MCAD Industry View - A SEPTEMBER 2008 Update


MCAD Industry View - A SEPTEMBER 2008 Update

by Dr. Russ Henke and Dr. Jack Horgan
Henke Associates

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) companies were analyzed and compared. Expectations of future financial performances of these same MCAD entities were documented.

The May 2003 MCAD Commentary was followed by twenty-one quarterly updates in MCADCafé.com, one for each subsequent calendar quarter. URL's on all past articles are available. The entities 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, a global division of the Siemens Automation and Drives (A&D) Group. Over the years UGS has bounced back and forth between being a public company and a private company under different ownerships. Although not required to do so, UGS has frequently reported on its financial results even when privately held. For the first quarter of 2007 there was only this terse statement from Tony Affuso, chairman and CEO of UGS PLM Software, “We had a very strong quarter in Q1, coming in near 11 percent on total revenue growth and 16 percent on software license growth.” This translates to about $300 million. According to a company spokesperson at the time, UGS would no longer report results separately from Siemens, a very common practice with large corporations. In the first quarter of this year, the entire A&D Group generated €3.9 billion of the €20.2 billion total Siemens revenue. Regrettably, we can expect very little insight into UGS performance itself from public Siemens' reports going forward.

On June 25, 2008 Autodesk completed its acquisition of Moldflow Corporation, so now Moldflow must be eliminated here from separate coverage.

Accordingly, this twenty-second MCAD Industry article in the sequel recounts the financial performances of the remaining group-of-six (G6) MCAD/PLM entities for the nominal second quarter of 2008.

Recent MCAD & PLM News Highlights

On August 25, 2008, ANSYS announced that preliminary performance data for its software running on Microsoft Windows HPC Server 2008 would be highlighted during the 2008 International ANSYS Conference held in Pittsburgh, Pennsylvania in late August. The preliminary data showed substantial performance gains when running software from ANSYS on the new Windows operating system.

On August 20, 2008 Autodesk announced it is adopting a new Flexible Software Delivery model for AutoCAD software, the company's 2D and 3D computer-aided design (CAD) application. Autodesk says it is the first company in the CAD industry to introduce this particular software development and delivery model. Autodesk hopes to increase customer satisfaction and subscription value by providing AutoCAD customers with earlier access to new features, delivered on demand, and provide them with the flexibility to choose which features to install and use.

On June 17, 2008 Dassault Systèmes (DS) announced an agreement in which DS would acquire Engineous Software. This acquisition will presumably extend DS SIMULIA's capabilities in providing Simulation Lifecycle Management solutions on the V6 IP collaboration platform. The proposed acquisition is for an estimated price of US$40 million.

On August 20, 2008 ESI Group announced the release of VA One 2008.0. VA One is a complete solution for simulating noise and vibration across the full frequency range. It seamlessly combines Finite Elements, Boundary Elements, and Statistical Energy Analysis (SEA) in ONE model. This second major release of VA One in 2008 is said to comprise over 40 major enhancements across all modules.

On September 2, 2008, MSC.Software announced that Italian sports car manufacturer Lamborghini Automobili S.p.A. had selected MSC.Software's simulation solutions to assist Lamborghini's product development process. The new software is intended to bring enhanced reliability into the Lamborghini simulation process and allow its designers to increase the number of virtual prototypes to be performed, especially in the early phases of the development cycle. By doing this, engineers would presumably be able to simulate more reliably and reduce the need for physical prototypes.

Also on September 2, 2008, PTC announced that Nikon Precision Inc., a wholly owned subsidiary of Nikon Corporation and a provider of photolithography equipment, had selected PTC's Arbortext Product Information Delivery software to assist the editing and publishing processes of its service manuals. Using Arbortext, Nikon Precision intend to provide its field service technicians with up-to-date information to diagnose problems and perform maintenance & repair procedures.

MCAD Vendors' Financial Performances in Q2 2008

As a group, the G6 MCAD vendors generated combined revenues of $1.599 billion, an increase of nearly 20% from the $1.335 billion in the second quarter of 2007 and an increase of 5.6% from the $1.514 billion in the just prior quarter. ESI Group, Dassault Systemes, PTC and ANSYS in descending order reported year-over-year percentage revenue growth in excess of 20%. Autodesk was close behind with almost 18% revenue growth. On a sequential basis ESI Group was the only decliner at -44%. Dassault Systemes at 14% growth was the only G6 MCAD vendor with double digit sequential revenue growth for Q2. See Table 1.

Figure 1 below provides a bar graph showing the revenue trend for each of the covered vendors, for the periods mentioned in Table 1.

For the quarter, Autodesk was the clear share leader at 39%, with Dassault Systemes in second place at 32%, followed by PTC at 17%. See Figure 2.

Table 2 reveals that the combined Q2 earnings of the G6 declined to $200 million, a significant reduction of 18% from the $244 million generated in the second quarter of 2007, but an slight increase of almost 2% over the just prior quarter. In Q2 2008, all G6 members reporting earnings showed net income. PTC suffered a significant drop in Q2 2008 earnings relative to last year, due primarily to a one-time tax benefit being recorded a year earlier. Autodesk and MSC.Software also saw a modest dip in earnings relative to the second quarter of last year. Autodesk and PTC slipped slightly in earnings this quarter compared to the just previous quarter. MSC.Software went from a small net loss to a small net gain.

Details on Individual Vendors' Q2 2008 Performances

On August 7, 2008 ANSYS, Inc. reported financial results for the second quarter, the period ended June 30, 2008. Total revenue for the quarter was $111 million, an increase of 20.6% from the $92.2 million in the second quarter of 2007, and an increase of 1.6% from the $109 million in the first quarter of 2008. Software license revenue was almost $74 million, accounting for 66% of total revenue. This was an increase of over 24% year-over-year and an increase of 0.4% from the prior quarter. Maintenance and services revenue was $37 million, 34% of total revenue, an increase of almost 15% from the year ago quarter, and increase of 4% sequentially.

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