MCAD Industry View - A May 2006 Update

ANSYS Forecast Update:

On June 5, 2006 ANSYS announced additional financial guidance for the second quarter and full year of 2006 to include the recently completed acquisition of Fluent Inc.

Second Quarter 2006 Guidance:

ANSYS currently expects the following for the quarter ending June 30, 2006:

    * GAAP revenue of approximately $57 - $60 million
    * Adjusted (non-GAAP) revenue of approximately $64 - $65 million
    * GAAP diluted earnings per share of $0.07 - $0.15
    * Adjusted (non-GAAP) diluted earnings per share of $0.36 - $0.37

Fiscal Year 2006 Guidance:

ANSYS currently expects the following for the year ending December 31, 2006:

    * GAAP revenue of approximately $248 - $257 million
    * Adjusted (non-GAAP) revenue of approximately $268 - $274 million
    * GAAP diluted earnings per share of $0.49 - $0.78
    * Adjusted (non-GAAP) diluted earnings per share of $1.58 - $1.60

As guidance Autodesk expects revenue in the next quarter to be between $440 million and $450 million. This compares to $481 million in the quarter just completed. For fiscal year 2007 Autodesk expects revenue to be between $1.81 billion and $1.85 billion.

Carl Bass commented, "Our business strategy and strong product position enable us to benefit from important business trends including the increasingly globalized nature of business, the rise of emerging economies, the massive worldwide development and repair of infrastructure, and the increased desire for sustainable or "green" design. Our business is sound, and we are increasing our business outlook to reflect the current environment."

As guidance Dassault expects (before inclusion of MatrixOne) that revenue in the next quarter will be in the range of €260ÿ million in comparison to €252 million in the quarter just completed. For fiscal 2006 the outlook is €1.105-1.115 billion. With MatrixOne included the figure, the next quarter rises to €275-280 million and the goal for the year becomes €1.175-1.185 billion, representing 25 to 26% growth in constant currencies, with about 7 points of growth from MatrixOne before deferred revenue write-down adjustments.

Thibault de Tersant, Dassault's Executive Vice President and CFO, stated, "We are updating our full year objectives with our revenue objective unchanged and our EPS objective slightly lowered as our better first quarter performance was offset by the change in our Japanese yen exchange rate assumption. MatrixOne will, however, have a slightly higher dilutive impact in 2006 than we originally estimated, simply due to the fact that the transaction could possibly close six weeks earlier than we had initially assumed."

As guidance Alain de Rouvray, ESI Group's Chairman and CEO, commented, "2005 was a significant year for ESI Group in terms of its realizations, both financially, where figures confirm our profitable growth, and in terms of our sales and technical activity. Not only have we been observing a very positive basic trend for 'realistic simulation' accounting for product-process interaction, but 2006 should furthermore see the initial benefits of actions undertaken in 2005; in particular, the intensification of Virtual Manufacturing (VM) solutions with the continuing deployment of the PAM-STAMP 2G, ProCAST and SYSWELD offer. Lastly, the recent strengthening of our positioning on the high-growth markets of Korea and China should also contribute significantly to the growth of our simulation activity and the development of new integrated industrial solutions projects.

All of these positive factors lead us to a sales growth target of 10% to 15% for the current financial year and support the prospect of achieving annual sales of 100 million euros in the medium term. This increase in activity will allow us to improve the amortization of our fixed costs. Similarly, the integration of our recent acquisitions will generate further synergy effects. We therefore anticipate a further improvement in profitability, with an operating margin target of 8% to 10% for 2006 and 15% for the medium term.

As guidance Moldflow expects revenue for its full fiscal 2006 year to be approximately flat when compared to fiscal 2005 revenue, which was $64.4 million. This would translate into revenue of $16.5 million in the next quarter, compared to $16.3 million in the quarter just completed, and compared to $18.3 million in the same quarter a year ago.

PTC's revenue forecast for the next quarter is between $205 million and $210 million. For the fiscal year ending September 30, 2006, PTC expects revenue to be between $810 million and $820 million.

CEO Harrison commented "At the midpoint of (fiscal) 2006, we remain enthusiastic about our fiscal 2006 targets, as well as our ability to achieve longer- term financial objectives of $1 billion in revenue and $200 million in non-GAAP operating income by 2008."

MCADCafé.com currently tracks the financial performance of multiple public companies in the Mechanical CAD market. Eight (8) companies were chosen for the author's initial May 8, 2003 Commentary. Four of these companies (Autodesk, Dassault Systèmes, PTC and EDS PLM Solutions -- now UGS, a privately held company) represented approximately 85 percent of the total revenue in this grouping, and each of these four companies offers a wide array of software and services products across the entire design to manufacturing space. The remaining four public companies (ANSYS, Moldflow, MSC.Software and Tecnomatix) offered specialized software/services products in specific MCAD niches and together they created the remaining 15 percent of the total group-of-8's revenue. Indeed, these latter four companies frequently partner with the initial four to provide end-customers with broader solution suites. Tecnomatix has been acquired by UGS and hence has been removed from this report.

For the author's August 2003 Commentary in MCADCafé.com, a ninth company, the ESI Group, was added. All nine were studied thereafter for comparison purposes.

