Commentary: MCAD Industry View – A March 2008 Update


MCAD Industry View - A March 2008 Update

by Dr. Russ Henke and Dr. Jack Horgan
Henke Associates

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) 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 eighteen 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.

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 07, 2007 UGS announced the close of its acquisition by Siemens AG effective May 4, 2007. As a result, the business will go to market as UGS PLM Software, a global division of the Siemens Automation and Drives (A&D) Group. Over the years UGS has bounced back and forth between being a public company and a private company under different ownership. Although not required to do so, UGS has reported on its financial results even when privately held. For the first quarter of 2007 there was only a terse statement from Tony Affuso, chairman and CEO of UGS PLM Software, “We had a very strong quarter in Q1, coming in near 11 percent on total revenue growth and 16 percent on software license growth.” This translates to about $300 million. According to a company spokesperson, UGS will no longer report results separately from Siemens. This is a very common practice with large corporations. In the first quarter of this year the A&D Group generated £3.9 billion of the £20.2 billion total Siemens revenue. We can expect very little insight into UGS performance from public Siemens’ reports going forward.

Accordingly, this nineteenth article in the sequel recounts the financial performances of the remaining group-of-seven (G7) MCAD/PLM entities for the nominal fourth quarter of 2007.

In this issue, recent MCAD news highlights are listed, followed by a group summary of revenue and earnings of the covered MCAD entities for Q4 2007, then company by company quarterly details, then vendor stock performances, then company by company yearly details, then future revenue forecasts by vendor.

Recent MCAD & PLM News Highlights

On January 15, 2008 Autodesk announced that it had completed the acquisition of Robobat, a privately-held company based in Grenoble, France, for approximately $42.5 million in USD cash, subject to a working capital adjustment. On November 15, 2007, Autodesk had announced an agreement to acquire Robobat. The Grenoble company provides software for structural engineering analysis, design, and steel and concrete detailing.

On February 19, 2008 Autodesk announced that it had signed a definitive agreement to acquire Kynogon SA, the privately held maker of Kynapse artificial intelligence middleware. Terms of the transaction were not disclosed. Kynapse is said to have been used to develop more than 65 AAA game titles, including Alone in the Dark 5, Crackdown, Fable 2 and The Lord of the Rings Online: Shadows of Angmar. Kynapse gives characters spatial awareness, enabling them to realistically navigate digital environments.

On January 14, 2008 MSC.Software expanded its thermal solution portfolio through its acquisition of Arizona-based Network Analysis, Inc. (NAI), a vendor of thermal simulation software and the developers of the SINDA/G(TM) thermal modeling software.

On January 23, 2008, Moldflow announced that more than 30 companies licensed Moldflow Plastics Insight - Enterprise Edition™ (MPI-e™) during its recent fiscal quarter ended December 31, 2007. This brings the total number of companies that have licensed MPI-e in just its first year of availability to 100.

On January 24, 2008 Dassault Systèmes announced PLM 2.0 and its new V6 platform. PLM 2.0 - PLM online for all - is said to be a 3D online environment for everybody to experience products virtually where all user interactions generate Intellectual Property (IP). V6 is DS's next generation platform for PLM 2.0.

On February 27, 2008, PTC announced the availability of CADDS 5 15.0, the newest release of its specialized CAD/CAM solution for shipbuilding. CADDS 5 and Optegra provide the power and performance needed to help large, dispersed teams create massive, highly complex assemblies within stringent schedules.

February 11, 2008 ESI Group announced the release of the new version of its PAM-CEM Solutions software package. This product is aimed at performing realistic and predictive ElectroMagnetic Compatibility (EMC) simulations in the transportation industry, in Aeronautics and Defense, in Telecommunications and in Electronics.

On February 25, 2008 ANSYS announced that it had been included on the Forbes Fast 15 list, a first-ever formal compilation by Forbes magazine of attractive companies with potential to become rapidly growing technology businesses in the future. ANSYS was the only engineering software provider to make the list.

On March 3, 2008 ANSYS announced that it had been listed among top performers on the 2007 Shareholder Scoreboard compiled by The Wall Street Journal. The Scoreboard is the newspaper's annual ranking of 1,000 companies in 75 industries, based on their stock performance over the past year as well as over the past 3-year, 5-year and 10-year periods. ANSYS was ranked #9 on the best performers' 10-year list, with a 36.8% average annual return for a decade. In addition, ANSYS was ranked #1 in the Software Industry Group with a 1-year return of 90.7%, as well as #14 on the Scoreboard's Honor Roll, a compilation of companies that earned straight-A ratings, ranked on five-year average compound annual total returns through year-end 2007.

As readers know, the MCAD software industry is dependent heavily on robust manufacturing activity. On March 01, 2008, The Chicago Tribune reported that the Chicago purchasing managers index, a closely followed measure of manufacturing activity, dropped in February to its lowest reading since the recession year of 2001. Meanwhile, weakening demand and plunging employment offered a clear signal that the industrial sector is in retreat. Instead of dropping from January's lackluster reading of 51.5 to 49.5 in February, as economists had predicted, the index unexpectedly plunged seven full points, to 44.5, its lowest level since December 2001. Economist Ryan Sweet of Moody's noted that "a below-50 level in orders and uncertainty about the economic outlook have led manufacturers to hit the brakes." He added that this "report underscores the fact that with consumers turning wary and the impact from the collapse of the housing sector still spreading, the manufacturing sector is clearly struggling."

As we sink deeper into W’s second recession, here is another economic tidbit. Capping a unremitting rise in the last seven years, oil prices hit a record high during the day on March 3, 2008, according to a report March 4, 2008 in the New York Times. The day’s highest trading price, $103.95 a barrel on the New York Mercantile Exchange, broke the record set in April 1980 during the second oil shock. That price, $39.50 a barrel, equals $103.76 today, when adjusted for inflation. The trend is expected to continue, especially after FED Chairman Ben Bernanke signaled in late February 2008 that he was ready to cut interest rates still further to try to bolster sagging US economic growth, despite relentlessly rising consumer prices. Sales of cars and trucks in the United States fell 10% in February 2008. Americans were paying an average of $3.165 for a gallon of regular gas as of March 3, 2008, 69.8 cents more than a year ago, according to the AAA. In CA it’s more like $3.50 now. Analysts say that a US average for regular of $4 a gallon is possible within months. By the way, oil was about $25 a barrel when W took office in 2001.

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