base for Licenses, essentially in rental mode, and the maintaining of Services with a highly innovative dimension. In a period marked by weak visibility, albeit with a slight improvement but with significant uncertainty still remaining, this is a positive sign for us that reflects the confidence our clients have in our virtual prototyping solutions, which generate exceptional gains in productivity and competitiveness.”

Back on September 15, 2009 the ESI Group announced limited financial results for the second quarter and half year ended July 31, 2009. First-half sales had totaled 31.2 million euros, up +6.4% year-over-year. The integration of Mindware contributed 2.8 million euros to sales over the first half. The product mix had already moved significantly towards services by July 31, 2009.

ESI also said the following about Mindware on September 15, 2009: “Mindware, an American company acquired at the end of December 2008, has been for the first time fully integrated in ESI Group's consolidated accounts. Mindware is a recognised player in, notably, high value-added engineering services in Computational Fluid Dynamics (CFD). With sales of 2.8 million euros over the first half of 2008/09, Mindware has continued to record significant growth in activity and has confirmed its fine integration within ESI Group.”


On January 26, 2010 PTC (NASDAQ: PMTC) reported results for its first fiscal quarter ended January 2, 2010.

Total Revenue for the first fiscal quarter was $258.4 million, a 7.5% increase compared to the $240.4 million achieved in the corresponding quarter a year ago, but only a 4.6% rise over the $246.3 million recognized in the sequential quarter that ended September 30, 2009. The $258.4 million in fiscal Q1 was well above the top-of-the-range figure of $240 million given as guidance last quarter.

Net income for the first fiscal quarter was $17.86 million, 283% better than the meager $4.66 million delivered in the corresponding quarter last year. Even the $17.86 million represents only a 6.9% return on sales (ROS). PTC delivered $15.90 million in net income in the just prior quarter that closed September 30, 2009.

Diluted EPS was $0.15 for the first fiscal quarter, compared to $0.04 in the year ago quarter and $0.13 in the sequential quarter that closed September 30, 2009.

C. Richard Harrison, PTC chairman and chief executive officer, commented, "We begin fiscal 2010 with strong performance in Q1: total revenue was up 8% year-over-year with license revenue up 48%. Our better than expected performance was driven by large enterprise PLM contracts in North America." On a constant currency basis total Q1 revenue was up 3% and license revenue was up 43%. Our PLM license revenue was $45 million, up 143% year-over-year, highlighting our leadership position in a large and growing segment of the enterprise software market," continued Harrison. "Our pipeline for new business opportunities with new and existing customers remains strong. During the quarter we recognized revenue from leading organizations such as Airbus, BAE Systems, Bucyrus International, Cummins Inc., DRS Technologies, The Danfoss Group, IKEA, Raytheon, Quanta Computer Inc., the United States Army and the United States Navy."

James Heppelmann, president and chief operating officer added, "Our ongoing investment in technology leadership is clearly paying off and our market momentum is becoming increasingly clear: our total PLM revenue is approaching a $500 million per year revenue run rate, we are engaged in more than 200 active competitive displacement opportunities on a world-wide basis, and we secured 4 additional strategically important "domino" account wins during the quarter."

"Our product portfolio has never been more compelling and we are continuing to invest to extend our technology leadership position," continued Heppelmann. "We have significant new releases of Windchill, Pro/ENGINEER, Arbortext, CoCreate and Mathcad coming out in FY'11, and we are progressing on our new embedded software and program portfolio management initiatives. We also continue to add to our product analytics platform; we recently acquired leading technology in the fast-growing carbon information management market, enhancing our "green product development" capabilities. Our product analytics platform enables customers to perform business intelligence-like analytics on their in-process product designs." Heppelmann concluded, "We are very optimistic about the long-term opportunity for PTC and will continue to make strategic investments that we believe are critical to delivering value to our customers and gaining market share. We expect these investments to enable us to achieve our goal of 20% non-GAAP EPS CAGR over the next 5 years."

Neil Moses, chief financial officer, commented, "PTC's strong license revenue was, as expected, partly offset by a slight year-over-year decline in our maintenance and services revenue as we continue to work through the impact of soft license sales in 2009. Our CAD and SMB-related businesses were down modestly on a year-over-year basis, as expected, given the maturity of the CAD market and the ongoing impact of the global economy on the SMB space. Importantly, however, we are beginning to see signs of improvement in the SMB market and in the European and Asian markets as well. Our balance sheet remains solid with $231 million of cash."

