March 05, 2007
UGS Reports Revenue And Business Highlights
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Jeff Rowe - Managing Editor


by Jeff Rowe - Contributing Editor
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UGS Corp. announced fourth quarter 2006 and full year 2006 results.


Fourth quarter financial highlights include: 
  • Total revenue increased to US$352.7 million, or 8 percent growth over the same period a year earlier. The company's fourth quarter revenue included US$128.1 million in license revenue, or a 12 percent increase as compared to the fourth quarter 2005.
  • EBITDA (defined below) was US$110.6 million, a 19 percent growth over the same period a year earlier. Net income was US$22.7 million, a 76 percent increase over the same period a year earlier.
  • Operating income was US$51.3 million, a 9 percent increase as compared to the fourth quarter 2005.
  • License revenue for all product portfolios grew: Collaborative Product Development Management (cPDM) license revenue increased 22 percent, digital manufacturing license revenue increased 28 percent and UGS Velocity Series portfolio license revenue increased 30 percent over the same period a year earlier. CAx license revenue increased 2 percent over the same period a year earlier.
  • In the amounts presented above, the company has not made adjustments for the impact of deferred revenues written off in connection with the acquisition of the company and acquisitions by the company. These write-offs had the effect of reducing fourth quarter 2006 revenues by US$0.1 million and 2005 revenues by US$1.1 million. 
  • Financial highlights from the full year 2006 include:  

  • Total revenue increased to US$1.2 billion, a 6 percent growth over the same period a year earlier. The company's 2006 revenue included US$379.2 million in license revenue, an increase of 6 percent as compared to 2005.
  • EBITDA (defined below) was US$297.1 million, a 23 percent increase over the same period a year earlier. Net income (loss) was US$(10.3) million as compared to US$(10.0) million from the same period a year earlier.
  • Operating income was US$71.8 million, and represents a 14 percent decrease from the same period a year earlier, and includes the impact of total amortization expenses of US$190.8 million in 2006 compared to $160.8 million in 2005.
  • Within product portfolios, cPDM license revenue increased 11 percent, digital manufacturing license revenue increased 26 percent and UGS Velocity Series portfolio license revenue increased 19 percent over the same period a year earlier.
  • In the amounts presented above, the company has not made adjustments for the impact of deferred revenues written off in connection with the acquisition of the company and acquisitions by the company. These write-offs had the effect of reducing full year 2006 revenues by US$0.8 million and 2005 revenues by US$11.3 million


  • "We are pleased with our strong performance in the quarter and that execution of our strategic plan delivered solid earnings and top-line organic revenue growth as planned, with 12 percent license revenue growth in the quarter," said Tony Affuso, chairman, CEO and president of UGS. "Our vision continues to be supported by customers who are market leaders and invest in UGS PLM to further their global innovation networks. We look forward to more growth in 2007 driven by our world-class product portfolio to be enhanced with major releases of Teamcenter and NX."


    Business Highlights and Announcements


    IBM and UGS recently announced a new agreement to support the cPDM requirements of small- to medium-sized businesses (SMBs) on a global basis. IBM and UGS will jointly market Teamcenter Express software and services to SMB customers in six countries: the U.S., Canada, France, Germany, Japan and China. (see separate release)


    BIZERBA GmbH & Co. KG, a technology company for professional weighing and information technology system solutions, selected UGS' NX, Teamcenter and Geolus search software solutions to enhance efficiency in the development and construction of its retail and compact scales.


    Sichuan Changhong Electric Co., Ltd. (Changhong), a leader in China's electronics industry, selected UGS' Teamcenter product data management (PDM) solution for its PLM backbone.


    ThyssenKrupp Bilstein Brasil, a ThyssenKrupp Technologies Company, a major automotive supplier, selected UGS' Velocity Series portfolio of products to address initiatives for enhancing speed to market, decreasing prototype costs and protect its intellectual property.


    Advanced Integration Technology, L.P. (AIT), a provider of turnkey aerospace factory automation, including the design, fabrication, installation and maintenance of fully integrated plant floor systems, integrated Tecnomatix FactoryLink into its standard solution. AIT cited Tecnomatix's flexibility, scalability and ease of use as key decision making factors for including it as a standard component of its automated assembly solution which helps the aerospace industry increase manufacturing efficiency.


    Commentary By Jeffrey Rowe, Editor

    Although all the activity took place last year, in hindsight, 2006 is shaping up to be a good year financially for UGS, its competitors, and the MCAD industry in general. And, despite several big changes within the industry, it was still a good year with UGS and Dassault in the $1 billion+ club; Autodesk approaching the $2 billion mark; and PTC up in the $1 billion neighborhood.


    A couple of the truly major changes, of course, involved UGS and Dassault, but while under different circumstances, I’m not convinced they make all that much sense in the long run.


    First, UGS was acquired by German-based Siemens for $3.5 billion, which on the outside seemed like a good deal for both parties, but when you think about it, where’s the synergy between the two, and what about the immense cultural differences. Can Munich, Germany personnel truly get along with personnel based in Dallas, Texas and work together on an equal footing? For the answer to that question, I contend you need look no further than the current situation over at Daimler Chrysler where the folks from Stuttgart, Germany are not exactly participating in a love fest with their counterparts in Auburn Hills, Michigan. As you’re probably well aware, and depending on the
    way you look at it, Chrysler is either on the cutting block or auction block, hoping a suitor will come along to avert the continuing crisis. Are there similarities and analogies to be drawn between DaimlerChrysler and UGS/Siemens? It’s really too early to tell, and it might prove to be a match made in heaven, but based on other acquisitions I’ve witnessed of this magnitude with such disparate companies and cultures, the match may be destined to be made in a little warmer place.


    Another major change occurring this year was Dassault Systemes’ announcement that it was expanding its 25-year partnership with IBM by letting IBM sell additional Dassault products. The announcement stated that both IBM and Dassault would “increase the scope of their respective responsibilities,” with IBM selling Dassault’s expanded portfolio of PLM products, and Dassault assuming management of the PLM indirect sales channel. At first glance this sounds like a solid move for both companies; however, when you read between the lines, Dassault is actually, in effect, reducing IBM’s presence and significance in the sales channel. Why Dassault would
    want to downgrade a partnership that has been very lucrative for both parties for 25 years is beyond me, but I’ll admit, these types of decisions are usually made by much bigger minds than mine.


    So how do these changes occurring at the “mega” CAD/CAM/CAE/PLM companies bode for the MCAD industry overall? Many of the features and capabilities that historically were available only in the so-called “high-end” products (CATIA, UGS NX) are becoming increasingly commoditized and are available in the so-called “mid-range (SolidWorks, Inventor, Solid Edge). This has been coming for some time now and has the big guys concerned as the high-end purchases begin to make a lot less sense to a lot of customers, and this leads to a lot of confusion in the marketplace.


    This seeming state of confusion, however, also indicates to me that there is plenty of future opportunity out there for the likes of Autodesk (that seems to have transitioned well to its new CEO, Carl Bass); PTC (that seems to have managed something of a surprising turnaround); and SolidWorks (that just keeps going in a positive direction on many fronts). The companies that understand this state of confusion will be the ones that seize this opportunity and make real inroads into major new territories heretofore untapped and unexplored.


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    -- Jeff Rowe, MCADCafe.com Contributing Editor.


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