commentary: Tecnomatix Looks Ahead to ?Step-Function? Growth

by Ira Breskin

Tecnomatix Technologies Ltd., a leading maker of factory simulation and planning software, has put down a solid foundation to underlay what it expects will be a big growth period.

The company is anticipating “step function growth in the next 24 months,” Harel Beit-On, company Chairman and CEO Harel Beit-On, said during a recent interview. “Our footprint is larger and more strategic.”

Twenty-year-old Tecnomatix, based in Herzliya, Israel, originally provided robot simulation software.

Beit-On’s confidence is based on the Tecnomatix’s recent success in building a strong customer base for its MPM, or manufacturing process management, software. Customers include Airbus Industries, BMW, contact manufacturer Celestica and General Motors Corp.

MPM allows manufacturers, along with their Internet-connected trading partners, to simulate and optimize how a product will be built. The goal: to more quickly and cheaply bring a product to market.

Essentially, Tecnomatix provides “a master model of the manufacturing process,” Beit-On said.

Should Tecnomatix succeed in convincing its premier customers, as well as new ones, to settle on MPM as a corporate standard and employ the software employ enterprise-wide, $10 million to $20 million in orders will result, Beit-On said.

“The major obstacle, which we are overcoming, is wining acceptance of our product. The sell is more strategic and longer. (However,) the multiplier (attached to winning an enterprise-wide contract) is enormous,” he added.

Now, Tecnomatix, like all enterprise software vendors, must muddle through a soft market that’s reflected in the company’s first quarter results that it released last week. During the 2003 period, Tecnomatix lost $1.4 million, or 13 cents a share, on sales of $20.6 million. That compares with a net loss of $500,000 or 5 cents, on sales of $20.4 million in the 2002 first quarter. While 2003 results include $1.5 million in special charges for restructuring expenses, 2002 first quarter results reflect $800,000 in charges for amortization of acquired intangible assets.

Also EDS delivered its first bundled Tenomatix product during Q1 2003, shortly after it began formally selling it. The alliance between the two companies dates back to August 2002.

For additional information about Tecnomatix, see www.tecnomatix.com.

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Ira Breskin, a freelance editor/writer specializing in business and technology issues, is a frequent contributor to Business Week, Newsday, and the New York Times. He holds a B.A. from Columbia University and a Knight-Bagehot Fellowship in Economics and Business Journalism, Columbia University Business School. He may be reached at Email Contact.



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