G4 MCAD Vendor Stock Performance


Table 3 below reveals that the combined total stock price of the G4 advanced 8.2% over the course of calendar Q4 2009, which slightly outpaced the 6.9% rise of the NASDAQ Composite index over the same period. (Interestingly, the generally more lethargic DJI delivered a slightly better percentage rise (+7.4%) in calendar Q4 2009 than the NASDAQ). Both ANSYS and PTC individually outpaced the NASDAQ's percentage rise by wider margins than the G4 sum, but neither AUTODESK nor DASSAULT kept up with the NASDAQ'S modest 6.9 percentage rise in calendar Q4 2009.

The combined total stock price of the G4 leapt an impressive 35.5% (from 105.49 to 142.90) during calendar year 2009, but surprisingly that rise was not enough to keep pace with the NASDAQ'S remarkable percentage growth over the same 12 months of 43.9%! Indeed, ANSYS was the only stock of the G4 whose rise of 55.8% outpaced both the combined 35.5% rise of the G4 total stock price as well as the 43.9% NASDAQ rise.


**Note: ESI Group is traded on the NYSE Euronext Paris Exchange, classified as a small cap stock. Its stock prices have not been summed in the TOTAL line in Table 3 above, to maintain the practice employed in previous MCAD Commentaries.

Current Stock Prices & Market Caps



For the record, Table 4 contains a snapshot of recent stock prices of the G5 MCAD companies, along with their respective Market Caps.


Table 4 G5 Current Stock Prices & Market Caps


Forecast Guidance from Individual MCAD Providers


On February 25, 2010 ANSYS updated its 2010 revenue and earnings per share guidance. For the quarter ending March 31, 2010, ANSYS is forecasting revenue between $125 to 131 million, and GAAP diluted EPS of 28 to 32 cents. For the 2010 calendar year, ANSYS currently expects revenue between $550 and $575 million, and GAAP diluted EPS of $1.34 to $1.47.

Autodesk provided the following forward-looking statements that are based on current expectations that involve risks and uncertainties. For the first quarter of fiscal 2011, Autodesk expects revenue to be in the range of $420 million to $440 million. On a GAAP basis, earnings per diluted share are expected to be in the range of $0.02 and $0.07. First quarter outlook assumes an effective tax rate of 27%. The increase in the tax rates from fiscal 2010 is primarily due to expiration of a research and development tax credit. For the full year of fiscal 2011 Autodesk is not providing specific revenue or EPS guidance at this time. However, operating margin on a GAAP basis for the full year fiscal 2011 is expected to increase significantly compared to fiscal 2010.

Thibault de Tersant, Dassault Systemes' Senior Executive Vice President and CFO, commented, “Looking at 2009 as a whole, it was rewarding to see how well DS managed through this difficult period. Thanks to the value our software brings to our customers' businesses, our recurring revenue was quite resilient, enabling us to contain the impact of the global recession to a single-digit software revenue decrease. And thanks to the efforts of the entire DS organization, we have been able to protect our operating margin, while maintaining our sales and custome0r services capacity, as well as increasing our R&D staffing.”

“Turning to our outlook, we expect 2010 to be a period of slow economic recovery. Nonetheless, within this environment we expect to drive double-digit constant currency new license revenue growth before taking into account the contribution from the IBM PLM acquisition. Incorporating the IBM PLM acquisition into our financial objectives, assuming it is completed by early April, leads to a target revenue growth of 15% to 17% in constant currencies for 2010 and a target improvement in our operating margin of about 100 basis points in comparison to 2009. Our outlook for the first quarter assumes normal seasonal factors and the flow-through impact from lower new license sales during 2009 on maintenance growth as well as some conservatism around sales activity as we prepare for the acquisition to close.”

The Company has assumed that the acquisition of IBM PLM is completed during the second quarter of 2010 and has incorporated the effects of this transaction for an estimated period of nine months during 2010. The Company's current objectives are the following:

* First quarter 2010 non-IFRS total revenue objective range of about €280 to €300 million and non-IFRS EPS range of about €0.32 to €0.39;
* 2010 non-IFRS total revenue objective growth range of about 15% to 17% in constant currencies (€1.410 to €1.440 billion: including approximately €165 million from the inclusion of IBM PLM, based upon the 2010 currency exchange rate assumptions below);
* 2010 non-IFRS operating margin of about 26%;
* 2010 non-IFRS EPS range of about €2.09 to €2.19;
* Objectives are based upon exchange rate assumptions for the 2010 first quarter and full year of US$1.45 per €1.00 and JPY140 per €1.00.

PTC offered guidance for next quarter of revenue of $235 to $245 million, and GAAP EPS of $0.02 to $0.07; and assumes currency conversion of $1.46 USD / EURO. FY 2010 targets increasing revenue to $1,015 million and GAAP operating margin of 7.5% with GAAP EPS of $0.50 The Q2 guidance assumes a GAAP tax rate of 25% and 120 million diluted shares outstanding.

