Schnitger Corporation Hot Topics 2009 Archive

Happy New Year!

Thu, 31 Dec 2009 14:23:38 -0500

If you poke around the Schnitger Corp. website, you’ll note that we’ve changed the way blog posts are archived. This should speed up page loads and, someday, searches. Until search engine crawlers catch up, you may find that Google and other search engines offer up incorrect URLs -- your best bet will be to go to the Archive pages for each year and use your browser’s search capability to find the article you seek. We apologize for any inconvenience.

Finally, all the best for 2010 - a new decade!

AspenTech feels the pain of license transition

Mon, 21 Dec 2009 13:18:15 -0500

Aspen Technology, a company you don’t usually see me writing about, today announced results for its first quarter of fiscal 2010. AspenTech creates chemistry, process management and supply chain solutions for the oil and gas, chemical and other industries and is arguably the largest of the companies providing this type of solution. AspenTech should be interesting to observers of the software space because it is in the process of transitioning its customers from a typical perpetual model, where a large upfront new license payment is followed by much smaller periodic maintenance payments in succeeding years, to a subscription program called the aspenOne licensing scheme. In the short term, this transition will significantly reduce revenue as the large initial payments are not booked, but, it is hoped, will build a stable, repeatable revenue base for the future. Says the company, “from a long-term perspective, we expect our financial performance to ultimately exceed that which would have been possible under our previous commercial model."

AspenTech launched its aspenONE licensing model early in the September quarter and will serve as a case study for other companies seeking to change their licensing model:

- It will be difficult to convince customers to change their purchasing habits without reopening their broader review of market offerings. We’ll monitor whether AspenTech’s customers take their business elsewhere.
- It will take years to complete the transition from perpetual to subscription since customers can only be transitioned when existing contracts expire. How well can the company manage its costs given the dramatically lower revenue?
- Many companies have had to make this transition while publicly-traded and and saw their stock prices plummet. AspenTech was delisted in early 2008 because of issues with timely filing of earnings reports but has said that it is seeking relisting early in calendar 2010. How will investors respond to the license model change?

It remains to be seen how this turns out in the long-term, but the short-term predictions proved correct. For the quarter ended September 30, 2009, AspenTech reported total revenue of $39.8 million, less than half of the $86.4 million reported in the the prior year. While there was some economic effect, the company reports that the “strong majority” of the decline was due to the license model transition.

The company reported only $25,000 (not a typo: $25,000) in subscription revenue in FQ1. Subscription revenue recognition begins when the first payment is due, typically 30 days after the contract is signed, so at most 60 days of revenue could have been booked for deals signed on the very first day of the quarter, so expectations were low -- but, still.

AspenTech also reported that non-subscription license revenue, lumped into a “software” category, was $11.1 million in the first quarter of fiscal 2010, compared to $49.6 million the prior year. It should be noted that the 2009 total included $15 million of deferred revenue that was recognized in Q1 2009.

Despite these rather dismal early results, the company reports that customer interest in the new model has been good and that the December-ending quarter will prove a better barometer for customer acceptance.

Services revenue declined from $36.8 million last year to $28.7 million in Q1 2010, and is a result of the “more challenging economic environment compared to the year ago period”. This category is expected to decline as the subscription line grows, as maintenance is bundled into that offering.

Needless to say, the overall impact of the licensing change and macroeconomic environment was a net loss from operations of $24.8 million and a net loss of $21.1 million in the first quarter of fiscal 2010.

It will be interesting to watch how AspenTech manages the transition to a subscription license model. Those large checks written for initial payments are addictive and many companies have had a hard time convincing customers to change -- and to restructure their sales incentives, account management, sales channel build-out and other in-house functions to make it happen. Stay tuned for the Q2 announcement in February.

Season's greetings from Schnitger Corporation

Fri, 18 Dec 2009 09:09:40 -0500

Thank you to all who emailed to ask about Lazarus House; for more information or to make a donation, please see http://www.lazarushouse.org.

Boston Scientific gets innovative

Wed, 16 Dec 2009 09:39:07 -0500

A couple of weeks ago, I was fortunate to hear Boston Scientific speak about how it sought to build a culture of invention and discovery that leads its various businesses to successful new products. Randy Schiestl, VP R&D, and Jude Currier, cardiovascular knowledge management and innovation practices lead, spoke at Invention Machine’s user group meeting about how they are changing both employee and corporate thinking to foster innovation.

