March 06, 2006
Dassault Systemes Acquiring MatrixOne
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Jeff Rowe - Managing Editor

by Jeff Rowe - Contributing Editor
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Dassault Systemes and MatrixOne jointly announced a merger agreement pursuant to which Dassault Systemes would acquire MatrixOne for $7.25 per share in cash, representing a total transaction value of approximately $408 million.

The proposed acquisition, which has been approved by both companies' Boards of Directors, is expected to be completed by the end of the 2006 second quarter, subject to customary closing conditions, including approvals by MatrixOne's shareholders and regulatory authorities.

MatrixOne is a leading global provider of collaborative PLM software and services to medium-to-large organizations including companies across the high tech, consumer products and medical devices industries among others. More than 850 companies, representing hundreds of thousands of users, work with MatrixOne's solutions, including industry leaders such as Alcatel, Celestica, GAP, General Electric, IBM, Intel, Johnson & Johnson, Nokia, Philips, Procter & Gamble, Qualcomm, Sony Ericsson, STMicroelectronics and Toshiba. MatrixOne has 488 employees and 26 offices in North America, Europe and Asia Pacific. For its most recent fiscal year ended July 2, 2005, MatrixOne reported total revenues of
$124.1 million. Cash and cash equivalents totaled $98.6 million at December 31, 2005.

Bernard Charles, Dassault Systemes' President and Chief Executive Officer, commented, "The acquisition of MatrixOne will extend our reach, enabling us to bring the value of PLM to a significantly expanded audience across a broader range of industries. The combination will enable a new level of collaboration and will leverage the best-in-class technologies, products and skills of both companies. Moreover, this strategic action will further advance our roadmap to provide on-demand service-oriented solutions. From all perspectives this combination is very complementary and, will result, following the closing, in an excellent fit that should provide significant benefits to our combined
customers, partners and employees. We are, therefore, clearly committed to further enhancing MatrixOne, ENOVIA and SMARTEAM solutions to serve the broad range of customers' demands.

"In summary, I believe we will be well positioned to offer customers the most advanced vision and most comprehensive offering in the marketplace. Our combined product portfolio will address a wide spectrum of product development requirements for companies across many industries. And from a collaboration perspective, our combined portfolio will provide offerings for teams, for the extended enterprise and for multi-enterprise integration."

Mark O'Connell, MatrixOne President and CEO stated, "On behalf of all MatrixOne employees, we are excited to join Dassault Systemes and believe the combination will leverage the unique value both companies bring to the market. Together we will extend our technologies, industry solutions and deep understanding of our customers to enable them to maximize their new product innovations."

Thibault de Tersant, Dassault Systemes' Executive Vice President and CFO, commented, "From a financial perspective, the acquisition is expected to have a neutral impact on our Non-GAAP EPS in 2006 and is expected to be accretive to our Non-GAAP EPS in 2007. We anticipate a one percentage point negative impact on our 2006 and 2007 Non-GAAP operating margin, with no further impact anticipated after 2007. We are confident that, working together, we can accelerate the pace of MatrixOne's growth at both the top-line and bottom-line."

Dassault Systemes estimates that the deferred revenue write-down, as part of purchase accounting adjustments, may approximate $20 million for the first twelve months following the completion of the proposed acquisition of MatrixOne.

Well, the consolidation of the technical/business application software market marches on with the acquisition of MatrixOne by Dassault. Is it surprising? Not really. Is it a wise move? That remains to be seen. Interestingly, Dassault's biggest competitor, UGS, felt compelled to pooh-pooh the purchase almost immediately after it was announced. UGS stated that it was aware that MatrixOne was for sale, but felt it was not a good complementary fit and cutting operating expenses (likely in sales and R&D) would be necessary, greatly diminishing its strategic value - at least for UGS anyway.

