Schnitger Corporation Hot Topics 2008 Archive

Hits and Misses of 2008

Wed, 31 Dec 2008 15:09:34 -0500

It's been quite a year -- like most, filled with stuff both good and bad. My top 10 happenings, all related to engineering software:

1. Hit: The CAE vendor landscape changed dramatically, as ANSYS bought Ansoft and
expanded its applications footprint even further; Autodesk acquired a number of companies
from Moldflow to ALGOR in a quest to bring CAE to a much wider audience; and as
Dassault Systèmes acquired Engineous to strengthen its high-end CAE and data
management capabilities. It will be interesting to see how the high end/specialist-caliber
products evolve amidst huge pressure to make advanced capability more accessible to
casual users.

2. Hit: License models are changing to accommodate difficult economic times and to
acknowledge the fact that no one vendor can have a "lock" on any account. There are a
number of smaller hits within the bigger topic: token models (in many forms) are taking off,
with Altair Engineering's being perhaps the most flexible because it includes partner
products in the overall suite of software accessible via tokens. Shared licenses, bundled
packaging and innovative pricing are going to be BIG in 2009 as vendors and buyers
struggle with tough times.

3. Hit: CAD and CAE software (or at least their end-products) are entering into the
mainstream of public consciousness. At AU, I spoke with the folks from Z Corp who
believe that their rapid prototyping machines (which make physical objects directly from a
CAD model) will hit it big when anyone can go online to craft an avatar, give a credit card
number and get a one-off representation in the mail a few days later. Who knows where
this will lead? Surprised parents the world over may realize that they can make prototypes
of their widgets, buildings, furniture - whatever they make - in a matter of moments. How
cool is that?!

4. Hit: Compute clusters enable simulation of massive problems, as demonstrated by
ANSYS' America's Cup sail and Siemens PLM's bending airplane wing. Many of these
tests are still just that, answering the "can it be done?" question. But compute power is
now so cheap, storage and interconnectivity getting so adept, that it's only a matter of time
before solving massive problems becomes routine. This will massively change how
companies use CAE and design their products - but see number 5.

5. Miss: None of the manufacturers I've spoken with this year believe they are taking full
advantage of the tools and infrastructure they have, let alone pushing the envelope. They
should be using CAE to test more concepts - but are still mostly using it to avoid only the
most egregious customer problems. Instead of seeking to create a low-risk product, these
tools should be used to make the best, most innovative products. Why? it's easier to
quantify warranty costs avoided than the market advantage of a truly innovative product.

6. Miss: Partisan politics once again sabotaged U.S. science and technology research
funding in 2008, and the state of the economy doesn't indicate that we'll see much more
spending in 2009. As Burt Rutan said at the Autodesk University Manufacturing keynote
(and I paraphrase): we're boring our kids. We need to do something dramatic, difficult and
energizing to drive growth in the economy and bring more scientists and engineers into the
workforce.

7. Hit? Miss?: Can't decide. Acquisitions that made the headlines this year (except
Moldflow) tended to be small - what some call "technology tuck-ins" - in part because all
acquisitions are risky and smaller/cheaper minimizes the damage if things go badly. There
are plenty more small companies with excellent technology, people and customers. The
hit: many of theser smaller companies are doing just fine right now (although 2009 won't be
easy). The miss: being acquired may not work as an exit strategy right now, given credit
and stock market problems.

8. Miss: I've been to a number of user conferences and analyst events in recent months.
One common thread: almost all in attendance are male, almost all over 40. Tied to number
6: the brain drain in technical computing (users, developers, industry analysts) is going to
be a massive problem when we all decide to chuck it and become wind-power
entrepreneurs.

9. Hit: Many software companies are aggressively tuning their products for the kids
graduating now, who have held a computer mouse since they were old enough to sit up,
and grew up on Nintendo. Factor in the knowledge-capture data management tools, and
we may be able to salvage some small portion of the expertise retiring daily.

10. Hit: The virtual and physical worlds are closer than ever. Realistic simulation of the
final product, its stages in manufacturing (using CAE to simulate the product and/or
factory floor simulation for the manufacturing process) and even design concepts using
styling tools are bridgint the gap between the designer's brain and the final product. That's
good - let the days of simplifying designs into black boxes be gone.

I'll be back soon with a 2008 market growth estimate and forecast for 2009. May your 2009
get off to a good start!

Peace on Earth

Sun, 21 Dec 2008 15:09:30 -0500

Goodness -- that would be quite an announcement. It's more of a wish ...

As the year winds down, we'd like to wish all of our friends and colleagues a joyous
holiday season. May your 2009 be better in every way.

Autodesk strengthens CAE offering by acquiring ALGOR

Wed, 17 Dec 2008 15:09:26 -0500

Autodesk announced today that it has reached an agreement to acquire ALGOR Inc., of
Pittsburgh for approximately $34 million, or (by our estimate) slightly more than two times
revenue. Autodesk has said all along that it will continue to seek strategic technology
acquisitions that enable it to broaden its vision of digital prototyping for it manufacturing
customers; ALGOR adds multiphysics, mechanical event simulation and some CFD,
among other offerngs, to Autodesk's existing CAE line-up of Moldflow, Plassotech and
Solid Dynamics.

ALGOR was founded in 1976 and currently serves the automotive, aerospace, medical,
consumer products, defense, energy and utilities industries. According to Autodesk's
press release about the acquisition, "Upon completion of the acquisition, Autodesk's
current intent is to integrate ALGOR into its Manufacturing Solutions business unit and to
continue developing and selling ALGOR's core product line. Autodesk plans to continue
developing the ALGOR products with an open approach, allowing direct data exchange
between ALGOR products and multiple computer aided design software offerings."

The transaction is expected to close by the end of January 2009.

ESI Group cautiously optimistic about Q4

Thu, 11 Dec 2008 15:09:21 -0500

ESI announced Q3 results today that were good -- and not foreshadowing gloom. It's the
first company to announce results that included October, after the world went into the
current financial meltdown. Total revenue for Q3 was up 4% to €13.4 million, with a
"negligible" currency effect. Growth was led by services, which generated sales of €4.3
million in the third quarter, up 17% from year-ago levels.

Alain de Rouvray, ESI Group Chairman and CEO, said the following in a prepared
statement about the results: "Although there has been major disruption to the global
economy, our main customers – including carmakers – have shown a high level of
confidence in our Virtual Prototyping solutions, which deliver major benefits in terms of
productivity and competitiveness. As usual, therefore, we expect our sales to show
significant seasonal variations, with most sales coming in the fourth quarter, barring
unexpected events arising from the economic situation."

"Displaced" workers take advantage of Altair's offer

Wed, 10 Dec 2008 15:09:17 -0500

According to Mike Kidder of Altair, the company received over 200 applications for its
training/update program for displaced workers in southeastern Michigan (details below).
December course offerings were completely booked within 48 hours of the announcement.
Writes Kidder, "We are keeping a waiting list [and] will be announcing new course dates
in early January. It's very definitely something we intend to continue to build upon in 2009."

Such economic gloom everywhere - it's heartening to hear of a group that's trying
something new.

What do users think of Autodesk's "Digital Prototyping"?

Wed, 10 Dec 2008 15:09:13 -0500

Yes, I know it seems like "all Autodesk, all the time", but 10,000 people really do have
10,000 stories.

While I didn't connect with all 10,000 -- not by a long shot -- I did talk with perhaps a
dozen attendees at Autodesk Manufacturing's keynote session about the "digital
prototyping" workflow and the Autodesk products that support this concept. This is not in
any way a scientific survey, but I did learn a number of interesting things:

1. Of the dozen or so people spoke with, only 4 were Inventor users. The rest used
AutoCAD and were not clear about how this vision applies to them. Most agreed that it
seemed like a good idea, but for someone else.

2. The Inventor users were most struck by the exploded view shown in the Manufacturing
keynote presentation -- it was visual, easily understood by the audience and had obvious
benefit within and outside the design/engineering realm. So that part of the digital
prototyping vision resonated well with the people I spoke with, and can perhaps be
leveraged as a way of moving outwards from design.

3. These same folks didn't see usefulness in the industrial design app shown during the
session. It was a very quick movie, and perhaps this wasn't the right crowd (after all, these
folks were mostly detail designers), but the idea of starting at that point in the design
process to create a single set of data blew right past this audience.

4. The very few people I spoke with who were aware of the "product lifecycle management"
concept felt that it was much too large for them -- they had neither the resources (time,
money, people), nor the corporate desire to build a system to manage their design
processes. Autodesk's "digital prototyping" concept seems less intimidating since it's not
tied to databases and backoffice systems.

Bottom line: The people I spoke with were mildly enthusiastic about Autodesk's "digital
prototyping" vision. Everyone was willing to see what happens next, in terms of products,
further outreach by Autodesk and the next few product releases -- but no one I spoke with
was rushing out to buy anything or implement a new design process.

Autodesk clearly has to do a lot of work to educate its users about the utility of eventually
migrating to a workflow that begins somewhere (maybe styling, maybe not), creating a
model that is passed through the various design stages, analysis and manufacturing. This
will resonate with some users but clearly not with all -- but perhaps it will with the
managers of these users.

Altair shows the softer side of capitalism

Mon, 8 Dec 2008 15:09:09 -0500

Last week, Altair Engineering announced that it would offer free training courses and
software licenses to displaced engineers in southeast Michigan who want to grow their
CAE expertise to increase their marketability to employers. If the program is successful,
it may be offered to displaced engineers in other parts of the United States.

Altair Chairman and CEO James Scapa said that the company has recently been
approached by many long-time Altair users who were laid off from their jobs and who
“requested free software licenses to stay current with industry technology … We felt that
we could perform a meaningful service for our colleagues affected by the economic
downturn while at the same time offsetting significant training costs for local companies
that may subsequently hire participants in the program."

According to Altair, the value of the program and 90-day software license exceeds
$11,000 per person. Details of the program, eligibility criteria and course descriptions are
available at www.altairhyperworks.com/PWI.

A sleeve off the vest? Perhaps. Software licenses are notoriously hard to value and
putting people into training classes being held anyway might seem a bit disingenuous.
But credit Altair for being the first engineering software company to try to help all of the
folks unemployed (or about to be) in Detroit.

Autodesk acquires iLogic rules-based design software

Mon, 8 Dec 2008 15:02:44 -0500

All user conference come with a blizzard of press releases, and this one almost got lost:
Autodesk has announced its intention to acquire iLogic from Logimetrix, a software
company that is part of Cypher Systems Group, a large Canadian developer of business
process software.

According to Logimetrix, iLogic enables designers to capture and embed engineering and
product knowledge directly into Inventor models, paving the way for rules-driven design.
iLogic creates "smart parts" that define product behaviors and can embed higher levels of
design intelligence directly into an Inventor mode through a user interface designed for
users with little or no programming experience.