Mr. Schiestly neatly summed up Boston Scientific’s goals when he said that every day the 25,000 employees at his company create knowledge but that “we have a hard time communicating between the first floor and the second floor-- let alone trying to communicate from the East Coast to the Midwest to the West Coast on new product development. We find ourselves developing the same technology at multiple sites at the same time, spending three times as much as we should be. We find ourselves repeating tests done years earlier, because we didn’t have access to knowledge; starting projects that another division might have cancelled. So how do we collaborate across the company, innovate better, get products to market faster, increase productivity, grow with worldwide markets? Tools and technologies are the keys.”

Boston Scientific is working to move to a more systematized approach for new product development, focusing on a business case that includes ROI metrics and models the voices of the consumer and regulators as well as the technologists and scientists. In the past, the process was more ad hoc and and drove business strategy into planning without considering technology, customer and market realities until late in the game, when business plans and commitments had been made. This transformation necessitates business and cultural changes at Boston Scientific -- as well as the technologies to collect and manage these various inputs.

One of the technologies chosen to capture knowledge, manage requirements and assist in planning is Invention Machine’s Goldfire. According to Mr. Currier, Goldfire helps Boston Scientific create automated workflows to analyze markets and search through the company's intellectual property for ideas for new products, test results, market research and other information. Goldfire combines proprietary company materials with information from public sources such as patent databases to help build connections between previously unrelated data sets, helping researchers and engineers be more creative in their thinking while able to weed out ideas already proven infeasible.

The benefits of such “collaboration” could be huge: Before its current innovation expansion project, Boston Scientific's R&D teams often had little or no access to work being done by colleagues in different parts of the company. Information was on people’s desktop computers, in filing cabinets or offsite storage -- or was considered so confidential that access was closely restricted. Part of this project is to work out methodologies for providing access as appropriate and then restricting that access as a project gets closer to patent application.

How is it going? The team has seen typical corporate resistance to change, with the biggest barriers being resource constraints and inconsistencies in how various teams are implementing Goldfire and the new innovation processes. No concrete measures of success were available, but Mr. Currier was able to say that patent applications are up for groups using Goldfire.

“We have a lot of IP,” says Mr. Currier, “now it’s about how to leverage that IP for the future.”

Update: Boston Scientific reports that engineers increased productivity by 30 percent and significantly accelerated speed-to-market using Goldfire and that, within a year, 10% to 15% of patents filed by the cardiovascular division were generated with the help of Goldfire.

Note: Invention Machine made it possible for me to attend its user conference but provided no other funding or compensation for this piece.

ESI reports Q3 sales up 3% on strong growth in services

Tue, 15 Dec 2009 12:46:28 -0500

ESI Group reported reasonably good results for the third quarter today, as total revenue grew 3.2% to €13.8 million in what is typically the company’s weakest quarter. License revenue declined almost 6% to €8.5 million when compared to a year ago, slowing the steep year/year decline seen in Q2. Services recorded an increase of +21.9% in sales, to 5.3 million euros. The Mindware acquisition made the difference this quarter, contributing about €1.2 million to the services total in Q3 2009 -- which, as ESI points out, is almost equal to the €1.4 million purchase price of the company.

For the first 9 months of its fiscal year, ESI saw a 3.6% decline in licenses revenue -- far smaller than its competitors -- as its repeatable revenue increased slightly to 78% over the last year. MSC Software, DS and ANSYS all have comparable recurring revenue levels, yet suffered far greater drops in total license revenue this year. ESI’s business model is based much more strongly on ratable licenses, which somewhat protected it from the larger fluctuations seen by rivals.

Mindware, which “recorded significant organic growth” according to ESI, contributed €4.2 million in revenue during the first 9 months.

Chairman and CEO Alain deRouvray said in prepared remarks that “these figures reveal a continuation of the ... wait-and-see attitude on behalf of clients in terms of new diversification orders, but a reaffirmation of the renewal of the installed base for (l)icenses.” M. deRouvray still sees significant uncertainty ahead. ESI never offers forward-looking guidance but typically has almost 40% of its revenue during the fourth quarter.

