MCAD/MCAE Industry View – An August 2010 Update


MCAD/MCAE Industry View – An August 2010 Update

by Dr. Russ Henke
Henke Associates


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

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) and Mechanical Computer Aided Engineering (MCAE) vendor companies were analyzed and compared. Expectations of future financial performances of these same entities were documented.

The May 2003 MCAD Commentary was followed by twenty-eight (28) 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, and none since. 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.

Henke Associates recognizes that some MCAD/PLM/MCAE vendors have expanded their offerings into the world of “multi-physics” by moving beyond pure MCAD into other disciplines, such as fluid dynamics and electronic analysis (e.g. ANSYS). This Commentary will also report on these new areas as appropriate. (The EDA WEEKLY posted on on July 19, 2010, entitled, “ANSYS turns 40!” dealt with ANSYS multi-physics, and it is available in the EDA WEEKLY archives).

This thirtieth MCAD/MCAE Industry article in the sequel recounts mainly the financial performances of the remaining group-of-five (G5) MCAD/PLM/MCAE entities for the nominal second quarter of calendar 2010:

The following is divided into two (2) basic sections, the first of which discusses the G5 financial results for the nominal Second Quarter of Calendar 2010, and the second section covers Recent MCAD/MCAE News Highlights. Enjoy!

G5 MCAD/MCAE Vendors' Financial Performances in Q2 2010:

Measured in $US except where indicated, Table 1 below reveals that the combined total revenue of the G5 was $1364.8 million in Q2 2010, a figure which was a mere 3.1% above combined total in sequential Q1 2010, but it was almost 13% better year over year than Q2 2009.

Dassault Systemes contributed the most ($60.4 million) to the modest 3.1% G5 growth in $US revenue of Q2 2010 over Q1 2010, less some $21 million for ESI Group. All the vendors save ESI Group contributed significantly to the 13% year over year improvement in total G5 quarterly revenues, except for ESI Group's tiny reduction.

Note: FX rates are averages used to match the various quarters shown, verified by using monthly average exchange rates averaged into quarters. The relevant FX rates used are as follows: euros to dollars Q2 2010 = 1.27277, Q1 10 = 1.38, Q4 09= 1.48, and Q2 09 = 1.362.

We turn now to earnings in Table 2 below. Measured in US$, the four vendors reporting earnings created almost $38 million more in Q2 2010 earnings than in Q1 2010, with Autodesk contributing 61% of the increase and DS some 27%.

Furthermore, Q2 2010 sported nearly $92 million better year over year net income for the G4 than the recessionary Q2 2009. Here again, Autodesk was responsible for 54% of the increase, DS 29%, and ANSYS and PTC tossed in the remaining 17% of the $92 million increment.

The $168.2 million of net income on $1334.56 million in revenues among the four vendors reporting earnings in nominal Q2 2010 represents a very healthy 12.6% ROS.

Details on Individual G5 Vendors' Q2 2010 Performances

On August 05, 2010 ANSYS, Inc. (NASDAQ: ANSS) announced in-line performance against its guidance in nominal Q2 2010 revenue, and it announced over-performance in non-GAAP Earnings Per Share (EPS) for the second quarter of 2010.

Double digit revenue growth in the second quarter was again spread across all major geographic regions, all major product lines and a broad array of industries. Solid top line performance translated to strong margins and 16% non-GAAP earnings per share growth in the second quarter. (Note: The MCAD Commentary usually deals only with GAAP numbers, but the non-GAAP mention was recounted here because ANSYS saw fit to highlight it. However, the remainder of this segment on ANSYS will deal solely in GAAP data).

"This quarter's results continue to reflect the improved business momentum that we have seen over the last few quarters, in spite of the greater than anticipated negative currency effects, due mostly to the volatility of the Euro. Overall, our business performed well on both the license and maintenance fronts, with a positive contribution from all major geographies. We strengthened our balance sheet, reduced our overall debt and our deferred revenue balance increased to an all time high," stated Jim Cashman, ANSYS president and CEO. "We are encouraged by our first half performance, despite pockets of uncertainty that remain in the global business climate. We also continue to validate our belief about the future potential of simulation through our customers' continued adoption of the ANSYS simulation suite to transform their product design processes, taking advantage of the strength of our broad physics portfolio to drive innovation, efficiencies and productivity gains."

ANSYS reported total GAAP revenue of $137.8 million in Q2 2010, 13% higher than the $122.0 million in the second quarter of 2009, and 1.3% more as compared to sequential Q1 2010 revenue of $136.0 million. (ANSYS also reported total GAAP revenue of $273.8 million in the first six months of 2010 as compared to $238.3 million in the first six months of 2009). Note: As implied in the first sentence in this ANSYS section, revenue of $137.8 million in Q2 2010 was right in the middle of the guidance given last quarter for Q2.

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