This ease of use, if true, is a huge plus. I attended a session on Autodesk Intent (renamed
to Autodesk Inventor Automation Professional) at AU at which three different users spoke
about the complexity and expense of setting up an engineer-to-order product configuration
system. Ultimately worth it, but not easy or cheap. If iLogic can provide an easier way to
automate some of the ETO process, that's a good thing.

Autodesk will acquire "software and related technology". Terms were not disclosed.

Autodesk University: 10,000 stories

Sun, 7 Dec 2008 15:02:39 -0500

Autodesk University was, as always, overwhelming. Perhaps nine or ten thousand people
at the Las Vegas Venetian Resort’s convention center, attending any one of several dozen
sessions going at any one time. I tried to hit as many as sessions possible, but could
only get to a tiny fraction of the offerings, and talked to an even tinier proportion of the
attendees. But I learned a LOT:

AutoCAD is WAY more capable than I had realized. My world tends to revolve around 3D
design tools, and I had long ago decided that AutoCAD was a 2D tool. Totally wrong. It’s
a very versatile tool for 3D design of parts (probably not assemblies, but no one I spoke to
was trying to do assemblies in AutoCAD) and ties nicely into a lot of more advanced
functions like producing output for rapid prototypes.

Carl Bass is a rock star. The stage for the opening keynotes (Bass, Autodesk CEO; Tom
Kelley, motivational speaker on innovation and Jeff Kowalski, Autodesk CTO) was a long
rectangle set amid a sea of chairs. Screens were suspended from the ceiling along the
length and width of the stage. Pretty cool, all in all. The speakers roamed the stage,
talking to all sides of the audience. It must have been tough to carry off, but all did it well.
Bass’ key point was that design software often gets in the way of the design process, but
fulfills the need to help all stakeholders understand the problem and try out many
alternatives. Autodesk’s goal: to make the software usable as a part of a company’s
design process rather than forcing design to happen in a certain way. CTO Kowalski
showed some breathtaking new technology – a 3D/2D city flythrough, something that
looked a lot hologram interacting with a design… Only missing elements: smoke and a
laser show. Next year?

There’s a lot going on at AU. I managed to make it to most of three industry keynotes:
manufacturing, plant design and civil as well as a bunch of sessions. The manufacturing
keynote reinforced much of what was presented at the recent analyst day. Two things:
check out inventorfusion.com to see cool, coming stuff and then go to Autodesks’s main
website to look up Inventor’s coming “documentation” capabilities – the latter looks a lot
like advanced visualization, with exploded views and fancy renderings. The audience
reaction was very, very positive to both of these. OK, one more thing: Burt Rutan (the
motivational speaker at the manufacturing keynote session) has a lot of interesting ideas
about why the US is falling behind, technologically. He makes a compelling argument that
the factors that excited him and the generation before him about space and flight are
missing now; he says we’re “boring our kids” and that the harm will be irreversible if we
don’t find some way to create energy and excitement around engineering and science.

The civil engineering keynote session included a customer describing the implementation
of Civil 3D at the Wisconsin Department of Transportation. The main takeaways: the long
lead-times of governmental civil engineering projects and the approvals needed from every
possible stakeholder (community groups, environmental agencies, etc.) make the
advisability of using a 3D model almost insanely obvious – but it’s a hard sell, given
budget problems in all levels of government and the entrenched mindset of many involved.

The plant keynote was very interesting. Recall that Autodesk is likely the largest installed
design software vendor at EPCs, OOs and construction firms, either as the underlying
technology to a plant design-specific app or as pure AutoCAD. A few years ago,
Autodesk decided to leverage this presence and build an application set of its own atop
AutoCAD, the first of which was AutoCAD P&ID. Ever since P&ID came out, people have
been asking for a 3D plant design package – which is now in Beta. The keynote
presentation highlighted how Autodesk plans to integrate with enterprise systems for plant
operations and maintenance, focusing all the while on the ease of use for which Autodesk
is known. I am told that you can sign up to participate in the Beta (code-named Stella) at
http://myfeedback.autodesk.com/

Autodesk takes the whole sustainability/green movement seriously. The conference
give-away this year was a messenger bag made with recycled vinyl banners from previous
events. I spent way too much time trying to figure out why my bag had a red strip and
others had green, blue, yellow – turns out the strips come in a rainbow of colors from the
various banner across the years. I hear people were trading bags to get their favorite color
;-) Other giveaways included steel water bottles and reusable plastic coffee travel mugs.
The convention center wasn’t helpful in the “green” messaging, though, handing out
endless paper cups for coffee, plastic bottles of water and the like. Small steps …

Carl Bass held a press conference one evening and graciously answered all questions put
to him. Of most interest to me was his comment that the review of underperforming
products he spoke about during his earnings conference call (the 80/20 comment: 80% of
revenue from 20% of products) would be bundled and priced to sell more readily. No
mention of product “retirements”.

AU is a true user conference. People attend to hear tips for building title blocks,
configuring layers, and the like, right from people who develop the software. One Autodesk
exec told me that he was meeting with a significant account and had thought that all
attendees from that company would come to the meeting, to hear strategy and provide
feedback. Nope – a few met with him while the rest attended the classes they were there
for. Strategy is too far into the future right now: these attendees were in Vegas to sharpen
skills to make it through this economic crisis, either at their present employer or
somewhere else.

There’s lots more to write about – after all, 10,000 people have at least ten times that
many stories. But while I was in Vegas, the world continued to swirl around us, and
there’s a lot to catch up on. Autodesk University was terrific – try to go next year, if you
can.

Quick news roundup: AVEVA has great H1, ESI buys VDOT

Mon, 1 Dec 2008 15:02:34 -0500

I'm off to Autodesk University shortly, so this will be brief; more coming after I'm back.

AVEVA announced terrific results for their half-year ended September 30, 2008 -- and their
shares fell like a stone. The results: revenue increased 32% to £74.8 million (up 31% in
Asia, up 46% in its Central/Eastern/Southern Europe region, and up 44% in the Americas)
even as pre-tax profit jumped by 67% to £31 million. The company also reported strong
cash flow for the six months, with net cash almost doubling over last year to £101 million.

The company says performance in the first half of fiscal 2009 was "driven by the
continuing demand for large, complex projects across all our major markets. Our
investment in new products and our ability to service these through our regional network of
offices will continue to keep us close to the developing requirements of our customers."

AVEVA's shares, traded on the London exchange, have taken quite a dip as concerns
over the global economy have taken hold. The company, like so many others, is cautious
in its outlook: "We acknowledge that recent and rapid developments within the world
economy have created less certainty about future demand and whilst there has been little
impact on our current trading we continue to monitor the situation closely."

Parsing that sentence: little impact so far. But shares go down (or up, I suppose) on
potential -- and since AVEVA can't guarantee that its customers will continue to buy,
shareholders are nervous. AVEVA's customers are among the largest oil & gas producers
and shipbuilders in the world and those companies can't abandon projects underway.
Demand for AVEVA's solutions may decrease a bit but certainly not disastrously.

Switching topics: ESI Group announced today that it had bought a technology called
Vdot, a project management tool that makes it easier for teams to reliably follow the right
plan, performing tasks with the right data. According to ESI, current Vdot users include
aerospace companies Boeing, NASA, and AVIC (China), as well as automotive firms
Ford, Chrysler and Nissan. Financial details weren't disclosed, but the acquisition
included code as well as the entire development, sales and marketing support teams
based in St Louis, Missouri. I need to find out more about Vdot, but it seems like an
interesting turn in ESI's strategic direction. Says Alain de Rouvray, Chairman and Chief
Executive Officer of ESI Group: "Vdot naturally complements our range of digital
simulation solutions, delivering virtual prototyping integration and synchronization within
the PLM. Thus the combination Vdot/VisualDSS allows much faster and more reliable
decision-making right from the start of the customer product lifecycle.

Autodesk talks product portfolio changes, credit crunch

Mon, 24 Nov 2008 15:02:30 -0500

Two more interesting bits of information from the Autodesk’s third quarter 2009 earnings call:

Carl Bass, CEO, said right up front that the economy is affecting Autodesk’s customers, but
has a plan to help at least North American customers in the short term. Said Bass, “The
sharp downturn in the global economy … is impacting our customers in various ways. Many
are unable to secure credit financing. Construction and media and entertainment projects of
all sizes are being delayed or cancelled. Lack of credit for small and medium sized
manufacturing firms is making it difficult for them to invest in their businesses. Even large
manufacturers are cutting spending significantly in response to lower end user demand and
their inability to secure financing or issue debt.” Seconds later, he said that Autodesk
offering customers in the United States and Canada “financing consisting of deferred
payment plus 0% interest”, through companies like Key Equipment Finance and others. It’s
interesting that there was no explicit mention of helping Autodesk’s channel partners, who
buy inventory from Autodesk (or a large distributor) and then resell it to the end-consumer.
Autodesk is committed to keeping its channel as intact and healthy as possible so perhaps
providing funding for end-customers was the best solution that could be arrived at with credit
markets as they are right now. Autodesk is, however, sitting on almost $1 billion in cash ….

Bass also said that Autodesk has begun to align its current spending to how it views the
future – in other words, implementing a hiring freeze and reducing discretionary spending. He
also alluded to other possible avenues: “investments become more targeted, divestments
occur, efficiency rises, and resources get realigned. We are already working on many
initiatives, including pricing, bundling, and portfolio management to improve our business and
strengthen the company.”

Possible measures cited in the earnings call included a re-evaluation of the company’s
product portfolio. Said Bass, “80% of our revenue comes from 20% of the products or
something in that neighborhood, so we are looking at what goes on in the other 80% of the
portfolio and how important is that to the ongoing health of the business.”

No one on the call asked the obvious question: a lot of the 80% of products creating revenue
are likely to be 2D or some of the less sophisticated bundling of 3D products: large volume
sales at relatively low dollars/unit. Is that the business Autodesk wants to stay in?

Italian supercomputer proves 1 billion cells can be solved

Mon, 24 Nov 2008 15:02:25 -0500

ANSYS announced last week that an Italian research team successfully conducted a
1-billion cell simulation to investigate the aerodynamics of an America's Cup yacht, reaching
a milestone in the simulation world. To give context, a typical ANSYS Multiphysics
benchmark for a sophisticated computing cluster runs to about 6 million cells, uses 2
Gigabytes of memory and takes about 5 to 10 minutes to iterate to a solution, depending
upon the number of processors and how they are all connected to one another and to storage

But the “typical” benchmark is just that – it’s not intended to push the envelope of what is
possible. As simulation becomes increasingly realistic, as analysts try to solve their
real-world problems rather than a simplified subset, simulations are becoming ever-larger and
resolving this scale of problem will become common-place. Proving that the simulation
industry’s “stretch goal” of 1 billion cells can be solved is a massive step forward.

