MCAD Industry View -- What did the Last Quarter Bring?
by Dr. Russ Henke
In a May 8, 2003 Commentary by this author published in MCADCafé.com, then-recent yearly and quarterly financial performances of eight (8) public Mechanical Computer Aided Design (MCAD) companies were analyzed and compared. Expectations of future financial performances of these same MCAD entities were documented. The conclusions in May? A gloomy economic outlook still gripped most high-tech companies and, in terms of major revenue growth, a significant MCAD turnaround was predicted to be unlikely during 2003.
Three months later -- how prescient were these predictions? What's the outlook today for the rest of 2003 and beyond? One industry observer again offers his thoughts on the subject.
In mid-July 2003, Americans were startled to read this headline in their morning newspapers, "The U.S. Economic RECESSION? Over!" Not only was the recession over, said the National Bureau of Economic Research in Cambridge, MA, but also the recession actually "ended" in November 2001 after only eight months (San Francisco Chronicle, July 18, 2003, page B1)!
With unemployment nationally still well above 6%, such "news" was fairly hard to accept for those millions of unemployed workers who knew that U.S. jobs were in fact still falling, some 21 months after November 2001! Indeed, the Labor Department reported on August 1, 2003, that 486,000 more U.S. jobs have vanished just since January 2003. The number of U.S. workers claiming jobless benefits now has reached its highest point since February 1983, said the IEEE*USA News (July 11, 2003).
The problem of course is that U.S. GDP "growth" since November 2001 has remained far too anemic to create new jobs, even though it's been just positive enough arithmetically to escape a formal recession classification. As a result, many firms have been trying to boost their bottom lines by reducing purchases and keeping payroll costs down, demanding more and more from old equipment and remaining employees. Among other causes, these mild profit improvements have nudged the stock market averages up slightly, but still well below the market levels of January 2001. And of course, cost cutting has natural limits.
U.S. manufacturing has been among the hardest hit. Manufacturing payrolls have contracted every month since July 2000. New York-based economist Maria Fiorini Ramirez said on the August 1, 2003 "News Hour with Jim Lehrer", that the U.S. is suffering a "depression in manufacturing", with massive job losses, often to offshore suppliers that may never be recovered.
In the May 8 MCADCafé Commentary, it was asserted that 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.
So if there is a "depression in manufacturing" today, it means a smaller manufacturing base to enable, at least in the U.S. In the sequel, we'll examine just how the public Mechanical Computer Aided Design (MCAD) companies are fairing in this relatively depressed environment.
Any MCAD Industry progress in Q2 2003?
Below we will check out the recent progress of the same group-of-eight public MCAD entities selected for mention in the May 2003 Commentary, plus we have added the ESI Group (Paris, France) to this quarter's list. (For additional information on these companies, click here). In May 2003 we saw that 2002 brought decreased performances for MCAD year-over-year, compared to 2001. We also noted that Q1 2003 did not provide improvement in financial performance for most of the covered companies, compared to Q1 2002. Indeed, the four largest MCAD companies sported revenue results that were down year over year in Q1 2003 compared to Q1 2002.
So was Q2 2003 any kinder to these MCAD companies? See Figures 1 and 2.
|Last QTR vs.
|EDS||5520 (7/23/03)||5370 (5/07/03)||5412||102%|
|EDS PLM||205 (7/23/03)||201 (5/07/03)||226||90%|
(Millions; U.S. $ except as indicated)
Note: 1 ESI Group historically enjoys a seasonal skew in its revenue in the fourth quarter of its fiscal year. The Q4 € 17.1 million here was 40% of its annual turnover in YE January 2003. In the previous year, Q4 was 35% of the annual turnover for YE January 2002. The Q4 € 17.1 million here was 14.5% higher than Q4 of the previous year.