MCAD Industry View -- What did the Last Quarter Bring?

Maria Shields, ANSYS CFO, commented "We feel comfortable with the consensus estimate of $0.44 EPS for the next quarter." CEO Jim Cashman added "With regard to the outlook for the remainder of 2003, we maintain our guidance for adjusted year's revenue in the $114M to $115M range and exceeding our earnings commitment from the beginning of the year. Long term outlook stays solid. We see some positive signs but are still cautious as to how quickly any recover will manifest itself. .. Looking forward we envision top line growth for 2004 in the 9% to 11% range and EPS between $1.66 and $1.67."

Autodesk projects net revenues for the third quarter of fiscal 2004 to be in the range of $216M to $221M. Earnings per diluted share for the third quarter of fiscal year 2004 are expected to be in the range of $0.13 to $0.16. Consistent with previous guidance, earnings per diluted share for fiscal year 2004 are expected to be in the range of $0.50 to $0.60. Net revenues for fiscal 2004 are expected to be in the range of $875M to $885M. This compares with estimates in May for revenue in the range $875M to $900M. Resellers are expecting an uptick when Autodesk stops offering technical support and upgrade option for Autodesk 2000 on January 15th. In October Autodesk signed a deal with Microsoft to integrate its engineering data management solution (Vault) with Microsoft's Business Solutions.

Dassault Systemes projects revenue for 4Q2003 to be €225M, which is flat year over year but is up 8% in terms of constant currency. For 2003 the projected growth has been lowered from 7% to between 5% and 6% in terms of constant currency, reflecting lower service revenue. Looking ahead to 2004 Thibault de Tersant commented "we are providing our preliminary views at this time. Our revenue growth objective is about 6% to 7% in constant currencies. Taking an assumed U.S. dollar to Euro exchange rate of $1.20 per EUR1.00, therefore, leads to a reported revenue growth objective of approximately 4 to 5%. At this point in time, our financial objectives assume a continuation of the current business environment into 2004."

EDS (the whole company): "We remain on track to meet our guidance for the second half of the year, including estimated pro forma earnings of about 70 cents per share on a POC basis - or 17 cents per share on an EITF 00-21 basis1," said Bob Swan, executive vice president and CFO.

On October 13th EDS announced it was considering an Initial Public Offering or private offering of a minority stake in its PLM Solutions subsidiary as a strategic alternative for the business. "A minority IPO or private offering in PLM Solutions would enable EDS to leverage the value of this key asset," said Michael Jordan, EDS chairman and CEO. "By operating as a software company in a growing space, PLM Solutions will be able to focus solely on the PLM market, while in turn supporting EDS' sharpened focus on our core business." Tony Affuso, president and CEO of EDS PLM Solutions added "We expect this alternative would enable PLM Solutions to be more agile in the market, make decisions more quickly and more effectively leverage our roots as an independent software company on behalf of our customers. At the same time, PLM Solutions would continue to be able to leverage the support and IT services expertise of EDS. It's a win-win scenario we are looking forward to."

It may not be realistic to assume that a company will possess more agility and flexibility when its actions come under the microscope of the financial community. Also EDS may be reluctant to share consulting opportunities with other system integrators. A more likely explanation for this possible sale is to raise cash. EDS has had some cash flow problems due to their upfront costs in major outsourcing deals such as the contract with US Navy and Marine Corps for an end-to-end IT infrastructure. Revenue and cash flow had also been impacted by bankruptcies of two major customers: Worldcom and US Airways. At the end of 2002 EDS had $1.6B in cash and equivalents. In June 2003 EDS raised $1.7B through the sale of senior notes and convertible senior notes.

Background: At the end of August 2001 EDS acquired SDRC for $940M and in September 2001 EDS purchased the outstanding shares of Unigraphics for $174M (implies a market cap of nearly $1.5B). In 2001 Unigraphics had $752M in revenue but would have had $1B in revenue if the acquisition of SDRC had occurred at the beginning of the year. Unigraphics revenue grew for a while thanks to the acquisition but has slid in recent quarters and is down about 20% from the combined pre-acquisition revenues of the individual firms.

ESI Group gave no guidance for follow-on quarters. As part of the strategic partnership executed on July 8 with the EASi, ESI Group acquired the intellectual property rights to EASi's CAE software. This cash acquisition was consolidated effective August 1, 2003. EASi is a Tier-1 supplier to many of the largest automotive companies. EASi license revenue was ~$2M in 2002 with half in the US. Alain de Rouvray said "The performance of this first semester confirms that the group is on track and continues to strengthen its competitiveness, both commercially and technologically. The business plan has shifted into a higher gear, as reflected by major partnerships with such groups as Renault and Dassault Systhmes. We expect our products to gain further market share as we continue to reinforce our strategic position in the emerging business of integrating CAE and simulation software."

Moldflow is calling for 10% to 15% year-over-year revenue growth between $9.8M to $10.3M and EPS of $.01 to $.03. They expect expenses to be higher due to annual salary adjustments on October 1 plus costs for new releases. Among the new releases will be an English version of the production monitoring software from the French firm Ctntrole Processus Industriels (CPI) acquired in January.

MSC.Software forecasts revenue for continuing operations in the fourth quarter to be in the range $65M to $70M, which represents nearly 10% growth sequentially but less than the $72.4M achieved in 4Q2002. Revenue for the year would lie between $248M and $253M versus $248M in 2002. The projected EPS in Q4 is between $0.05 and $0.07. For 2004 MSC.Software is forecasting revenues between $260M and $280M with EPS between $0.35 and $0.40. "My recent interaction with customers and staff at our conference has reconfirmed my enthusiasm that we will continue to succeed in this tough market and will perform even better when the economy turns around. The breadth and depth of our software and services product portfolio uniquely positions us in the market, and we are confident we can continue this momentum into the fourth quarter and into 2004," according to CEO Frank Perna

According to PTC's press release: "PTC 's revenue forecast for the first quarter of fiscal 2004 is between $150M and $160M. Additionally, PTC's cost reduction program is on track, and we expect to incur a restructuring charge of $20M to $25M in the first quarter. Net loss per share is expected to be between $0.09 and $0.13." PTC is targeting $120M in annualized cost reduction in F2004, specifically quarterly operating expenses of $160M in 1QF04 and $150M by end of F04. The projected headcount at the end of F2004 is to 3,000 versus 3,500 at the end of F2003. PTC will be eliminating direct sales in low profit and non-strategic geographical regions and have greater reliance on VARs. VARs contributed 27% of revenue or $9.2M in last quarter. On October 20 PTC announced a new Channel Advantage Reseller program. For the first time, certified partners can now also sell Windchill PDMLink and Windchill ProjectLink. PTC will also be using offshore resource in India and Israel for maintenance programming and services.

Oren Steinberg, chief financial officer and executive vice president of Tecnomatix Technologies said, "Our focus in the fourth quarter will remain on increasing sales, maintaining our cost controls, and overseeing a smooth integration of USDATA activities. Going forward, we expect sequential revenue growth of 5-10% in the fourth quarter 2003 with similar profitability. In 2004, we expect to see revenue growth of 10-15% year over year with improved profitability."

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