This 1 billion cell simulation was performed on CILEA’s (an Italian inter-university consortium
for information and communication technologies, named Consorzio Interuniversitario
Lombardo per L'Elaborazione Automatica) Lagrange supercomputer, ranked #135 on the list
of the 500 most powerful supercomputers in the world. Lagrange is an HP Cluster Platform
3000BL running Linux, with 208 HP ProLiant BL460c server blades and Intel Xeon 3.166 GHz
quad-core central processing units. Total peak performance of the system approached 22
teraflops (22 thousand billion floating point operations) per second; the system has recently
been ranked number 135 on TOP500's list of supercomputers.

If you remember past races, you’ll know that America’s Cup yachts often involve weird and
wonderful underwater structures. This leads to, as ANSYS says, “some of the most complex
physics effects possible, with hydrodynamic and aerodynamic fluid flow and stiffness among
the structural physics involved.” The test-case simulation focused on the aerodynamic impact
of wind on the racing yacht sailing downwind, with a particular emphasis on the mainsail and
an asymmetrical spinnaker.

The test case was completed in 170 hours, which seems like a lot. But ANSYS
characterizes this time frame as “commercially viable”, given that the value of the solution is
mission critical and expensive (if possible at all) to arrive at in any other way. Typically, in
yachting, a scale model is built and tested in a wind tunnel; ANSYS reports that the
simulation results showed “good agreement” to the wind tunnel results. The question, of
course, is how much it cost and how long it took to build the scale model and test it in the
wind tunnel – and how that relates to the cost and time of creating and executing the
simulation.

ANSYS has some pretty cool images available at
http://www.ansys.com/special/news-images/2008/billion-cell-11-17-imagesheet-08.htm.

While this 1-billion cell case was clearly a test to see if this was possible at all, it’s not a
stretch to say that larger and larger analyses are run every day all over the world. Companies
are investing heavily in the compute infrastructure to support their analysts, with the view that
realistic analyses will improve product reliability, reduce warranty exposure and minimize
risk. Not a bad investment.

Autodesk sees tough times ahead

Fri, 21 Nov 2008 14:55:59 -0500

Autodesk reported good results for the quarter ended October 31, 2008 but spoke of
uncertainty ahead. Since the earnings release happened at the same time as the Autodesk
Manufacturing group’s industry analyst event described below, I was unable to participate in
the financial analyst call so all of the following is based on the press release issued by the
company. I’ll update with more color after I listen to the analyst call replay.

The details:

- Total revenue for the quarter was $607 million an increase of 13% over the third quarter of
fiscal 2008

- The company says that this growth was driven by sales of model-based 3D design
solutions (up 26% to $163 million), revenue generated in emerging economies and increased
maintenance revenue from a growing customer base

- Autodesk defines its “model-based 3D design solutions” as including Inventor, Revit, Civil
3D, Moldflow, NavisWorks, and Robobat; these accounted for 27% of total revenue for the
quarter

- Moldflow, which was acquired earlier this year, contributed $12 million. Given that
Moldflow’s revenue typically was about $14 million for the summer quarter, this is a solid
performance

- Excluding Moldflow, revenue from “model-based 3D design solutions” was up 16% over the
year-ago quarter, and now amount to $151 million

- Autodesk reports shipping 41,000 commercial seats of “model-based 3D design” products:
9,000 commercial seats of Inventor and Moldflow and 32,000 seats of Revit, Civil 3D,
NavisWorks, and Robobat

- It’s interesting to note that revenue from 2D vertical solutions, as defined by Autodesk,
actually decreased 6% from a year ago. No color was provided in the press release, but this
could be due to adoption of 3D solutions or reflect the way Autodesk bundles 2D and 3D
solutions in the 3D packages. Hard to tell.

- On a geographic basis, Autodesk reports that revenue from emerging economies increased
25% from a year ago to $114 million, representing 19% of total revenue. Revenue from
EMEA was $258 million, up 27% as reported and up 20% at constant currencies. Revenue
from Asia Pacific was $133 million, an increase of 12% as reported, and up 9% at constant
currencies. Finally, revenue from the Americas was down 1% to $216 million.

In the earnings press release, CEO Carl Bass is quoted as saying: "The sharp downturn in
the global economy had a substantial impact on our results for the quarter. Our business in
the United States slowed as a result of the economic climate. In addition, we started to
experience headwinds in some of our international markets. While we realize that there is no
quick or easy response to the current economic environment, we are focused on serving our
customers and helping our channel partners in these challenging times. We are taking
actions to stimulate demand and are making appropriate adjustments to our cost structure.
In the process we intend to balance these cost reductions with investing in our future.
Investment focus areas continue to be increasing channel capacity and developing
technology that will help Autodesk better serve our customers."

Given the economic uncertainty, Autodesk believes revenue for the fourth quarter of fiscal will
be between $525 million and $550 million, a marked 10-12% decrease from the $599 in
revenue reported for F4Q08.

Digital prototyping, Autodesk style

Fri, 21 Nov 2008 14:55:54 -0500

Autodesk’s Manufacturing group, headed by Buzz Kross, hosted an industry analyst day in
Lake Oswego, Oregon this week. Kross and his staff presented Autodesk’s “democratizing”
vision for the manufacturing space, tying together industrial design, engineering, detailed
design, analysis and manufacturing in a single unified vision under the heading of “Digital
Prototyping.” It makes sense: Autodesk has so many technologies in its portfolio that
judicious combining and packaging will enable the typical manufacturing company to
streamline product innovation.

A lot of what was presented at the event is under NDA until the company formally announces
“stuff”. Since I think teasing is mean, here are a couple of observations about what Autodesk
has said publicly and reinforced at the event:

- My interest in CAE had caused me to be concerned about Autodesk's integration of
high-end Moldflow and 3G products into a toolset aimed at the mid-market. While I have
more to learn about Autodesk’s plans for these acquisitions, it does appear that Inventor
Professional will grow to encompass subsets of the overall functionality of each. Not a
dumbing-down, but a selective cherry-picking of the advanced capabilities for a user base
with minimal skill or training in these types of products.

- Autodesk is very sensitive to setting prices that maintain a product’s perceived worth while
making it affordable even for those just “getting their feet wet”, topping out at somewhere
around $10,000 per user. Note the “per user” – it’s important. I believe that Autodesk (at least
in Manufacturing) sees its potential as unlimited at that price level, perhaps because that’s
within the signature authority of most departmental managers. So rather than looking at
pricing on a per product basis, the focus seems to be to price on a user’s “role”: what does it
take for an industrial designer to do his job? How can we (Autodesk) bring that to her for
around $10,000? What may have started as several disparate acquired and home-grown
products is integrated, cherry-picked and transformed into a useful toolset at a great price
point. There will always be “expert” tools at a significantly higher price, but that’s OK – it’s a
different type of user.

- Autodesk is incorrectly perceived as selling only to small and midsized companies. While
that accounts for the majority of revenue, the company does boast some very impressive
global accounts in its customer base. I think it’s often true that the PLM biggies fight to
announce a win at a Fortune 500 company in a press release, but it’s likely that an Autodesk
product is already in use there. Autodesk hasn’t made a big deal about this in the past, but
its expanding product set and increased integration with products like Windchill and
Teamcenter will continue to bring this to the fore.

- The word “democratizing” makes me crazy. It politicizes the use of technology, which I
believe is inappropriate in a commercial setting. China is a huge IT market, yet no one can
claim that technology is in any way democratizing it. Anyhow, Autodesk uses the term to
mean “bringing sophisticated tools to a much broader market” through its pricing, packaging,
channel reach and VAR strategies. That’s good – I just wish they used a different word.

- Is “Digital Prototyping” another term for PLM? I don’t believe it is. PLM, as I understand it, is
still a very complicated technology designed to capture and guide a company’s product
innovation process from early design to product retirement. After all, one still can’t swap out
one PLM system for another with any degree of ease. Autodesk’s “Digital Prototyping”
seems to be more about data creation and flow than data control. One thing that I don't think
"Digital Prototyping" is. is a buzzterm, created purely for market hype. Autodesk truly sees
benefit in the creation of digital models of all sorts throughout the design process, created in
a way that is intuitive to most users, without a great deal of overhead. But I’ll be at Autodesk
University in early December, and we’ll see what users think.

- One problem I do see for the “Digital Prototyping” definition as promoted by Autodesk is
that the term was used to define and broaden the older CAE moniker. CAE used to mean
finite element analysis, but we needed a new term that also includes motion analysis, fluid
flows,electromagnetics and other, newer forms of analysis. Hence, “digital prototyping”.
Autodesk’s definition includes that but so much more. The old, narrow definition could cause
problems in accounts that already do CAE but think they do digital prototyping.

- Autodesk usually reports that about 20-30% of sales each quarter are of 3D products.
Assume for a moment that this holds true for Manufacturing, and that the people who buy
bundled 2D and 3D are using 3D. That still leaves 70% of users who don't work in 3D and
therefore can’t partake of the Digital Prototyping vision. So, clearly, one benefit of this
strategy is to make 3D use so attractive, and the benefits so great, that these users will be
dragged forward. Another is that the 3D technology is more likely to appeal to younger
workers who grew up with digital gaming. But I can’t help wonder if the 2D users who like 2D
and feel it is sufficient for their needs won’t feel disenfranchised.

Readers of this blog seem to like the asides I include in these write-ups about the “feel” of an
event. So: this one can best be described as having serious laid-back energy. The event was
held on the 5th floor of the Autodesk Manufacturing headquarters in Lake Oswego, Oregon,
in the customer demonstration area (“There’s a sea of cubicles downstairs where the
programmers are – you can look if you want to,” said Buzz Kross at the opening reception. I
don’t think anyone took him up on it.). Gorgeous, glitzy setting, with giant monitors,
interactive displays, products designed using Inventor … the works. The Autodesk team was
firmly on-message, but accepted and welcomed challenges from the analysts in attendance.
The energy surrounding the event was electric – the employees were passionate, their
message was well-articulated and thought-out.

Some software companies' employees all use similar words to describe their company’s
vision, almost like a memorized script of talking points. Not here. The “message” was
articulated in many ways as individual Autodesk employees used their own words to convey
their thoughts.

I was impressed, but the real test is with users – and I’ll ask them in two weeks at AU.

Webinars 101

Tue, 11 Nov 2008 14:55:49 -0500

I get to/choose to attend lots of webinars, seminars hosted on-line to demonstrate
technology, inform participants of new releases or teach attendees about a particular
subject. Webinars are invariably interesting, but some organizations are FAR better than
others at getting the most out of these events. A few thoughts:

- Attendees pre-register and are later emailed details on how to join the event. Make sure
this information is correct. I've registered for several webinars but had organizers email out
incorrect times, log-in information or links. Once you lose a prospect through sloppiness,
you may not get her back.

- Know your technology. If you want to play embedded videos of some sort, make sure that
the computer from which the webinar is shared can run the video and that participants were
informed in advance if they need a specific plug-in.

- On that topic: don't require anything too strange. A lot of companies do not allow
rank-and-file employees to download software, so requiring a cutting-edge plug-in may
prevent users from seeing what you're trying to show.

