Commentary: MCAD Industry View - A May 2008 Update
ANSYS CEO Jim Cashman noted, "ANSYS delivered another outstanding quarter highlighted by strong revenue growth and operating margins. Looking ahead, as a result of our solid first quarter results, combined with our second quarter and beyond visibility, we are increasing our outlook for the year. We believe we are well positioned to leverage our extensive customer base, strategic vision, technology leadership, and solid business model, to drive continued growth and momentum during the remainder of 2008."
As guidance Autodesk
expects net revenue for the second quarter of fiscal 2009 to be in the range of $600 million and $610 million. This does not yet include any contribution from Moldflow, which Autodesk has announced it is acquiring (see MCAD news highlights above). The $600 to $610 million rage compares to $599 million in each of the last two quarters and compares to $526 million in the corresponding quarter a year ago. Net revenue for the third quarter of fiscal 2009 is expected to be in the range of $605 million to $620 million. For fiscal year 2009, net revenue is expected to be in the range of $2.45 billion and $2.50 billion. This compares to $2.17 billion in fiscal 2008.
Thibault de Tersant, Senior Executive Vice President and CFO of Dassault Systemes
, commented, “Our 2008 outlook remains good and essentially unchanged from when we released it in February. We, therefore, are reconfirming our 2008 non-GAAP constant currency objectives for total revenue growth of about 10% and slightly increasing our software revenue growth to about 12% to 13%. We are also reconfirming our objective to increase our 2008 non-GAAP operating margin by 80 to 130 basis points in comparison to 2007. We are reducing our 2008 non-GAAP earnings per share growth objective to a range between 6% and 10% solely to reflect the severity of the US dollar weakness as our overall business outlook remains unchanged.”
Due to the pending acquisition of Moldflow by Autodesk, Moldflow
suspended its historic practice of providing guidance for future periods.
At this time the MSC.Software
will not issue guidance but will continue to evaluate its decision to provide guidance in the future. CEO Weyand said, “We are pleased with more consistent growth in maintenance revenue as our installed base of customers continues to see the business value in MSC's solutions, and our consulting services business has stabilized and is delivering value. Product launches scheduled for May and June will provide, in the long term, new business opportunities with our customers, as we build on our foundation and extend simulation to the enterprise."
CEO Harrison said, "Looking forward to Q3, we are currently expecting non-GAAP revenue to be between $260 million and $270 million.”
PTC expects GAAP third quarter revenue between $259 million and $269 million. This compares to $258 million in the quarter just reported and to $225 million in the same quarter last year. For the fiscal year ending September 30, 2008, PTC currently expects GAAP revenue to be approximately $1,055 million compared to $841 million last year.
MCADCafè.com currently tracks the financial performance of multiple public companies in the Mechanical CAD market. Eight (8) companies were chosen for the author's May 8, 2003 Commentary. Four of these companies (Autodesk, Dassault Systemes, PTC and EDS PLM Solutions (now named 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 partnered with the initial four to provide end-customers with broader solution suites.
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. Tecnomatix has since been acquired by UGS and hence was removed from this report. As a result of the acquisition of UGS by Siemens, UGS (now Siemens PLM Software) will no longer provide any financial data and therefore has also been dropped from the financial coverage list. Moldflow likewise will soon be absorbed into Autodesk, and will be eliminated from direct coverage.
The combined worldwide total annual revenue of these companies is nearly $6 billion, not an insignificant sum. But it is, in fact, less than 3 percent of the money 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 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 (such as we're in now), 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 (~15%) stems from a segment which provides systems and software for creating and animating imagery. Even in the remaining 85% of Autodesk's total revenue, derived from its Design Solutions Segment, is divided among solutions for Manufacturing, GIS, AEC, 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 Systems 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 has been taken over increasing responsibility for managing IBM Business Partners. 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.
While now buried inside Siemens, 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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About the Authors:
Since 1996, Dr. Russ Henke has been president of HENKE ASSOCIATES, a San Francisco Bay Area high-tech business & management consulting firm. The number of client companies for Henke Associates now numbers more than forty. During his corporate career, Henke operated sequentially on "both sides" of MCAD and EDA, as a user and as a vendor. He's a veteran corporate executive from Cincinnati Milacron, SDRC, Schlumberger Applicon, Gould Electronics, ATP, and Mentor Graphics. Henke is a Fellow of the Society of Manufacturing Engineers (SME) and served on the SME International Board of Directors. He is also a member of the IEEE and a Life Fellow of ASME International. In April 2006, Dr. Henke received the 2006 Lifetime Achievement Award from The CAD Society, presented by CAD Society president Jeff Rowe at COFES2006 in Scottsdale, AZ. In February 2007, Henke became affiliated with Cyon Research's select group of experts on business and technology issues as a Senior Analyst. This Cyon Research connection aids and supplements Henke's ongoing, independent consulting practice (Henke Associates).
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