With the acquisition on MatrixOne, Dassault now has four PDM-related products to offer and support - ENOVIA, SMARTEAM, and PDMWorks. This rounds out Dassault's PDM offerings and will likely give provide a door for getting into new types of industries beyond its historical strength of presence in the automotive, aerospace, and defense markets, such as consumer products and medical devices. The acquisition may also prove more attractive to small and medium sized businesses (SMBs) with less than 500 employees that previously might have shunned Dassault's PDM applications.

Both Dassault and MatrixOne have been careful, however, not to use the term "PDM," opting rather for the acronym, PLM, and the terms "PLM platform" and "PLM environment," instead. I guess the reason for this is that PLM encompasses and commands a bigger universe and potential customer base than mere PDM. With the way things are evolving in the PLM space, ultimately, Dassault may see as much competition from SAP or possibly Oracle as it has historically from UGS. Only time will tell how prudent and profitable the MatrixOne acquisition will prove.

The Week's Top 5

At MCADCafé we track many things, including the stories that have attracted the most interest from our subscribers. Below are the five news items that were the most viewed during last week.

SolidWorks Corp. announced it would grant SolidWorks Student Edition CAD software to as many as 1,000 individual U.S. educators in a new initiative aimed at improving students' math skills and their interest in technology-related careers. The SolidWorks-STEM Educators grant - whose acronym stands for science, technology, engineering, and math - includes training and lesson plans to help teachers and faculty from middle school through college integrate the four separate disciplines for more effective education. With backing by the National Science Foundation (NSF), STEM is an emerging movement in American education, which is increasingly realizing that global competitiveness requires
students to be technologically literate. STEM addresses academic warning signs such as a new study funded by the Department of Education that found that U.S. math students in 4th and 8th grade perform consistently below peers around the world and continue that trend into high school.

3D Systems Corp. has launched its new dental lab system, the InVision DP (Dental Professional), and expects to begin shipments of the new system during the second quarter of 2006. The InVision DP 3-D Printer produces castable wax-ups for copings and bridges for up to 16 elements from scans and designs done directly in the dental lab. It provides dental labs with an integrated solution that includes a 3-D Scanner, design software and a customized InVision 3-D Printer. The system converts digital input data to castable wax-up shapes using a proprietary material designed specifically for dental molding applications.

PTC announced that it had effected the two-for-five reverse split of its common stock. The reverse stock split was approved by PTC stockholders at the Annual Meeting of Stockholders on March 10, 2005. PTC's common stock began trading on a split-adjusted basis under the trading symbol "PMTCD" for a period of 20 trading days. Commencing March 28, 2006, PTC's common stock will resume trading under the symbol "PMTC". This reverse stock split is part of PTC's program to improve its equity structure and bring the Company's total shares outstanding in line with software peers of similar size. The number of shares of PTC common stock issued and outstanding will be reduced from
277,888,500 shares as of February 27, 2006, to approximately 111,000,000 shares post-split. The number of shares reserved for issuance under PTC's equity compensation plans will also be reduced proportionately. As a result of the reverse stock split, every five shares of common stock of PTC that is issued and outstanding shall be automatically combined into two issued and outstanding shares without any change in the par value of such shares. No fractional shares will be issued in connection with the reverse stock split. Stockholders who would be entitled to fractional shares will receive cash in lieu of receiving fractional shares.

CoCreate Software announced that over 500 new and previously undecided customers have invested in CoCreate product development applications since the start of its first quarter. The majority of companies have added CoCreate's Designer Modeling to their product development fold. Of the companies, nearly 100 are new customers with no previous exposure to CoCreate's platform, demonstrating the significant growth in the number of organizations recognizing the differences and benefits that history-free Dynamic Modeling offers over a history-based approach to 3D product development. CoCreate's PLM strategy fills the gap between product definition and manufacturing systems,
such as ERP, with a rich product development suite. Rather than the traditional PLM approach of adding another enterprise IT layer, CoCreate complements existing IT investments and leverages a 3D master model to extend the reach of design data throughout the organization.

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-- Jeff Rowe, Contributing Editor.


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