- If the webinar tool being used has a question/answer capability, pre-seed the questions
with topics adjacent to the topic of the webinar. For example, if the stated topic of the
webinar is CoolNewTool Rev. 1.1, ask and answer a simple licensing question such as "Is
rev. 1.1 included in my maintenance subscription?" Keep it non-controversial, make CNT
and its maker look good, but answer honestly.

- Keep the presentation short and anchored. This is PowerPoint 101: Organize the content
so that attendees can follow it, make it visual enough to keep them engaged and refer to
your context as often as possible. If you're showing a long demo, periodicall remind
attendees of the ultimate goal.

- Follow up. No matter what the topic or occasion, webinars are marketing tools. Email
attendees a copy of the presentation (or at least a short summary), ask if they have any
questions, automatically register them for the next webinar (if it's a series of seminars) -- do
whatever it makes sense to stay engaged.

- Consider posting the webinar online, if bandwidth permits. I miss many sessions I'd like to
attend, so make it easy for me to do it on my own time.

Too many companies look at the relatively low cost of a webinar and look at it as a quick
and dirty way to connect with customers and prospects. But put in a little
extra effort and it's a very valuable marketing tool.

The rest of the story: ANSYS post-conference call

Sun, 9 Nov 2008 14:55:44 -0500

ANSYS held an unusually-long Q3 conference call, as a lot of Wall Street types who were
unfamiliar with the company tuned in for the first time since ANSYS joined several new
indices. The company took questions for close to an hour, following the typical presentation
by CEO Jim Cashman and CFO Maria Shields. Additional details:

- Total Q3 revenue was up 37% from last year, as organic revenue grew 19% and Ansoft
contributed $17.1 million in the two months since the acquisition closed. That's good --
Ansoft reported revenue of $23 million for the quarter ending October 31, 2007, so $17.1
would be even to or slightly ahead of last year's run-rate. Clearly, Ansoft customers have
confidence in the ANSYS/Ansoft merged entity.

- Paid-up license revenue was up 61% from last year, up 25% organically -- most of Ansoft's
license revenue fell into this category.

- The lease business grew more slowly, at 17% for the quarter, but Cashman expects this to
pick up a bit as economic concerns among its customers make this option more attractive.

- On a geo basis, Europe remains ANSYS' strength, with revenue up 31% led by Germany,
up over 40%. Growth in Europe was largely organic. The General International Area (GIA)
was up 65% in total, with the rest of the region growing more quickly than Japan's 55%
growth rate. Organic revenue was up 31% -- recall that most of Ansoft's business was in
Asia. North American revenue was up 25%.

What economy? ANSYS turns in another solid performance

Thu, 6 Nov 2008 14:55:39 -0500

ANSYS reported another strong quarter this morning, leading to the preliminary thought that
analysis tools may not be as affected by the overall economic downturn as other technology
areas. ANSYS reported both GAAP and non-GAAP data, to reflect the affects of the Ansoft
acquisition on the overall business; we're sticking to GAAP since that is most directly
comparable to other companies in the space.

Total GAAP revenue in Q3 2008 was $122.2 million, up 30% over the $94.0 million reported
a year ago. Keep in mind that this total includes 2 months' contribution from Ansoft; we
hope that ANSYS will quantify this contribution during the earnings conference call.

On a GAAP basis, software revenue was up 31% to $80.3 million, services was up 28% to
$42 million. Net income was reported as $25.8 million, up 38% from $18.7 million a year
ago.

ANSYS also released Q4 and 2009 guidance, in line with what analysts had been
expecting/predicting. For Q4, ANSYS sees GAAP revenue of between $137 million and
$141 million and for 2009, it sees overall GAAP revneue in the range of $602 million to $622
million.

More after the earnings call.

MSC beats expectations

Tue, 4 Nov 2008 14:49:30 -0500

MSC Software posted good results today, with total revenue up 11% from last year to $63.7
million. Revenue from large deals was up significantly, as both the size of the average large
deal and the number of large deals increased markedly. MSC reports that a year ago the
company signed 79 deals worth an average of $194K; this last quarter this grew to 100 deals
worth $228K -- a revenue jump of close to 50% driven by adoption of the company's
enterprise message.

Probably of greatest interest to investors was the dramatic improvement in net income to
$2.3 million (from $62 thousand in Q3 2007) due in part to the cost-cutting measures
instituted during the second quarter. MSC expects gross margins to be relatively stable in
the near-term, but said that it will continue to monitor its expense structure given economic
realities faced by its customers.

The high point of the earnings news was, once again, maintenance revenue, which was up
9% over the year-ago quarter to $31.6 million. For the year, maintenance is up 12%, driven
by a continued high renewal rate and growth in the installed base.

Software revenue was up 8% to $21.5 million, due to favorable exchange rates. For the year,
software revenue declined 2% as lower engineering tool sales were only partially offset by
growth in the MD and enterprise solutions.

MSC broke out software revenue by product category, showing a gradual change in the mix
as sales of "engineering apps" declined as a proportion of total software revenue. But the
real key is dollars. Using MSC's percentages and reported software revenue for each period,
it would appear that enterprise software revenue has grown nearly 50% from $3.2 million in
Q1 2007 to $4.5 million in Q3 2008. Engineering apps + MD has gone up and down, likely
because so many IT budgets flush in Q4. Averaging it out, it appears that non-enterprise
sales are down about $2.5 million over the seven quarter period.

MSC may have given some clues about why this decline is likely not such a bad thing. The
company established indirect sales in 3 countries (Brazil, Malaysia and Australia) --
meaning less revenue to MSC now but more sales capacity in those countries leading to
ultimately more recurring revenue as new customers buy maintenance. Too, the rate of
attrition is slowing, likely as customers understand how the MD products fit into the overall
engineering software map and ramp up buys. Finally, Japan is characterized by MSC as a
"tools" market, which means that the economic slowdown there disproportionately affects
these product. We'll see what Q4 brings -- an uptick in the MD + engineering apps total
would be nice but may be hard to come by as manufacturers struggle to determine what
they can and cannot afford right now.

All in all, cautious optimism seems warranted. Wall Street certainly thought so, sending the
stock price up almost 7%.

Uh-oh: Autodesk warns for Q3

Tue, 4 Nov 2008 14:49:25 -0500

Autodesk this morning issued a terse press release saying that preliminary results show
that revenue will be in the range of $604 million to $607 million -- far below the earlier
forecast of $630 million.

The press release contains the following from Carl Bass, CEO: "The sharp downturn of the
global economy is substantially impacting our business. Demand for our products fell
dramatically in October in all geographies as the financial crisis worsened. With many of our
customers and partners unable to secure credit, projects are being delayed and our
business is being impacted. While our currency hedge will provide a net benefit to our third
quarter, the considerable strengthening of the U.S. dollar and our unusually low ending level
of backlog will likely create a significant headwind for the next few quarters."

That doesn't give many hints. Autodesk competes in so many technology areas, that it's
possible the hit was taken in financing-heavy areas such as building design, or in
discretionary technologies like digital media. But presuming that the hit was felt in
manufacturing, it'll be interesting what MSC Software reports in a few hours -- let's see what
they have to say about the economy at the higher-end.

But before then, take time to VOTE. It's not hard and it's a sure way to make yourself heard.

PTC not for sale?

Wed, 29 Oct 2008 14:49:20 -0400

On today's earnings call, PTC CEO Dick Harrison was asked to comment on the
widely-circulated rumor that PTC was for sale. Replied Harrison, "We're not shopping the
company." So there.

Earnings: so far, so good

Wed, 29 Oct 2008 14:49:16 -0400

Here we go! The PLM earnings season starts today: so far, 2 of 2 companies have reported
solid calendar Q3 results but see rocky times ahead. Quick hits:

- MSC did not announce earnings (that's next Tuesday) but did file a series of forms with the
SEC about changes in stock ownership. Of note, Elliot Associates or a subsidiary controlled
by Elliot Associates has bought an additional 35,500 MSC shares. You may recall that Elliot
is an activist shareholder whose earlier buys of a 10% stake in MSC caused great
consternation.

- PTC announced fiscal Q4 results that were ahead of expectations. Total GAAP-based
revenue was $299.55 million, up from $266.65 million a year-ago -- an increase of 12%. As
has been the case for a while, maintenance revenue was the stand-out, up 25% to $132.2
million, while license revenue grew 3% to $98.5 million. On a geographic basis, Europe led
the way, up 29% to $131 million; the Pacific Rim was up 15% to $36 million (even though
Japan declined 4%) while the Americas were flat at $102 million.

Revenue for fiscal 2008, ended September 30, was $1.07 billion, up 14% over last year.
Maintenance again grew ahead of the other revenue categories, up 22% while license
revenue was up 7%. The company announced that it expects revenue of $1.10 billion in fiscal
2009, a significant slowdown in growth (just 3%) due to the uncertain economic climate.

- Dassault Systémes reported Q3 results that were also ahead of expectations, although not
quite as stellar as PTC's. Total GAAP-based revenue was €318.3 million, up 6%, led by a
14% increase in recurring revenue, which grew to €186 million. On a GAAP-basis, new
license revenue actually declined slightly, from €92.8 million a year ago to €90.5 million this
last quarter. Looking at a geographic split, GAAP revenue was up 12% in Europe, up 6% in
the Americas and down 2% in Asia. By product category, again using GAAP numbers, PLM
was up 8%, including a 6% increase in CATIA and a 16% increase in ENOVIA. The
Mainstream 3D software category increase 9% for the quarter.

DS expects Q4 revenue to be between €385 million and €395 million, leading to a full-year
forecast of between €1.340 to €1.350 billion -- up about €20 million from prior estimates. The
company sees economic turbulence ahead, but, according to prepared remarks by CFO
Thibault de Tersant, "However, thanks to our diversification strategy, sales channels
expansion, recurring revenue model and year-to-date results..." the company remains
confident in its ability to meet these targets.

PLM vs the unions -- maybe

Tue, 28 Oct 2008 14:49:12 -0400

There is absolutely nothing I can add to the reams of information and speculation published
about the "demise" of the US automobile industry. But an excellent article in the Wall Street
Journal simply cries out for PLMish commentary. The piece, How Detroit Drove Into a Ditch,
includes the following:

...to thrive, instead of just survive, Detroit will have to use the brains of its workers instead of
just their bodies, and the [United Auto Workers] will have to allow it. Two weeks ago some
automation equipment broke down at the Honda factory in Marysville, Ohio, but employees
rushed to the scene and devised a temporary solution. There were no negotiations with shop
stewards, no parsing of job descriptions. Instead of losing an entire shift of production,
Honda lost just 150 cars.

Yes, this was about factory workers coming up with a solution to a production-line problem.
But the point can be extended to all areas of the car company (or any company, for that
matter). Every enterprise relies on the brains (intellect, imagination, creativity, perseverance
and all the rest) of all of its employees. Any tool that improves the employees' ability to use
their native capabilities for the good of the enterprise should be made available -- especially
when times are tough.