The combined worldwide total annual revenue of these companies is over $4 billion, not an insignificant sum. But it is, in fact, less than 3% of the ~$190 billion spent annually on all types of software (source IDC). So why study MCAD companies at all? The key to MCAD's importance lies in the leverage its users apply to create the everyday durable goods with which we are all familiar: automobiles, trucks, military gear & weapons, appliances, farm & construction equipment, aircraft & aerospace vehicles, etc. In short, MCAD is arguably responsible for enabling today's manufacturing industries, which are the centerpieces of creating real productivity and wealth creation in every modern economy.

Understanding the comparative MCAD revenue content of various vendors is not merely academic. For example, it helps observers better understand the likely future competitive MCAD strength of each vendor relative to its peers in such areas as amount of money available for R&D, for potential new acquisitions, for financial stability to weather economic cycles (see Economic & geopolitical discussion below), and for other key business factors.

In comparing financial performances of the four largest MCAD companies tracked by MCADCafé.com, it's instructive to account for the actual MCAD content of each. For example, the revenues of Dassault and PTC can arguably be considered 100% MCAD in nature, whereas Autodesk's total revenue is only partially made up from its business in MCAD. Some Autodesk revenue stems from another segment which provides systems and software for creating and animating imagery. Even in the remaining largest portion of Autodesk's total revenue, derived from its Design Solutions Segment, is divided among solutions for Manufacturing, GIS, the building industry, and the platform technology group. Only the solutions of the Manufacturing Group (Inventor, AutoCAD Mechanical, Mechanical Desktop, Streamline, Point A, etc.) might be thought of as "pure" MCAD revenue.

It should also be noted that the companies have different business models. IBM, both direct and through Business Partners, is the exclusive marketing and sales arm for Dassault Systèmes high end product lines: CATIA, Enovia and Delmia. The IBM channel also carries SmarTeam solutions in a non-exclusive basis. IBM records the end user revenue and pays DS a royalty of approximately 50%. DS subsidiary SolidWorks is sold through value added resellers. Autodesk sells its products overwhelmingly through valued added resellers. The other MCAD vendors sell mostly on a direct basis. Direct sales result in greater percentage of end user revenue recognition but also involve higher cost of sales and risk.
UGS annual revenues are right there at similar levels as the world's other MCAD revenue leaders Autodesk, Dassault and PTC. For purposes of our discussion, we considered the revenues from the remaining public companies (ANSYS, ESI Group, Moldflow, and MSC.Software) to be 100% MCAD.

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Review Article
  • October 09, 2008
    Reviewed by 'Randy Bigs'
    I agree that the authors did not clearly tie in the overall state of the economy with the topic at hand: The MCAD industry. But, based on this week's Wall Street stock meltdown, and the worry about increased inflation, It's obivious that we've got big trouble right here in River City, and it will not only negatively impact our economy in general but the MCAD industry specifically. I applaud Russ and Jack for their in depth financial analysis, but I also would like to see their US and geopolitical comments weaved into the central theme, and I hope when things turn around they'll continue to present an objective viewpoint.

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  • October 09, 2008
    Reviewed by 'Mac'
    Where's the beef? As I read the article hoping to get an update on the MCAD industry, I quickly realized that this article was just another political aid without any data that could be interpreted without a secret MCAD decoder ring. I find it ridiculas that instead of giving us a real opinions on state things in the MCAD space, the authors just threw up graphs and charts and ambigious explantions about what those caharts and graphs meant. At the end of the article, I could only grin as I kept wating for some information that might actually provide me with some insight on the state of affairs in the MCAD space, but it didn't happen.
    I guess I will have to keep on collecting data myself and come up with my own opinions as I am not on someone's pay roll and have no political agenda. Here's a noval idea, lose the jibber jabber talk (Denny Crain) and call it like it is for once.

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  • October 09, 2008
    Reviewed by 'S. Wertel'
    This article is quite detailed and well written, but what does your political view on the current administration have anything to do with MCAD?
    The entire Economic & Geopolitical Factors section is filled with tripe and misleading statistics pulled from sources biased to anti-Bush sentiments. Is this the only medium Henke and Horgan have available to prevail themselves as some sort of economic masterminds? Please keep your political drivel to yourselves, or at least place them in a forum suited to that topic. If I were to have written something as perverse as this, my high school social studies teacher would have accused me of having diarrhea of the mouth and sent me back to perform an unbiased analysis showing both side of the story and how they relate to the topic at hand - the state of the MCAD industry. No where in the Economic & Geopolitical Factors section was there a tie between the rubbish on the page and how it relates to the topic of MCAD. Please go back to high school.
    In the future, please contain the Industry View to just an Industry View, or at least tie in the Economic and Political Factors with how they affect MCAD.

      One person found this review helpful.

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  • October 09, 2008
    Reviewed by 'Brian T.'
    What can I say, this article is not a News/Commentary article on MCAD. It is a Liberal Propaganda Tool which I will no longer subscribe to. This is my third comment on these out of place personal comments in a otherwise informative article. When the last article was being reviewed, the last I checked 6 out of 7 responses to that last article agreed with my review, then it was removed from the mcadcafe page. I guess this would be expected, that poll might not swing their way, so cut it short before it looks bad. I have never seen this report taken off this site before. These views are included in a bias manor. Some of the same information could be included with out the Liberal Bias View or the quotes from the Like Sources. Enough Said, another media tool that can't seem to go down the middle.

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