Holiday Greetings: Efficiency, personalization, environment

Thu, 10 Dec 2009 11:47:04 -0500

This blog post on the Harvard Business Review site got me thinking. They point out that this time of year is hectic, and that holiday cards have a way of getting lost in the shuffle. Either we spend too many hours personalizing greetings, leading clients to wonder what better use we could have made of the time while we resent having to cram yet another task into an already too busy calendar. Or we take a quick and easy route and send out impersonal, mass-mailed, automated efforts that let us check the task off the list but may make the recipient feel ... underwhelmed. And, if you’re HBR, underwhelmed could mean a disaffected customer.

HBR doesn’t go there, but my other peeve about holiday cards is the fact that they are a (lovely, colorful) use of paper, a precious resource that might be put to another use and will only clog up a landfill or recycling center in January. Too, the postage fee will make our struggling Post Office happy, but that money could be used for causes that need it more urgently.

So what’s a conscientious person to do? Last year, Schnitger Corporation emailed out personalized holiday greetings, with a nice seasonal scene and the message that the money not spent on holiday cards and postage would go towards feeding the hungry and housing the homeless in my little part of New England. We’ll likely do something similar this year, when even more people are struggling to make ends meet.

Last year, several people emailed to say that they appreciated both the email and the donation;. Since holiday greetings don’t normally generate thank yous, I’m guessing that people liked the idea.

But what do you think? Will your business be sending paper holiday cards, an electronic message or doing something else? Flip it around: what’s your favorite type of greeting to receive? Send us an email to let us know!

The SEC, ANSYS and deal ethics 101

Thu, 10 Dec 2009 11:03:57 -0500

My browse of the morning news turned up a Wall St. Journal story that the US Securities and Exchange Commission (SEC) is looking at how brokers, hedge funds and others dealt with information about, among a dozen other deals, ANSYS’ acquisition of Ansoft.

Before we all get too excited, it’s important to note that nothing released so far by the SEC or discovered by the Wall St. Journal implicates ANSYS or Ansoft employees -- nor is any action taken by the SEC going to undo the merger of the companies. But it is interesting to see how the SEC is trying to safeguard the rights of investors.

According to the Journal,

“The investigations are part of an effort to better understand how people meet and communicate with one another—and swap information—among banks and Wall Street trading floors. People who have seen the subpoenas say hedge-fund executives are being asked to hand over appointment books and business-contact lists, in addition to phone and email records. The SEC is looking at when traders, bankers and others held meetings either in person or over the phone, and how those meetings coincided with progress in deal talks and the timing of trades, a person familiar with the matter said.”

When a company is seeking to acquire another, an army of advisers is involved: investment bankers who do due diligence to figure out if the price is “fair” and who may help to arrange financing for the deal; lots of lawyers; market analysts (like me) who help to explain the market and its dynamics to various stakeholders; more lawyers; management consultants who help determine where “synergies” could be found to improve profitability -- and so on. While not company officers, these people are typically considered “insiders” until the deal is announced to the public.

When the company’s shares are traded on US stock exchanges, the law requires that no one involved in the deal comment on it (or even on the possibility of a deal) to outsiders who may use that information to profit from the sale or purchase of stock. But keeping the deal a secret is very, very difficult, with so many people trooping in and out of office buildings they don’t normally visit. An astute observer may decide a deal is in the offing; that person is not considered an insider.

What the SEC is trying to find out about the deals under investigation is (1) who knew what when; (2) who told what to whom, when; and (3) if anyone profited from that information. The SEC’s job is to ensure the equitable functioning of markets: that, as much as is practical, everyone act on the same information. So if a banker involved in a deal for Company X told a hedge fund manager about the deal and the manager promptly bought shares of Company X in anticipation that the price would rise when the deal was announced, both the banker and his friend would have been parties to an insider transaction.

We’ll have to wait for the investigation to run its course to find out what, if anything, happened that was illegal. All of the investment banks I know of have rigorous policies in place to prevent insider trading (and are required by law to report it if they discover it) -- but humans are humans. And recent events have shown that human greed really knows no bounds.

(Just FYI: There’s lots of legal insider trading; it just doesn’t make the news. Legal insider trading happens when a company insider buys or sells shares in her company at specific, allowed times in the earnings cycle and reports those trades to the SEC.)