Can you imagine how quickly the line workers could have found a solution to their problem if
they had had access to the underlying data on the piece of broken equipment? If they had
been trained in use of a shop-floor version of a CAD model? If they had access to the repair
record for the equipment? All that a PLM system is supposed to keep track of -- if only the
worker knows how to access it.

And, yes, the underlying point of the quote about how union(s) may have stifled their
members' abilities and willingness to improvise a solution is also true. Unions that specify
that a certain task (CAD access, for example) is restricted to a select job category limit the
flexibility of the overall enterprise to adapt to changing conditions.

My first "real" job was a union job. My father-in-law was a union member for his entire
working life; this gave him health insurance and provided for my mother-in-law long after his
death. Unions serve very valuable functions but they need to adapt, too.

Siemens Exiderdome meets Boston harbor -- Brrr

Fri, 24 Oct 2008 14:43:59 -0400

I spent much of the last two days with Siemens Energy and Automation -- part of the
Siemens division that now houses Siemens PLM. Siemens brought its exiderdome to
Boston for the week, inviting customers, prospects and analysts to tour what is, in essence,
a barge full of displays of Siemens products. It was interesting, and I have to give credit to
the demo people who tried to interest a bunch of software analysts in gears, motion control
systems and other factory automation products. A couple of quick thoughts as I thaw out:

- It's got to be good to be part of a EU40 billion company. Lavish would be a good word for
how the exiderdome felt and how we were treated back on dry land.

- Siemens PLM sometimes feels (to me, at least) like a very tiny tail on a very large dog. It's
clearly a good idea to integrate product design with production design, but the company has
yet to discuss customer examples or provide proof points.

- Siemens (the corporation) is in its quiet period ahead of announcing full-(fiscal) year results
next month, but Helmuth Ludwig (President, Siemens PLM) did provide a few nuggets to
show how that the division is making good progress: revenue in this little bucket is up 13%,
another up 28%, etc. But until the company elects to provide more concrete, comprehensive
revenue information, competitors will keep taking shots and claiming superior performance.

- The Thursday afternoon track included a presentation by an early adopter of Solid Edge
with Synchronous Technology. Ken Tardif of Hardigg Industries described how his users
(many used to 2D) are learning 3D modeling and a new product all at once. Hardigg has had
SE for about six weeks and Ken reports that users are slowly moving from resistance to
grudging agreement that this change may be a good thing -- but Ken himself seems
convinced that the only change his team has of managing their workload is to model in 3D,
use ST to deal with customer designs coming from a variety of CAD packages, and
eventually provide some input to the company's production group.

- The PLM track on Thursday afternoon covered SE/ST; the partnership announced a while
back with Invention Machine; the extension of Tecnomatix' Unicam products into the
Siemens product line for manufacturing planning and monitoring for printed circuit boards and
electronics boxes; and the emergence of mechatronics as a critical design and service
element (think software upgrades for all the chips in your car). Notably missing was any
discussion of high-end products: NX, TeamCenter, Tecnomatix. Interesting but incomplete.

- The exiderdome itself is very (forgive me) cool. It's basically 55 containers (each 40 ft long
and 12 ft high) that sit atop a barge -- maybe four containers wide by three high. We entered
straight from the pier, up a gangway, across a bit of deck and into the structure atop the
barge. The exhibits are arranged in what appeared to be double-wide containers. It was a bit
like seeing a series of displays on buses. [Remember the old days, when SGI and
Computervision, among others, had touring Greyhound-sized buses? Same idea. Bigger.] If
you get the chance, GO. Dress warmly, though.

Primavera

Mon, 20 Oct 2008 14:43:53 -0400

On October 8, 2008, Oracle announced it was acquiring Primavera Software, the developer of
the eponymous Primavera project management application as well as other solutions related
to managing contracts and disputes, billing and sourcing. The deal is expected to close "in
the second half of 2008" -- they'd better hurry; not much 2008 left! Financial details were not
made public but I believe Primavera had sales on the order of $100 million in 2007.

Primavera first came to my attention years ago, when it wanted to enter the hot online
markets opening up for the construction industry. Remember how money and interest flowed
to industria, buildnet.com and others? Primavera saw a way to leverage its presence in just
about every construction company using a digital planning tool to other parts of the builder's
business. Since then, the company has grown to offer what it calls "project portfolio
management" (PPM) to engineering and construction, public sector, aerospace and defense,
utilities, oil and gas, manufacturing and high tech companies, as well as IT and other
services providers. According to Oracle, Primavera has over 2.5 million users at more than
5,000 customers in 85 countries, managing more than $6 trillion in project value.

Also according to Oracle, Primavera's PPM products will be bundled with Oracle's project
financials, human resources, supply chain management, product lifecycle management,
business intelligence, and infrastructure software to "provide the first, comprehensive
Enterprise Project Portfolio Management solution. This solution is expected to help
companies optimize resources and the supply chain, reduce costs, manage changes, meet
delivery dates, and ultimately make better decisions, all by using real-time data."

This deal should not come as a surprise. In 2006 Francisco Partners and Insight Venture
Partners acquired what was termed "a substantial stake" in the company. Given the
timeframes in which private equity funds usually operate, a deal was about due.

Without knowing the financial details, it's hard to know if the deal truly is a good one.
However, it is likely that Francisco, Insight and Primavera principal Joel Koppelman got a
good deal for Primavera. From Oracle's perspective, they stand to acquire 25 years of
expertise in AEC, construction planning, contract management and overall project
management. Too, Primavera's customers are very, very loyal and committed to the
company's products. From Oracles' material, it is unclear how many Primavera customers
are not already Oracle customers, but one could see significant cross-selling potential -- if
the channel issues in bringing together these two very different businesses in scope and
scale can be ironed out.

Of course, this could always go badly, as statistics tell us most acquisitions fail. Standard
wisdom says that Oracle must (1) keep Primavera connected to their customers (which
seems likely, given that Primavera employees will be a dedicated Global Business Unit
within Oracle); (2) keep product pricing at reasonable levels (ie. don't jack them up now that
it's no longer a small company); (3) avoid forcing Oracle's other products on customers; and
(4) prove that there is a way forward for Primavera customers.

Oracle appears to be doing a good job communicating its intentions -- let's hope that
continues.

So now the question is: who's next?

DASTY to DSY

Fri, 17 Oct 2008 14:43:48 -0400

Sorry about that. Yes, you still can follow Dassault Systèmes shares as they trade on the
Paris Euronext exchange. Each tracking system will have a slightly different syntax, but the
symbol will be some variant on Paris:DSY. For example, DS' symbol on Euronext in

Google is EPA:DSY

Yahoo is DSY.PA

DS's pink sheet shares here in the US are some variant on DASTF, such as DASTF.PK.

And no, I have no idea why each engine uses different symbols. Makes me nuts, too.
Thanks for reminding me to post this.

From the Nasdaq to Paris

Thu, 16 Oct 2008 14:43:43 -0400

If, like me, you have a little stock chart on your browser screen, you'll notice a lot of zeroes
next to the DASTY symbol. No reason to panic. Dassault Systèmes (DS) stopped trading on
the Nasdaq as of today, October 16, 2008. That's not a surprise: the company announced
the change months ago, citing the costs of maintaining compliance with US reporting
requirements and outreach to what amounts to very few shareholders. Officially, DS filed a
form 25 with the SEC a few weeks ago, which says that it wants to voluntarily withdraw its
shares from listing and registration on the Nasdaq and a form 15F today to officially
deregister and so that it no longer has to file paperwork compliant with US regulatory
standards.

DS does intend to maintain its American Depository Receipt (ADR) program, which will
enable investors to retain their ADRs and trade them on the U.S. Over-The-Counter (OTC)
market.

On its last earnings call, DS said that it will continue reporting results according to U.S.
GAAP for the third and fourth quarters of 2008. But starting with Q1 2009, it will report
according to the IFRS -- the International Finance Reporting Standards. The Standards are
as exciting to read as the US FASB publications but serve the same end: to make
statements from different entities conform to similar standards of understandability,
relevance, reliability and comparability. The IFRS does have some quirks. As of January 1,
2009, a 'balance sheet' will become 'statement of financial position', an 'income statement'
will be a 'statement of comprehensive income' -- but the lowly 'cash flow statement' stays
pretty much the same, becoming 'statement of cash flows'.

But the interesting element here is the relative decline of the importance of the Nasdaq. Back
in the 1990s and early 200s (even after the dot-com bubble burst), the Nasdaq was the
exchange for technology companies. Or companies that weren't really tech-based but
wanted to be seen as hip. It used to be true that all companies wanted to be listed on the
New York Stock Exchange (NYSE) as a signal that they had "arrived"; this shifted in the
1990s as companies flew to the "hipper" Nasdaq. Even MSC.Software, a tech company if
ever there was one, moved from the more "staid" NYSE to the Nasdaq a few years ago.

In the case of DS, the company went public in 1996 in both Paris and on the NASDAQ. In
the intervening years, the international share markets have really strengthened, highlighted
by the growth in the number of companies choosing to list on the Euronext instead of or in
addition to the Nasdaq. Since US investors have access to many international markets
(through brokers like Merrill Lynch or directly via online trading), they can trade on many
markets not available 10 years ago.

So will this move hurt DS? Not likely. Investors currently owning ADRs that were previously
traded on the Nasdaq can still trade them on the US over-the-counter (OTC) market.
Customers, partners and others (like analysts) can gain all of the information they need
about DS' finances from the IFRS-based releases. Employees? A good question. Tax
accountants will undoubtedly be able to answer questions arising from stock-based
compensation in European shares -- but the shares can still be awarded (and will go up and
down in value) just as if they were traded on the Nasdaq.

An interesting tidbit in the 15F highlights the relative insignificance of DS' share volume on
the US market. In the 12 month period ending August 31, 2008, an average of 17,909 shares
were traded in the US out of a total of 527,987 shares. That's less than 4%. According to DS
on its last earnings call, complying with US regs and doing roadshows and the like for US
investors cost the company about 1 million Euro/year. Clearly the actual volume traded didn't
warrant the costs involved, and the caché of the Nasdaq seems tarnished, too.

The delisting clearly makes sense.

[Note: I do not own shares in DS or any other PLM company.]

CAE bottlenecks are moving

Thu, 9 Oct 2008 14:43:37 -0400

I've recently been focusing on CAE: who is using cutting-edge tools, why, where they see
improvements, where they still have issues. One theme that keeps coming up is that the
bottlenecks are no longer where they used to be. As compute power increases to the point
where enough money will accomplish almost anything in a reasonable timeframe, we're now
looking at other parts of the computational cycle.

Back in June, the New York Times wrote about the new Roadrunner supercomputer being
built by IBM and the Los Alamos National Labs. For $133 million, you can buy the compute
power needed to perform 1.026 quadrillion calculations per second. To put this in
perspective, the NYT article has this tidbit: "Thomas P. D’Agostino, the administrator of the
National Nuclear Security Administration, said that if all six billion people on earth used
hand calculators and performed calculations 24 hours a day and seven days a week, it
would take them 46 years to do what the Roadrunner can in one day." Wow.

