MCAD Industry View – An August 2006 Update

Dr. Russ Henke Dr. Jack Horgan Commentary

MCAD Industry View — An August 2006 Update


by Drs. Russ Henke & Jack Horgan
Henke Associates

In the first MCAD Industry Commentary published in May 2003 in MCADCafé.com, then-recent yearly and quarterly financial performances of a selected group of public Mechanical Computer Aided Design (MCAD) 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 thirteen quarterly updates in MCADCafé.com, one for each subsequent calendar quarter. URL's on all past articles are available. The entities covered were ANSYS, Autodesk, Dassault Systèmes, UGS PLM, ESI Group, Moldflow, MSC.Software, PTC and Tecnomatix.

Due to the acquisition of Tecnomatix by UGS that closed April 1, 2005, Tecnomatix was no longer covered here as a separate entity. While MSC.Software will be discussed in the article below, its financials will be omitted from the vendor comparisons because of MSC.Software’s ongoing financial restatement issues.

Accordingly, the current article in the sequel recounts the financial performances of the remaining group-of-seven (G7) MCAD/PLM entities for the nominal second quarter of 2006. Following MCAD news highlights, the revenue and earnings of the G7 collectively are discussed. Then details on each vendor’s performance are covered, followed by stock data and company forecasts for the next quarter’s financials.

Finally, for Geopolitical and Economic Commentary on conditions that affect the MCAD Industry, i.e. such commentary that often appears at the end of these articles, interested readers may be motivated to click on the following URL. It will take you to the Commentary on these topics for May 2006, updated all the way through mid-August 2006:

http://www10.mcadcafe.com/nbc/articles/view_article.php?articleid=274130&page_no=9

Recent MCAD & PLM News Highlights

On May 1, 2006 ANSYS announced that it had completed its acquisition of Fluent Inc. for a combination of stock and net cash of total value of over $600 million.

In July and August 2006, MSC Software filed 10Qs for the first two quarters of 2006. This brings MSC current with regard fiscal reporting to the SEC. MSC is hopeful that its application for reinstatement on the NASDAQ will be approved.

Many publicly-traded companies, particularly in the high tech arena, have announced that they are reviewing how their stock option grants have been treated from an accounting perspective. For example, Apple delayed filing of the company’s Form 10-Q for the quarter ended July 1, 2006 while it continues an internal investigation. This delay could cause Apple to be de-listed from the NASDAQ Stock Market. As another example, CA (formerly Computer Associates International) reported that it may need to restate earnings from past years, in part because of the way it handled stock option grants to employees. The Securities and Exchange Commission recently said that at least 80 companies are the subjects of such probes. In some cases, the option grants were backdated to maximize gain for the recipients. Autodesk has announced a voluntary internal audit of its historical stock option granting practices and the related accounting. As a consequence, the firm provided no earnings data for the quarter being covered in this MCAD Commentary.

MCAD Vendors' Financial Performances in Q2 2006

Revenues:

As a group the G7 MCAD vendors generated combined revenues of $1.42 billion in the second quarter of 2006. See Table 1. This was a healthy increase of nearly 20% from the $1.19 billion in the same quarter of 2005, and a 7% rise sequentially from $1.32 billion for Q1 2006.

Company

Lastg QTR Revenue

Prev QTR Revenue

Last vs. Prev QTR

Comparable 2005 QTR

Last QTR vs. Comparable QTR

ANSYS

62

46

35.9%

38

65.3%

Autodesk

450

436

3.1%

373

20.5%

Dassault (€)

286

256

11.7%

217

31.6%

Dassault ($)

360

307

17.3%

274

31.6%

ESI Group (€)

12.8

24.7

-48.2%

13.5

-5.2%

ESI Group ($)

16.1

29.6

-45.6%

17.0

-5.2%

Moldflow

17

16

5.4%

18

-6.3%

PTC

217

200

8.2%

180

20.2%

UGS PLM

297

290

2.2%

285

4.1%

Total

1,419

1,325

7.1%

1,185

19.7%

Table 1 - Quarterly Revenues of G7 MCAD Vendors (US$ millions)

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