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A Word about MSC.Software:

In the November 2009 MCAD Commentary, a warm “goodbye for now” was said to MSC.Software as a public company. As of March 2010, the writer* remains pleased that MSC has been given a new lease on life by way of its recent acquisition by STG. STG has an excellent track record. A new era has now begun for MSC, and it's fully expected that MSC will be public once again sometime in the future.

Back on July 9, 2009, a report appeared that MSC.Software had entered into a definitive agreement with affiliates of Symphony Technology Group (STG) under which a company controlled by STG would acquire all of MSC's outstanding shares in a one-step cash merger transaction valued at approximately $360 million. Under the terms of the agreement, MSC's stockholders were to receive $7.63 in cash for each share of MSC common stock. That price per share represented approximately a 13% premium to the closing price per share of MSC's stock prior to that announcement and approximately a 24% premium compared to the 90 trading-day trailing closing average price per share.

Within days of that definitive agreement, several law firms around the country launched class action suits, alleging that the “deal appeared to be unfair, given the fact that on June 1, 2009, MSC Software shares were trading at the exact price then offered, and that throughout 2008, MSC Software traded at significantly above the offer price, and as recently as October 2008, was trading above $10.25 a share, substantially higher than the then- current offer.”

That the original STG offer price of $7.63 per share was possibly too low was given some credibility when MSC.Software subsequently received an offer from at least one other would-be acquirer at a price higher than $7.63.

Indeed, on September 21, 2009, the MSC Board of Directors formally acknowledged that it had in fact received an offer from third-party private equity firms to acquire all of the issued and outstanding common shares of MSC at $8.30 per share in cash.

This formal announcement caused STG to react. On September 28, 2009, Symphony delivered to the MSC Board a revised offer to purchase MSC, the terms of which were not disclosed. However, it is presumed that STG's revised offer is at least $8.30 per share, since the MSC Board of Directors determined that the offer from the other would-be acquirer no longer constituted a “Superior Proposal” and the MSC Board authorized MSC to re-enter into the amended Symphony deal.

In order to give stockholders sufficient time to consider the amended proposal, the special meeting of the stockholders of MSC previously scheduled for September 30, 2009 was rescheduled for October 9, 2009.

Finally, on October 14, 2009, MSC.Software posted a Press Release on its website announcing that Symphony Technology Group (STG) had successfully completed its acquisition of MSC.Software Corporation.

Under the terms of the deal, Maximus Holdings Inc., an investment vehicle of STG and co-investor Elliott Management Corporation has purchased all outstanding shares of MSC stock for a price of $8.40 per share in cash, a total purchase price of approximately $390 million.

Moreover, industry veteran Dominic Gallello joined MSC as CEO. Gallello came to MSC from Graphisoft, a Budapest-based architectural design software developer, where he was CEO. In addition, Jim Johnson joins MSC as CFO. Johnson was most recently CFO of VG Holdings, a videogame producer that was acquired by Electronic Arts in 2007.

See the brief News Highlight on MSC.Software in this March 2010 issue of the MCAD Commentary.

* The writer served on the MSC Board of Directors 1995-96 and then as Consultant to the CEO 1996-97.

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About the Author of this MCAD Commentary:

Since 1996, Dr. Russ Henke has been president of HENKE ASSOCIATES, a San Francisco Bay Area high-tech business & management consulting firm. The number of client companies for Henke Associates now numbers more than forty. During his corporate career, Henke operated sequentially on "both sides" of MCAE/MCAD and EDA, as a user and as a vendor. He's a veteran corporate executive from Cincinnati Milacron, SDRC, Schlumberger Applicon, Gould Electronics, ATP, and Mentor Graphics. Henke is a Fellow of the Society of Manufacturing Engineers (SME) and served on the SME International Board of Directors. He is also a member of the IEEE and a Life Fellow of ASME International. In April 2006, Dr. Henke received the 2006 Lifetime Achievement Award from the CAD Society, presented by CAD Society president Jeff Rowe at COFES2006 in Scottsdale, AZ. In February 2007, Henke became affiliated with Cyon Research's select group of experts on business and technology issues as a Senior Analyst. This Cyon Research connection aids and supplements Henke's ongoing, independent consulting practice (HENKE ASSOCIATES). Dr. Henke is also a contributing editor of the EDAcafé EDA Weekly.

Since May 2003 HENKE ASSOCIATES has now published a total of eighty-seven (87) independent COMMENTARY articles on MCAD, PLM, EDA and Electronics IP on IBSystems' MCADCafé and EDACafé. Further information on HENKE ASSOCIATES, and URL's for past Commentaries, are available at http://www.henkeassociates.net. March 31, 2010 will mark the 14th Anniversary of the founding of HENKE ASSOCIATES.