OK, so we can now calculate how nuclear weapons explode, how climate patterns affect us
and lots of other things. But what then? What happens to the output?

According to data supplied by Stan Posey, now at Panasas but at SGI when I first met him,
if it took 10 minutes to read the file containing the mesh and boundary conditions and and
35 minutes to write the results to disk for an analysis that 14 hours to calculate in the
1990s, the I/O took 5% of the total time. Now that's a slow overall turnaround -- one of these
per day was the limit and meant that analysis was usually done a specific points in a design
cycle. Today, that same analysis done on a high performance compute cluster might take
26 minutes -- but the I/O still takes 45, or 63% of the total time. Much faster, so analysis is
likely more a "what-if", frequently used part of the design process -- but there's a lot of time
"wasted" that keeps the analyst from his results. [In full disclosure, Panasas' products are
intended to streamline these I/O bottlenecks.]

But even if one could reduce these I/O bottlenecks just as CPU times have been
phenomenally reduced, we're still left with post-processing. Output files these days run to
terabytes; doing any meaningful visualization on the results is still a massive process of
partitioning the output file, creating a human-intelligible output and sewing the parts together.
Will that be the next area for innovation in the CAE space?

Solid shipbuilding

Thu, 2 Oct 2008 14:36:28 -0400

Say you want to build a yacht and, since you're a competitive person, you want to be able to
gloat at Larry Ellison the next time you run into him in Cannes. That means your yacht
needs to be bigger and better than his -- or, according to Wikipedia, have at least 82 rooms
on 5 levels (including a gym, wine cellar, private theater with a giant plasma screen), 3,300
square meters of teak deck, and a basketball court that can be used as a helipad. All of it
powered by diesel engines that give an output of 36,000 kW (50,000 hp) and four propellers
that enable your yacht to reach a cruising speed of 28 knots (just over 30 miles per hour).

How do you engage with a naval architect to begin the design? One word: hydrostatics.
Relatively boring, unsexy stuff that calculates bouyancy and stability, and allows the
designer to begin to assess how the vessel will trim, how efficient it will be to push her
through the water, how a helicopter landing will affect people sipping champagne in the
theater and many other factors. This information is also often used to provide a preliminary
estimate for the cost and timetable of construction.

It used to be true that much of the preliminary work in naval architecture was discarded once
the job was won, but this has changed as modern design tools were added to the traditional
toolkit. AVEVA (formerly Tribon) Marine, Intergraph's SmartMarine and now Dassault
Systémes (DS) are working to smooth out the design process and enable the re-use of
earlier work in each step of the iterative design process. DS last week announced that its
business partner CENIT had released CENIT NAVAL ARCHITECT, a CATIA V5 add-on that
integrates hydrostatic and stability analysis into the CATIA solutions for yacht and ship
design.

CENIT's solution is based on the MAAT Hydro+ volume-based computation engine,
developed by Sistre. According to CENIT, MAAT Hydro+ is the first 3D hydrostatic
calculator based on the direct integration of water pressure fields on float faces. Traditional
hydrostatic calculations rely on a 2D representation of the Navier Stokes equations; modern
compute horsepower makes using 3D calculations possible. DS believes that, since 3D
solids modeling is the most efficient way to create accurate and reliable models, why waste
time and possibly compromise accuracy converting existing high level hull models into 2D
data?

Getting back to our yacht design: The naval architect likely begins by adapting an existing
design that has proven to have many of the desired characteristics -- say Ellison's, if those
plans are available. She would then stretch the hull where needed, add an America's
Cup-caliber keel or other complex configurations, make sure that there was enough volume
inside the hull for the desired number of rooms (and square footage of teak decking). Once a
first pass design was complete, she would then check the design's seaworthiness by
running a hydrostatics analysis package. This used to be done by slicing the 3D hull at
points along its length (a process called "sectioning") and then running the hydrostatics
calculator on the resulting offsets. Obviously, by slicing at points along the hull, any
characteristic changes between those points is lost; starting with and sticking with the 3D
model for these calculations arguably gives a more accurate result.

Further, using CENIT NAVAL ARCHITECT, the designer can continuously update the
calculations, seeing in an instant the effect of any change to the hull. So say you change
the basketball court to a bowling alley, you may now have too much weight on one side of
the vessel -- leading to a very unpleasant voyage that these tools can help avoid.

DS says that CENIT NAVAL ARCHITECT is already commercially available, that the 3D
solids-based calculations run on a standard laptop (a limiter used to be the compute cycles
needed for these calculations) and that pilot users report that the product is easy to learn
and easy to run. Anchors aweigh!

PLM stocks battered on Wall Street -- why?

Tue, 30 Sep 2008 14:36:23 -0400

So everyone knows that the US Congress on Monday failed to vote to pass a $700 billion bill
to bail out the financial markets. Whether you're for or against the bill is irrelevant; its failure
to pass cost investors $1.1 trillion. Almost twice what the bill would have cost in its entirety,
wiped out in a day. But the panic affected far more than the financial stocks actually under
discussion: PLM stocks lost nearly 10% of their combined value, going from $20.8 billion at
the close of trading on Friday, when a bail-out seemed possible, to $18.8 billion by the close
of the markets on Monday. [Note: this includes ANSYS, Autodesk, Dassault Systémes,
MSC Software and PTC. I simplified the picture to these five because they are by far the
largest and represent the market well.]

Why? Aside from the general "sell and get me out NOW" panic shown on the news, PLM
products are sold to industrial companies that rely on credit to produce their goods -- and
PLM suppliers will therefore be indirectly affected until the credit market open back up. Car
companies take out loans to buy materials, pay workers and keep factories running. The
theory goes that if they can't get credit, they can't produce; if they can't produce, they don't
need engineering tools.

But this theory is flawed. In general, companies invest in tools and methods that enable
them to be more competitive when the belt-tightening eases -- as, of course, it always has,
eventually. But with the good folks in my neighborhood Starbucks talking Depression (yes,
capital D, like in 1929), it may take a while this time, unless people far smarter than me can
figure out what to do and do it quickly.

It's interesting to note that PLM company shares usually fluctuate at twice the rate of the
Nasdaq -- if the Nasdaq goes down 2%, PLM shares go down 4%. But this time, the
declines were aligned. On September 29, the Nasdaq fell 9.14%, PLM shares fell 9.66%. I
can't help but wonder if some investors believe that PLM are a good investment at a time
when many things aren't?

Solidworks, Dassault Systèmes and PTC -- Oh mY!

Sun, 21 Sep 2008 14:36:17 -0400

It’s been an interesting week. Like you, dozens of emails and press releases cross my desk
every day, some of which are far more relevant and interesting than others. Of interest:

Bernard Charlés appeared for the first time ever at a SolidWorks-sponsored event – and the
earth shuddered to a stop, at least for a moment, or so the reports would have us believe. It’s
true that M. Charlés, the CEO of SolidWorks’ parent company Dassault Systémes, has
generally stayed in the background, preferring to emphasize SolidWorks’ stand-alone nature
and the independence it has from the parent company. But it’s also true that just about
everyone knew of the connection between the two companies, so his presence at the
SolidWorks event should not have been a big shock. SolidWorks has long been one of the
chief revenue growth drivers for the parent company; the business has since its inception
used a very attractive reseller model that the parent now seeks to emulate (and perhaps
leverage for its own products?) and the SolidWorks base is sophisticated and ready to use
some of the products for which the parent seeks a wider market. So why the shock and
awe? Apparently some SolidWorks users are worried that tighter business oversight and
product integration may cause them to lose some of the attributes they most value about
SolidWorks. But not to worry too much: When asked if users can look forward to easier data
exchange between CATIA and SolidWorks, users were reportedly told: "That's currently
handled by solution partners and that's the way it's going to be for the foreseeable future."

On a somewhat related note, a piece appeared not long ago in the Financial Times that said
that PTC was for sale. PTC’s headquarters are in suburban Boston, as are (and were in
1997) SolidWorks’. This similarity led one Boston business paper to opine that “[i]f fellow
CAD software maker SolidWorks Corp. is any indication, an acquisition [of PTC] may not be
a bad thing for the local economy” because SolidWorks went on to spectacular growth after
Dassault Systèmes acquired it. But one can’t really compare the two – apples and oranges.
PTC could see $1 billion in sales this fiscal year; SolidWorks was in very early stage product
shipment, with sales of under $30 million in the year of its acquisition. PTC is a large,
complicated company, addressing many markets, huge customers, a diverse geography ….
SolidWorks was a much simpler business on a huge growth trajectory because its
technology was barely ready for the market; PTC’s technologies span the spectrum from
moderately-early to very mature. One could not expect PTC’s acquirers to see the same
level of growth as did Dassault Systèmes.

That same article also mentioned that, in addition to Autodesk, Cadence Design Systems
and ANSYS could be possible PTC acquirers. Cadence because of a perceived
complementarity between its semiconductor and circuit board design tools and PTC’s MCAD
technology. The case for ANSYS isn’t made in the article, but I can’t see that any more than
I can an acquisition by Cadence. I still think a potential acquirer is likely to be a financial
buyer that will allow the company to create a business model that can compete on price on
the low end (against Autodesk and SolidWorks) and on functionality against high-end
competitors like Siemens PLM and Dassault Systèmes.

How often is too often?

Sun, 21 Sep 2008 14:36:11 -0400

The length of release cycles continues to be a point of contention between developers and
users of engineering technology. On the one hand, developers want to get new releases out
there to bring in revenue, deal with competitive issues and fix customer bugs. But users are
increasingly saying “STOP – we can’t be the guinea pigs for software that’s not
production-ready, our IT departments won’t allow upgrades too frequently because it’s too
expensive and the cycles are so frequent that we have a hard time adjusting them to our
project schedules.” The current trend of 12-month cycles does seem to be falling apart, as
many companies refuse to upgrade to a new release until several service packs have come
and gone, leading to what appears to be a more natural timeframe of 12 to 18 months.

Of course, this ties directly to how ready the software is for release and many are saying
that software quality has taken a big hit recently -- in part, to keep up with aggressive
release cycles. Several users have said that they resent being beta testers, seeing it as
performing unpaid work for a software developer. Back in the day, when I worked at
Computervision, being part of a beta program was a big deal. The user got access to new,
cool technology before (almost) everyone else as well as a direct pipeline to R&D, which
often led to interesting new additions to the next release. Companies wanted to participate
and understood that the software wasn't production-ready. Are vendors today overselling the
capabilities of their beta releases? Are they simply not ready for release outside the test
lab? Or have the relationships between vendors and users become so fractured that "early
look" has come to many to mean "do my work for me?"

Is PTC hanging out the “For Sale” sign?

Mon, 8 Sep 2008 14:36:06 -0400

The Financial Times of London reported on Saturday that PTC has approached Goldman
Sachs about selling itself for something on the order of $2 billion. FT cites "people with
knowledge of the process" but was unable to get PTC to comment. The article says that
PTC is interested in either a private equity deal or an outright purchase by a competitor
would be considered. [Note: PTC was contacted for comment but had not responded by the
time this was posted. If they do comment, we will post an update.]