Hmm ... CFD results via Twitter

Wed, 9 Dec 2009 08:18:10 -0500

Every so often, someone comes along and does something I honestly would not have thought of: Symscape, a UK CAE vendor, announced recently that release 2.0.1 of its Caedium product includes “the world's first automated simulation telemetry system for posting images to TwitPic and posting associated messages (tweets) to Twitter.” The company says that this new feature can be used “if you want to check on the progress of a Computational Fluid Dynamics (CFD) simulation while you are away from your simulation's host machine and you have access to Twitter. It is also a great way to share CFD simulation progress with other colleagues on Twitter in real-time.”

Twitter as a means for exchanging possibly sensitive business data? Maybe not such a great idea. Remember that your Twitter timeline can be accessed by anyone who want to subscribe (unless you specifically block them or hide access to your tweets -- and I’m not sure how secure that really is from a determined hacker) and is probably eminently discoverable in patent and other legal proceedings. Secure it is not.

But this is still a very creative way to tie together technologies. Since it’s often difficult to predict when a simulation will converge, simply being pinged to know that it is done has tremendous value. Using Twitter to do this is an imaginative combination of an emerging technology and old-school engineering.

2102: Reliable Plant says manufacturing returns to the US

Mon, 7 Dec 2009 15:18:10 -0500

Reliable Plant, an industry magazine for the manufacturing community, just came out with predictions for 2010. It’s a provocative piece and the predictions have interesting implications for the PLM community:

1) Production will return to the United States.

The author of the article, Jeff Owens (president of a managed services provider for production equipment maintenance, industrial parts services and IT solutions), says that the weak dollar will enable manufacturers to be more flexible in where they opt to manufacture. This, he believes, will bring high-value, high-precision manufacturing will come back to the US. I certainly hope he’s right, but don’t look for rapid construction of huge plants by major global companies. If the prediction is correct, small and medium-sized manufacturers that have the agility to adjust rapidly will be the ones to jump first. Large high-precision manufacturers have heavily invested in overseas production facilities and may not be able to shift production before exchange rate changes tilt the playing field back to Asia, so impact at the high end may be muted.

The effect on PLM vendors could be significant, especially at the low- and mid-market parts of the spectrum, which specializes in manufacturing machinery, and in factory automation products like Tecnomatics, DELMIA and the like. Manufacturers who want to capitalize on this trend will need to very quickly design, build and bring on-line these new manufacturing plants and are likely to invest in the tools that can make that happen.

2) In a flat economy, manufacturing must ramp up.

It’s a simple economic fact: As we exit the recession, inventories that have been drawn down need to be replenished to meet growing demand. This means performing deferred maintenance, restarting production lines, putting new product development onto the fast-track -- all of the areas in which PLM excels. Look for demand across the board, increasing as signals become more clear about strengthening demand.

3) Highly skilled workers will be in demand – and can demand high pay.

Pundits have for years been lamenting the loss of skilled manufacturing workers in North America as jobs went overseas. Now that some of these jobs may come back to North America, we’re faced with a serious skills shortage. The potential is great, therefore, for training solutions of all kinds. Using virtual reality tools to simulate processes, creating work instructions in 3D, renderings and advanced visualizations -- all will play into (re)training workers for what is hoped to be a resurgence.

4) Outsourcing will ramp up along with the economy.

The writer of the article (a provider of outsourced services, so not unboased) says that manufacturers will outsource non-customer-facing functions to others, so that they can concentrate on “lean, highly focused” operations. Likely to be outsourced: maintenance and repair, most IT functions and training. While manufacturers have been trimming their workforces to deal with the economic downturn, many of their outsourcing partners have been planning for the recovery, often scooping up the most talented human capital available. Again, there is good potential for PLM companies to benefit, as the companies winning the outsourced business grow their own businesses. They will need to train workers, simulate plants, and plan work.

If you believe the basic premise, that manufacturing will return to North America as a result of the weak dollar and growing demand for high-precision and high-quality products, the future looks positive for PLM companies. Expect a slow start to the year, though, as caution will keep manufacturers from resuming large-scale production until there are clear signals of an economic recovery.

What do you think: when will you ramp up production? Do you see manufacturing return to North America in any meaningful measure?

Siemens AG has a tough quarter; what about PLM?

