MCAD/MCAE Industry View – An August 2010 Update

The DS Annual Shareholders' Meeting was held on May 27, 2010. At the meeting shareholders approved for the fiscal year ended December 31, 2009 the payment of an annual cash dividend equivalent to €0.46 per share, equal to the prior year. The Company has consistently paid annual cash dividends since its initial public offering in 1996. The cash dividend was paid on June 17, 2010.

Dassault Systèmes' self description:

As a world leader in 3D and Product Lifecycle Management (PLM) solutions, Dassault Systèmes brings value to more than 115,000 customers in 80 countries. A pioneer in the 3D software market since 1981, Dassault Systèmes develops and markets PLM application software and services that support industrial processes and provide a 3D vision of the entire lifecycle of products from conception to maintenance to recycling. The Dassault Systèmes portfolio consists of CATIA for virtual product design - SolidWorks 3D for Professionals - DELMIA for virtual production - SIMULIA for realistic simulation - ENOVIA for global collaborative lifecycle management, and 3DVIA for online 3D lifelike experiences. Dassault Systèmes' shares are listed on Euronext Paris (#13065, DSY.PA) and Dassault Systèmes' ADRs may be traded on the US Over-The-Counter (OTC) market (DASTY). For more information, visit

On June 15, 2010 ESI Group reported partial financial results for its first fiscal quarter, the quarter ended April 30, 2010. [Note: Consistent with past reporting practice in these MCAD COMMENTARIES, the ESI Group results for the quarter ended April 30, 2010 will be treated here as Nominal Q2 2010].

ESI Group Nominal Q2 2010 Summary:

  • Significant upturn in the growth of new business licenses
  • Slowdown in services due to the economic situation
  • Increased seasonal effect for licenses

Nominal Q2 2010, which is the first quarter of ESI's fiscal year, is “traditionally relatively non-significant, reflecting distinct economic influences: a fall in services activity mirroring the trend observed throughout the sector, but a strong level of repeat business for license sales and a significant upturn in new business. At the current time, we are confident that we will record a good global performance this financial year”, said Alain de Rouvray, ESI Group's Chairman and CEO.

Note Bene:

  • The period under consideration does not include any scope effect, with Mindware and Vdot's activity consolidated within accounts from December 2008.
  • As announced last quarter, when annual results were published, ESI Group has bolstered its presence amongst key accounts. Subsequently, like last year, the contribution of fourth-quarter, and hence annual, sales should increase and thus amplify the seasonal effect.

ESI Group Sales for the first quarter of its current financial year (Nominal Q2 2010) totaled 15.9 million euros, down -2.9% in actual terms and down -3.7% by volume (constant exchange rates) compared to the 16.4 million euros of the same quarter of the previous year. The evolution of the geographical split in activity reflects the return to buoyant growth in Asia compared to Europe or the Americas, which are continuing to be affected by the economic situation. Europe thus accounted for 37% of Nominal Q2 activity, the Americas for 20% and Asia for 43%.

License sales totaled 11.0 million euros in Nominal Q2 2010. Given the difficult economic environment, and in line with trends observed throughout the sector, Services activity was down by -7.6% in actual terms and -7.7% by volume. Services were notably affected by postponed contracts due to budget deferments. This activity represented 31% of total quarterly activity, versus 32% last year. This trend is expected to stabilize over the next quarter.

ESI's self-description:

ESI is a pioneer and world-leading solution provider in virtual prototyping that takes into account the physics of materials. ESI has developed an extensive suite of coherent, industry-oriented applications to realistically simulate a product's behavior during testing, to fine-tune manufacturing processes in accordance with desired product performance, and to evaluate the environment's impact on performance. ESI's solutions fit into a single collaborative and open environment for End-to-End Virtual Prototyping, thus eliminating the need for physical prototypes during product development. The company employs over 750 high-level specialists worldwide covering more than 30 countries. ESI Group is listed in compartment C of NYSE Euronext Paris.

NYSE Euronext

On July 27, 2010 PTC (NASDAQ: PMTC) reported results for its third fiscal quarter ended July 3, 2010, referred to as Nominal Q2 2010 for purposes of this MCAD Commentary.

Nominal Q2 2010 Highlights

  • Q2 2010 Results: Revenue of $243.0 million and GAAP EPS of $0.09
    • GAAP operating margin of 4.9%
    • Relative to updated Q2 guidance ($230 - $240 million in revenue), currency fluctuations did not meaningfully impact results
  • Q3 2010 Guidance: Revenue of $255 to $265 million
    • GAAP EPS of $0.20 to $0.22
    • Assumes $1.25 USD / EURO, up from $1.20 assumption in previous guidance, a $3 million positive impact to revenue in Q4 and a $1 million negative impact to expense
  • FY 2010 Targets: Four quarters ending October 31, 2010: Maintaining revenue target of $1 billion
    • GAAP EPS of $0.50
    • Maintaining license revenue growth target of 35% to 40% year-over-year growth
    • Non-GAAP operating margin of 16%; GAAP operating margin of 7.5%

The Q2 2010 results include a GAAP tax rate of 8%.

Nominal Q2 2010 Results Commentary

C. Richard Harrison, chairman and chief executive officer, commented, "Q2 2010 was another solid quarter for PTC with total revenue up 7% year-over-year and license revenue up 37%. Our revenue performance was above the high-end of our expectations, driven primarily by continued strength of our PLM business." On a constant currency basis total Q2 2010 revenue was up 8% and license revenue was up 39% compared to the year ago period. Our PLM license revenue in Q3 was $36.5 million, up 63% year-over-year, continuing to highlight our leadership position in a large and growing segment of the enterprise software market," continued Harrison. "Our pipeline for new business opportunities with new and existing customers remains strong. During the quarter we recognized revenue from leading organizations such as BAE, Compal Electronics, Continental AG, Fresenius Medical Care, Harman Becker, Kuhn, Lenovo, NASA, Samsung, and the United States Navy."

James Heppelmann, president and chief operating officer added, "Our continued revenue momentum in the PLM market is further bolstered by an additional 2 'domino' account wins during Q2 2010.. Since 2009, we have won 15 strategically important domino accounts, all of which are large multinational companies who have chosen to standardize their PLM initiatives on our Windchill platform. Dominoes represent the largest of the many competitive displacement opportunities we are pursuing, and we believe they are a clear indicator of our momentum in the PLM market. They also demonstrate that PTC is gaining share and becoming recognized as the industry leader for both our technology and product development process expertise. We are further engaged in more than 250 other opportunities world-wide with companies that are looking to replace their existing PLM solution to help improve their competitive position in their own markets."

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