First, is the price reasonable? The most recent acquisitions in the PLM universe were
Moldflow by Autodesk and Ansoft by ANSYS. These were both strategic acquisitions
involving smaller dollar amounts, so the deals aren't exactly comparable to putting PTC up
for sale, but they do provide an upper boundary. Moldflow was acquired for $297 million or
$22/share, a premium of 12% over the closing price of $19.61 on the day the deal was
announced. Moldflow had revenue of about $55 million, so this purchase price represented a
5.4 multiple of revenue. Ansoft was acquired for $832 million or a combined $32/share in
cash and stock. At the time the deal was announced, Ansoft shares were trading at $23.42,
so the price was a 37% premium. Revenue for the year was $103 million, for a revenue
multiple of about 8.

Using these ranges would lead to a PTC price somewhere around $2.5 billion to $2.9 billion,
given PTC's opening price of $19.62/share today, and between $4.7 billion and ... well, a
ridiculous number since the Ansoft deal was at such a premium to revenue. But combined
with the fact that PTC's market cap right now is $2.4 billion, the FT numberof $2 billion would
seem a bargain price.

But PTC's shares have had a recent run-up. Not that long ago, the stock was trading at $14
and $15 per share, so with a market cap of about $1.7 billion. This would be a more
reasonable view for buyers, but would the sellers agree? No.

Next, who wants PTC? There has been industry buzz for years that private equity buyers
were interested in PTC because they could separate the cash cow MCAD division from the
(then) less-successful Windchill products, sell off Windchill and ride the continuing MCAD
revenue stream into the sunset. But, rumor had it, PTC's board refused all such offers. Who
knows if such rumors are true? It is, however very clear that equity buyers continue to be
interested in large profits in a relatively short timeframe. If one of them were to buy PTC now,
it's likely that the prior strategy of separating the product sets would hold.

Which PTC competitor might want it? Hard to say. Autodesk has a pile of cash, but also has
its hands full trying to deal with all of its recent acquisitions -- too, does it need yet another
mechanical CAD solution? It could happily integrate Windchill, but I doubt it would want
Pro/E. The other PLM vendors believe their products compete strongly on both MCAD and
data management and would have a hard time creating a sane product strategy that includes
their own as well as PTC's products.

So that leaves dark horses. I definitely didn't predict Siemens buying UGS, but that situation
was different. UGS had a great factory-floor-integrated-to-the-design-office vision, which made
it a slightly more natural fit than it first appeared. PTC has a weaker factory floor offering, but
still might be of interest to a Honeywell or other Siemens competitor. Then, too, PTC
competes in some markets its peers are less well-known in, such as apparel, that are driven
by international powerhouses not known to many PLM users. Wing Tai International Apparel
Group, currently partnering with DS, is a billion-dollar holding company that could be a
candidate acquirer. Or perhaps an auto company using Pro/E for powertrain could be
interested.

PTC is caught in that spot where its current high market cap makes it hard to find a buyer
with deep enough pockets; legacy revenue streams that are very attractive because of their
profitability and predictability; products in many markets that make it somewhat confusing to
target at an outside-PLM buyer ... It'll be interesting to watch what happens next.

What, exactly, is a seat?

Thu, 4 Sep 2008 14:26:03 -0400

A few weeks ago I pointed out that most public companies put information into their earnings
releases that leads to ... shall we say, less than clarity?

Autodesk is a champion at providing reams of information that turn out to be not so useful. In
its fiscal second quarter, 2009 press release, supplemental material and earnings call, the
company made available the following nuggets about seat sales in the quarter:

1. Autodesk shipped 36,000 commercial seats of its 3D design solutions -- Inventor, Revit,
Civil 3D, NavisWorks, Robobat, and Moldflow. [The wording is a little strange; Moldflow may
not have been included in the 36,000 seat total, but since Moldflow shipped in the hundreds
of seats per quarter, it isn't really material.]

2. Autodesk shipped about 26,000 commercial seats of the "Revit family" -- Revit, Civil 3D,
NavisWorks and Robobat.

3. By subtraction, then, 10,000 seats of Inventor and possibly Moldflow were shipped in the
quarter.

4. Inventor's total installed base in the quarter went from 794,000 to 819,000. When I
subtract here, I get 25,000.

So, what exactly is Autodesk counting in each case? Parsing the language used in each
factoid, it's possible that the installed base number includes non-commercial seats; some
sort of 2-for-1 bundling (which the company derides when its competitors are thought to do
it); non-3D-design-solution-Inventor (is there such a thing?); pirated licenses being
grandfathered into a support agreement; all of the Moldflow seats ever sold (which I can't see
getting to 15,000 since Moldflow's annual reports show that it sold 500 or so per year) ...
Hmm.

If you know, let me know and I'll post it.

Cool stuff in Pittsburgh

Tue, 2 Sep 2008 14:25:59 -0400

ANSYS held its bi-annual user event in Pittsburgh last week - Pittsburgh in late August? -for
roughly 800 customers, staff and investors from 30 countries. Quick take: ANSYS
customers do cool stuff, use cool tools and are excited about the possibilities the next
product release (R12) offers. Michael Phelps was not in the house, although swimsuits very
like the one he wore were prominently displayed. At least while I was there, no one modeled
;-)

Jim Cashman led things off, giving an overview of the company, its 50,000-foot-level strategy
and reiterating the company's commitment to investing in R&D. He then handed the podium
to a team led by Dipankar Choudhury that went over the changes, features and
enhancements in R12. Far too much detail in far too short a time, but the users sitting
around me definitely took notice when the team got to significant user interface and
interoperability enhancements planned for Workbench 2.0, especially the integration of
Fluent and CFX meshing from within the project space.

The ANSYS team also introduced Zoltan Cendes, former Chairman and CTO of Ansoft and
now leader of the Ansoft business unit within ANSYS, who gave an excellent (if brief)
overview of what Ansoft products do -- and why. The ANSYS users sitting around me were a
bit puzzled (all mechanical designers in the automotive supply chain) about Maxwell's
Equation. Concerns over how ANSYS plans to cross-sell its Ansoft and traditional ANSYS
products certainly still remain since not one of the people sitting near me said "The guy who
sits in the next cubicle can use this stuff!" -- but ANSYS' track record of taking the best of
acquired technologies buys it the time to sort this all out.

The user keynotes ramped up the excitement. Willem Toet, Head of Aerodynamics
for the BMW Sauber F1 Team spoke compellingly about the team's use of Fluent to make
critical design decisions in very little time to gain milliseconds on the race track. Jerry
Young, Director, Materials and Structures Technology, Boeing – Phantom Works talked
about the difficulties inherent in simulating something like an airplane wing from "atom to
airplane" - meaning that a "full" analysis requires not only information about airflow around
the wing but a view of how a composite material might change should that plane be hit by
lightening. He had terrific parting thoughts for the analysts in the audience: "Your answer is
worth the most at the point the question is asked. Always have the answer. Refine the
answer as you get more information." -- the implication being that having no answer is not
acceptable. David Scott, Director of High-End High Performance Computing Systems at Intel
Corporation then talked about the progress processors and compute hardware have made --
highlighting the forthcoming Nehalem family of processors and their performance
benchmarks.

Then ANSYS spirited all of us financial and industry analysts away to our own lunch and an
afternoon of briefings, highlighted by Jim Cashman's birthday cake. Actually, the cake was
nice but the real stars of the afternoon were Ahmad Haidari and Thierry Marchal, who spoke,
respectively, about how ANSYS products were used in the hunt for alternative fuels and
biomedical applications. Both are clearly passionate about the benefits ANSYS'
technologies bring to their industries -- and had lots of interesting user cases to pass on.

While I definitely wish I had had more time to attend user presentations, it's clear that the
ANSYS staff is very much engaged with its user base, intent on delivering value and not
afraid to take on all comers -- and why should they be? 50-odd quarters of success back
them up.

MSC Q2 earnings release provides some unusual factoids

Sun, 17 Aug 2008 16:44:55 -0400

MSC Software, like most public companies, provides information in its quarterly earnings
releases that leave analysts wondering why a particular nugget was worthy of inclusion.
Since all information provided is fair game, following are a few additional conclusions that can
be drawn from MSC’s Q2 release. Note that all companies do this and I am not picking on
MSC – as often as possible, I’ll try to come up with similar “huh?” questions/comments on
other software suppliers.

MSC included in its Q2 earnings presentation a slide on the number of quota-carrying
salesmen (yes, sexist. But that’s not the point). The presentation is at
http://ir.mscsoftware.com/common/download/download.cfm?companyid=MSCS&fileid=2199
75&filekey=2e1e1ec2-1d05-46bc-9547-fdd65b61eac1&filename=Q2_slides.pdf and the sales
rep slide is number 12.

This slide shows that MSC has had a relatively steady number of reps in each region, with
178 in total in Q2: 52 reps in the Americas; 71 in Asia and 55 in EMEA. Combining that with
the stated revenue per region in Q2, we get to the fact that (since no information was given
about channel sales which could render this analysis completely incorrect) American sales
reps had an average Q2 2008 productivity of $387K; in Asia, $275K and in EMEA, $451K.
Doing similar analyses for prior quarters leads to the following obvious questions (channel
sales aside): How is a rep in EMEA almost twice as productive as one in Asia? How can the
average productivity of a sales rep in the Americas have gone up over 20% from Q2 2007 tor
Q2 2008? (This could be answered by a big deal or two.) Annualized, these productivity rates
strike me as quite good -- but are they? How do they compare to other companies'? (I’ll
research this one from other companies’ public data.)

To MSC’s credit, one definite impression that this data leaves is that things are improving;
productivity is up except in Europe where it’s flat sequentially. The company seems to be
keeping the reps that produce, releasing those that don’t and hiring/expanding as the trends
in each geo indicate – for example, ramping up in the hot Asian markets of India and China.

Changing subjects, MSC also provided data on the success of its enterprise software
products, showing the products’ growth as a proportion of total software sales. MSC does
include the MD products in this grouping, so it’s not completely correct to call the
“non-enterprise” products “engineering,” but still ... From slide 18, one can also glean
nuggets on the strength of MSC’s traditional engineering products by inverting the enterprise
data. Enterprise sales have made up 21%, 18%, 20%, 27%, 28% and 33% of total software
revenue each quarter since Q1 2007. By subtraction, then, one can get at the non-enterprise
product revenue – 79%, 82% etc. of software revenue per quarter. The depressing conclusion
is that this revenue source is in decline ($20 million in Q1 and Q2 2007, $17 million in Q3,
$21 million in Q4 2007, $16 million in Q1 2008 and $14 million in Q2 2008.) Again, since MD
revenue is classified as “enterprise”, these totals should not be read as an indication of the
lack of demand for engineering products, but it does lead to further questions: Why is MSC
classifying things this way? (The cynic says ‘to boost enterprise revenue’.) How much of this
is due to MSC’s token model? What's really happening with sales of MSC's traditional
powerhouse products: Nastran, Patran, Adams, etc.?