Thu, 3 Dec 2009 12:40:31 -0500

Siemens AG on December 3 announced dismal results for its fiscal fourth quarter, ended September 30, with total revenue down 9% to €19.714 billion. According to the company, “While the global economy showed increasing signs of stabilizing, capital investment was still restrained in industrial and infrastructure markets in developed countries. Fourth quarter orders came in 16% below the same period a year earlier, while conversion of Siemens’ strong order backlog held the decline in fourth-quarter revenue to 9%.” That last sentence bodes badly for the next few quarters, too, as the a declining backlog will make it harder to reach revenue targets. Revenue from the Industry Sector, home of Siemens PLM Software, declined 13% from a year ago.

Overall, on a geographic basis, the sharpest revenue declines came from Europe, the Commonwealth of Independent States, Africa and the Middle East, and in the Americas. In other words, everywhere except Asia.

The company said that it expects a recovery in the Industry Sector in the second half of fiscal 2010, but still expects lower total revenue for 2010 than in fiscal 2009. As a consequence, profit is also expected to be below the level of fiscal 2009, which means that restructuring measures begun in fiscal 2009 will continue “to the necessary extent” in fiscal 2010. No breakdowns are available for the Industry Sector, but Siemens AG cut about 22,000 jobs across the company in fiscal 2009, or about 5% of its global workforce. CEO Peter Loescher said during an analyst event Thursday that no company-wide job cuts are planned at present.

While the part we care about, the Siemens PLM business, is buried deep within the Industry sector, we can assume that it suffered the effects of the economy seen by other PLM vendors. Most of Siemens PLM’s revenue comes from the North America and Europe, with half coming from automotive and aerospace -- all hardest hit, and slowest to recover. Those effects are only somewhat balanced by the fact that almost half of revenue comes from maintenance, leaving the business vulnerable. My model has overall revenue for CY2009 down between 10% and 15%, to about $1.3 billion, led by a decrease of about 30% in license revenue.

Finally, one interesting speculation: Siemens AG's CFO Joe Kaeser said Thursday that it will put the Siemens IT Solutions and Services unit into a legally separate entity on July 1, 2010 and that an IPO is an option for this unit. According to Kaeser, the unit has 35,000 employees, of whom 10,000 are in Germany. Might we see Siemens PLM bundled into this business and, once again, spun out a ginormous parent company?

AU Virtual: just like being there?

Thu, 3 Dec 2009 10:16:43 -0500

I’ve been to a number of Autodesk University events in Las Vegas, and can tell you that they are HUGE. Last year, around 10,000 people crammed into the convention center attached to the Palazzo and Venetian Hotels, attending the handful of keynotes, dozens of presentations and hundreds of classes. Analysts and the media also attend meetings, briefings and a press conference. It’s two to three days of watching, talking and listening to what the Autodesk customer base cares about.

This year, Autodesk launched a AU Virtual for people who could not, for economic or other reasons, attend the physical event. Since I was just in Lake Oswego, Oregon with the Autodesk Manufacturing team, I decided to try AU Virtual this year -- and it is impressive. It’s not like being there, but Autodesk doesn’t seem to have tried to duplicate the physical experience, and that’s why it works so well. Other virtual events have had faux lobbies, exhibit areas, chat rooms and lounges in addition to the main auditorium. All of these highlighted the fact that the attendees were sitting along; rather than making one feel a part of the event, they highlighted the artificiality of the device.

AU Virtual took a completely different approach, going for clean and simple: a fairly large window overlays the browser (in my case, Firefox), with a Twitter feed strip on the right, and a presentation window and event listing on the left. The presentation window shows the live or recorded feed from the main stage, a class or an interview -- but rather than just the slide or presenter, both are visible, making the experience far more interesting than a typical webinar. For CEO Carl Bass’s keynote, for example, Mr. Bass appeared in front of his images; during the Manufacturing keynote, VP Buzz Kross was in an inset next to the media being displayed. As always, Autodesk relied heavily on customer images to make its points, so the juxtaposition worked very well.

The technology worked flawlessly for me. I did note from the Twitter feed that a few people had a less positive experience. Autodesk had a person monitoring the feed and suggesting real-time fixes, so I hope everyone eventually got to the content they were seeking.

