MCAD Industry View – An August 2009 Update
by Dr. Russ Henke and Dr. Jack Horgan
This August 2009 issue of the MCAD Industry Commentary recounts the financial performances of a selected group-of-six MCAD/PLM vendors for the nominal Second Quarter of 2009.
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)vendor 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-four quarterly updates in MCADCafé.com, one for each subsequent calendar quarter. URL's on all past articles are available. The entities initially 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 (and later as Siemens PLM Software), a global division of the Siemens Automation and Drives (A&D) Group. Over the years UGS itself had bounced back and forth between being a public company and a private company under different ownerships. Regrettably, we have been able to gain very little insight into UGS’ financial performance itself from public Siemens' corporate reports after the Siemens acquisition. Occasionally we will include Siemens PLM Software news items that bear on the industry as a whole, as in this August 2009 issue of the MCAD Commentary in the comments about MSC.Software. Siemens PLM was also mentioned in the May 2009 MCAD Commentary.
Then on June 25, 2008 Autodesk completed its acquisition of Moldflow Corporation, so thereafter Moldflow was eliminated here from separate coverage.
Accordingly, this twenty-sixth 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 2009.
Recent MCAD News Highlights
On August 20, 2009 ANSYS announced its inclusion on the 2009 FORTUNE 100 Fastest-Growing Companies list. ANSYS is ranked number 33 overall, the only engineering simulation provider to make the list. Of the 24 companies in the technology sector, ANSYS was in the top 10, ranked at number eight. FORTUNE's Fastest-Growing list includes profitable, publicly traded companies with at least $50 million in annual revenue and a market capitalization of at least $250 million. Companies on the list must also have posted yearly revenue and earnings per share growth of at least 20%. To compile the list, FORTUNE ranked companies based on the last three years of revenue, profit growth and total return using data provided by Zacks Investment Research. In the past, ANSYS has been listed on the magazine's 100 Fastest-Growing Small Businesses list, which includes public companies with annual revenues of less than $200 million.
On July 01, 2009 ANSYS announced the latest release of ANSYS Icepak software, which is said to provide robust and powerful fluid dynamics technology for electronics thermal management. The 12.0 release introduces new solutions for printed circuit board (PCB) and package thermal analysis, new and enhanced technology for meshing complex geometry, and new physical modeling capabilities. Properly applied, the ANSYS Icepak software, based on the ANSYS FLUENT CFD solver, can accelerate the product development process by simulating the dissipation of thermal energy in electronic devices at the component, board or system level.
In late July 2009, Cyon Research published its 2009 Survey of Engineering Software Users. The survey takes a deep look at engineering software buying preferences and practices.
Here's a sample from the executive summary:
The economic outlook has never been more uncertain. When will customer spending on engineering software and related hardware recover?
Is the worst over, or can we expect further declines? What is the risk to recurring software maintenance or subscription revenues? How many of your firm’s competitors have already begun investing in their engineering software tools to prepare to gain market share in the eventual recovery? What factors are driving customer spending priorities in the post-recession period? How do you identify the companies that are likely to be the first to increase investments in engineering software?
Cyon Research’s recently-completed survey of technical software users helps answer these questions and others like them. This survey is based on validated responses from nearly 600 users of CAD, CAM, CAE, and PLM software and focuses on customer purchasing policies, practices, and spending expectations. Cyon Research’s Survey of Engineering Software Users is an ongoing project, intended to capture market trends early. Cyon Research customers on annual subscription receive this and other updates as part of their paid subscriptions.
More information on the survey is available from Email Contact.
On June 3, 2009, PTC acquired privately held Relex Software Corporation. Relex provides software and services for analyzing design and field data in order to evaluate and improve product reliability and safety. Relex products and services are used by thousands of customers in a variety of businesses around the world, including aerospace & defense, medical equipment, telecommunications, electronics and high-tech, automotive, and industrial equipment. Terms were not disclosed.
The following multi-paragraph news highlight discusses the July 07, 2009 MSC.Software announcement that it had entered into a definitive agreement with affiliates of Symphony Technology Group (STG) under which a company controlled by STG would acquire all of MSC's outstanding shares in a one-step cash merger transaction valued at approximately $360 million. The comments of the MCAD Commentary authors are included. This set of paragraphs ends at the section of the August MCAD Commentary entitled, “The G6 MCAD Vendors' Financial Performances in Q2 2009”.
Under the terms of the definitive agreement mentioned above, MSC's stockholders would receive $7.63 in cash for each share of MSC common stock. The transaction is subject to customary closing conditions, including approval of MSC's stockholders and regulatory approvals. This transaction is proceeding and is currently expected to close near the end of the third calendar quarter of 2009. Class action lawsuits have already been filed claiming that the purchase price should be higher, even though the $7.63 price per share represented approximately a 13% premium to the closing price per share of MSC's stock prior to the announcement and approximately a 24% premium compared to the 90 trading-day trailing closing average price per share.
The private investment firm Elliott Management Corporation ($14 billion) is MSC's largest shareholder, owning about 13%. Elliott has committed to provide debt and equity backing to help finance the transaction (around $50 million). Wells Fargo Foothill, part of Wells Fargo & Company and CapitalSource, has committed to provide senior debt financing of around $65 million. What ownership and influence Elliot will later have is not clear. Some observers think that the ways of private equity companies are mysterious, and/or that this deal is convoluted. However, MSC.Software’s cash, investments and current debt are attractive.
Headquartered in Palo Alto, CA, the Symphony Technology Group (STG) is a strategic private equity firm with the announced mission of investing in and building “great” software and services companies. In addition to capital, STG provides expertise with the goals of enabling its companies to deliver maximum value to their clients, to retain and attract the best talent, and to achieve best-in-class business performance. All STG companies are expected to grow through innovation. STG's current portfolio consists of nine global companies with combined revenues of $2.5 billion and 15,000 employees spread across North America, Europe and Asia.