And, finally, tying the two together: Are MSC’s sales reps incented to sell all products
equally or to focus on enterprise at the cost of more traditional engineering solutions? If so,
the success in the first data set would be a direct detriment to the second.

Autodesk’s streak continues

Sun, 17 Aug 2008 14:25:55 -0400

Autodesk handily beat market expectations for the second fiscal quarter of 2009, reporting
total revenue of $620 million, up 18% over last year and ahead its own earlier forecast.
Excluding foreign exchange effects, total revenue was up 10%. Moldlfow contributed $7
million in the quarter.

First, slicing by revenue type, license revenue grew 12% to $440 million while maintenance
revenue from subscriptions grew 27%.

By division, Platform Solutions and Emerging Business reported $270 million, up 12% but
posting a sequential decrease due to an LT promotion; Manufacturing Solutions grew 32% to
$131 million (up 25% excluding Moldflow); AEC Solutions grew 21% to $144 million and
Media and Entertainment grew 12% to $69 million.

Revenue from "model-based 3D design solutions" (identified as Inventor, Revit, Civil 3D,
NavisWorks, Robobat and Moldflow) grew 36% and now accounts for $166 million, or 27% of
overall revenue. The company reports shipping 36,000 commercial 3D seats.

Revenue from 2D vertical products was was up 16% compared to a year ago while AutoCAD
was up 12% and LT up 6%. The slowdown in LT was attributed to buying patterns related to
the prices increases for the AutoCAD LT 2009.

On a geo basis, growth clearly came from what Autodesk characterizes as “emerging
markets” which now account for 18% of total Q2 revenue and was up a total of 40% over last
year. These countries are not singled out, but are combined into overall geographies:

Within its Americas region, overall growth of 4% to $203 million was driven by a "rebound" in
Canada and a "record quarter" Latin America, with the only standout in the US being
Autodesks' ability to "make inroads in the government, with federal agencies, state agencies
and city-level departments."

Revenue from EMEA was $267 million, up 31% over last year, driven by the Middle East;
while revenue from Asia-Pacific was $115 million, an increase of 18%, led by “infrastructure
build-out in China.” Also credited for revenue increase was “increased awareness around
digital prototyping.” In constant currencies, revenue was up 15% in EMEA and up 11% in
Asia.

The company made four small acquisitions during the second fiscal quarter: REALVIZ, for
image-based content creation software; Kynogon, for the gaming industry; Square One
Research, which creates environmental design tools; and Green Building Studio, an energy
analysis service for designers and architects. Autodesk expects these companies’
technologies to enhance its current solutions for "visualization, simulation, and analysis, as
well as technology used to create energy-efficient buildings.”

Autodesk provided guidance for fiscal Q3 of revenue between $625 million and $635 million
for Q3. For Q4, the company expects revenues on the order of $670 million. For fiscal 2009,
then, Autodesk expects total revenue of around $2.5 billion, a 15-16% increase over fiscal
2008.

ANSYS glitters -- again

Sun, 17 Aug 2008 14:25:50 -0400

ANSYS once again announced results that beat expectations – for something like the 50th
time in a row. ANSYS reported Q2 2008 revenue of $111 million, up 21% from a year ago
(and not including any contribution from Ansoft, which closed after the quarter ended). On a
geographic basis, revenue in North America was up over 20%; Europe was up 28%, led by
Germany and Central Europe (excluding the effects of the strong Euro, European revenue
was up 20%); the general international area was up 17%, led by Japan. Orders in China were
delayed as companies there refocused to deal with the earthquake suffered during Q2.

Software revenue was $73.9 million in Q2 2008, up 24% from a year ago, but essentially flat
on a sequential basis. The lease business makes up 39% of total revenue (or $36 million)
and grew 20% over last year while the paid-up business grew 30% for the quarter. High-end
products grew “in excess of 20%,” slightly ahead of the lower-end products because of
ANSYS’ growing portfolio at the high end – not because of lack of demand for other
products. Maintenance and services revenue was $37 million, up 14% year over year, led by
“mid-20” percent growth in the “pure software and enhancement subscription” plans. The
company said that the services-only revenue component declined as it focuses on
higher-margin services.

One interesting note: Jim Cashman, CEO, said on the earnings call that the company had
recorded “12 seven-figure orders that actually disproportionately went to deferred revenue….
[T]hey were forecasted as part of our Q2 guidance.’ First of all: seven figures. In a CAE deal.
Amazing – and then to have 12 in one quarter. But the most impressive aspect is that these
deals largely went to deferred revenue, meaning that ANSYS didn’t recognize the bulk of the
revenue in Q2 yet turned in solid results anyway.

It’s likely that these mega deals are possible because ANSYS now sells a portfolio of
products to customers who may have been used to dealing with separate vendors, sales
teams and renewal periods but are now dealing with a single vendor as ANSYS continues to
roll Fluent customers into the ANSYS “family.” It’s likely that this will ramp up as it
integrates Ansoft into the product list, but one has to wonder if such huge deals usually
include discounts simply to get them done. Might this lead to eventual price pressure on the
market as a whole?

Curiously, this is countered by Cashman’s statement that ASPs in Q2 “increased notably at
the high end” while ASPs at the low end “adjusted for volume purchases” rose slightly. It’s
summertime and I can’t quite wrap my brain around the conflict between mega deals and
rising ASPs. The only thing I can conclude right now is that the revenue recognized in Q2
doesn’t include enough license revenue that would change an ASP calculation; perhaps any
license revenue in the deals will be recognized in coming quarters and ASP changes would
happen then. Hmm.

For Q3, ANSYS forecasts total GAAP revenue of between $115 million and $121 million and
non-GAAP revenue of around $125 million. For the year, ANSYS forecasts total revenue of
between $476 million and $486 million, with non-GAAP revenue of just under $500 million.
While an increase over the company’s last forecasts, these totals reflect the addition of
Ansoft for the remainder of the year; the company still sees organic revenue growth of 15%
to 17%.

I'll be attending the ANSYS User Group meeting, so look for a write-up on my return.

MSC Software reports a mixed bag for Q2 2008

Sun, 17 Aug 2008 14:14:28 -0400

On August 5, 2008, MSC Software reported revenue of $64.4 million, up 6% due primarily to
growth in the maintenance revenue stream, with a quarterly profit that topped Wall Street
expectations by a penny – yet the share price declined 20 cents. Clearly, investors were
unhappy about the $1.9 million decline in overall license revenue, led by a $4.8 million
decrease in revenue from engineering tools; an operating loss for the quarter and the fact that
the revenue increase was significantly helped strength in the Euro and the Yen.

Overall, the picture painted by MSC in its earnings release was a tad gloomy but represents
a company in transition. On the plus side, the company reported the following:

- Revenue from the Americas was stronger than anticipated, up 17% from Q2 2007

- Large transactions are up 40% from Q2 2007 to almost 150, which leads to

- An average transaction size of almost $250,000, up 18% from a year ago.

MSC Software still faces an uphill climb, as it seeks to sell its customers on a two-fold
message: the engineering applications are strong and continually being developed even as
MSC itself focuses its messaging on its enterprise products (which, of course, include the
engineering applications – a fact that seems to be overlooked quite often). By branding the
MD tools – updated versions of NASTRAN, Patran, etc. – as “enterprise” apps, MSC is
confusing its customers and the market in general.

Hip like me!

Wed, 13 Aug 2008 14:14:25 -0400

Never let it be said that I am not cool. I have a
Nintendo Wii -- and now an avatar, courtesy of
http://www.faceyourmanga.com where you can get
one too.

More serious stuff coming after vacation. Lots of
earnings, Autodesk acquires more companies --
and announces how it will integrate Moldflow and
plastics customers into its portfolio.

Dassault Systèmes reports solid Q2 but shares fall anyway

Thu, 31 Jul 2008 14:14:20 -0400

It’s tough being a public company. Dassault Systèmes announced solid second quarter
results today: revenue up, non-GAAP earnings per share slightly ahead of expectations,
solid and solid-ish contributions from all brands and all geographies… and still its share price
is falling on global markets. DS gave no bad news; the problem appears to be that the news
was not good enough. In describing its objectives for the third quarter, DS adjusted its prior
guidance to account for the divestiture of a sales subsidiary (lowering revenue and costs) and
the Engineous acquisition (adding revenue but also costs). In all, objectives for the year went
from total revenue of EU 1325 million - EU 1340 million to of EU 1320 million - EU 1330
million. That’s a change of about 0.5% in overall revenue taking the stock price down 2.5%
on the NASDAQ (at 11AM ET). Crazy.

In related news, DS will be delisting from the NASDAQ in October – in part, according to
CEO Bernard Charles, because of the small number of shares traded on that exchanges and
the growing interest among investors of trading in their own, native markets. The global
dominance of the US-based NASDAQ may be at an end. Charles was quick to say that
compliance with Sarbanes Oxley was not a deciding factor, although CFO Thibault de
Tersant was able to identify $1 million in costs specifically related to compliance with
NASDAQ listing requirements.

[Disclosure: I do not own shares in any PLM companies.

Autodesk gives first look at Plassotech integration

Mon, 28 Jul 2008 13:58:34 -0400

You may remember that Autodesk expanded its footprint into CAE with the acquisition of
Plassotech just about a year ago. At the time, Plassotech had a small but devoted following;
many thought its CAE solutions were on par with more established, extensive offerings in
linear static stress, steady state thermal analysis, optimization and buckling. Most
significantly, the acquisition would eventually enable Inventor users to perform analysis on
entire assemblies, as well as individual parts.

Autodesk Labs this week makes available an early peek into the way it will incorporate its
Plassotech acquisition in Autodesk Inventor Simulation Suite 2009. You can check it out at
http://labs.autodesk.com/technologies/advanced_simulation/.

According to this website, the Advanced Simulation Technology Preview for Autodesk
Inventor 2009 includes:

- “Simulate Inventor parts and assemblies - Users can directly read in Inventor parts and
assemblies and perform stress and modal analysis on them

- “Parametric simulation of Inventor models - The Advanced Simulation Technology Preview
allows users to change parameters, simulate various permutations, and compare results

- “Multi-criteria optimization - Users can determine the optimal values of design parameters
to meet their objectives using optimization

- “Automated tools to set up simulation model - Automated mesh refinement and contact
detection allow users to quickly set up their simulation models and get usable results”

Check it out and let me know what you think. It will be exciting to see how Autodesk rolls
this out – and how it incorporates the Moldflow product set into its offerings.

PTC continues to roll

Wed, 23 Jul 2008 16:42:00 -0400

Strategic discovery?

Wed, 9 Jul 2008 13:58:22 -0400

Coffee and usability

Wed, 2 Jul 2008 13:58:13 -0400

And the big get bigger

Wed, 18 Jun 2008 13:38:36 -0400