In no particular order, some random thoughts on the event:

• I believe AU virtual cost $99, was free for Autodesk subscribers and was bundled into the physical Autodesk badge pricing. A lot is available for that small sum: virtual access to keynotes, dozens of classes and other sessions, as well as their handouts. If you are at all interested, it may be worth signing up even now, for access to replays although I do not know how long the site will remain live. (See disclaimer below; Autodesk gave me a complimentary login.)
• Autodesk says that over 350 on-demand and 50 “live” classes are available for the top-priced category of registrant.
• Classes are nearly interactive. The teacher and the slides are both visible in the player window while questions and answers are visible in the scrolling window below.
• Finding specific classes is a bit cumbersome (the search mechanism doesn’t seem to work too well), but once you’ve signed up for a class (past, present or future), it appears in a My Schedule tab. From there, you can view the session (assuming it is or has happened) and download any handouts. It’s an easy and intuitive way to get at what you need.
• The handouts at AU are always useful and it’s great that these are available online. I’ve often shlepped home too much paper, and would rather rely on digital downloads if I could be assured of their availability after the event.
• The Cut & Paste Design Slam is always fun and it’s great that it was broadcast via AU Virtual. Watching CEO Carl Bass, and VPs Buzz Kross and Phil Bernstein in the "Modeling for Bond, James Bond" session was a hoot, although it definitely is not the kind of thing that is fully represented by webcast. One needs beer and snacks to fully appreciate the event. All three contestants clearly know their stuff, and did well. Buzz designed a bullet-proof, mechanized martini shaker in Inventor 2011, Phil designed a new home for Bond and his new wife Moneypenny, while Carl used “a secret mix of new Autodesk weaponry” to design a seashell-themed table for the house. All in good fun.
• An Elvis impersonator sang Autodesk’s typical “we’re going to show things that may never become products” disclaimer at the AU opening session. Autodesk clearly doesn’t take itself too seriously.

Was anything new demoed in the sessions? The company presented lots of cool, future-oriented stuff, but perhaps the most interesting announcement was that Autodesk Inventor Publisher is now available on Autodesk Labs. Inventor Publisher was previewed at the analyst day last month: designers can create exploded views and view sequences or generate full-motion animations without any prior animation experience. These documentation can then be published in SWF, AVI, DWF, PPT, PDF and other file types for publishing on the web or in other forms.

One last comment: a number of tweeters mentioned that they had signed up for sessions that they had not actually attended, hoping to catch up at some point. That’s always the case with virtual events, especially if they are free or at low cost. But the sessions I attended were worth the time.

Being virtual is definitely not the same as being there, but AU Virtual was well conceived and executed. If you attend for the classes and demonstrations, it’s a good way to go. I enjoy the conversations in the hallways and elevators and feeling the crowd’s sentiment during the sessions; if I can, I’ll probably attend in person next year.

Note: Autodesk made it possible for me to attend Autodesk University Virtual at no cost.

Keeping tabs on what people say ...

Tue, 1 Dec 2009 08:37:20 -0500

Last weekend, a famous athlete was involved in a car accident that has many weird aspects. While all that ultimately matters is whether he or anyone else was seriously injured, the media has been buzzing about the lack of solid information about why he was out in the middle of the night, how he happened to hit the tree/hydrant/whatever and how the athlete came to be found, lying next to the car.

While the human being who is the athlete owes no one an explanation (perhaps excepting the police), the brand has to do some damage control.

No matter how intrusive, annoying, ridiculous or outrageous, hoping the comments go away simply won’t work. Not responding at all simply fuels the situation and allows people to come up with their own explanations, which are far too likely to be worse than the truth, no matter how ridiculous or embarrassing it may be. It is true that people will ultimately forget but in the interim the brand will suffer, key relationships with customers (or, in the athlete’s case, sponsors) may degrade and it will take serious work to get back to the original level.

So avoid this before it starts. Listen to what is being said about you, Google your brand, participate where appropriate. Do what you can to short-circuit the speculation -- having customers guess what’s wrong won’t do you any good.

Twitter Top 10

Mon, 30 Nov 2009 17:00:14 -0500

As many of you know, I’ve been experimenting on Twitter: checking out what the PLM companies are doing (not much) and trying to figure out who is doing Twitter well, with a view to getting that out there so that everyone can start off strong. Here are my top 10 dos and don’ts -- so far. The Twitter platform keeps changing (I don’t like the new retweet feature, for example), so this list is likely to evolve. But Twitter is fun, exposes me to things I might not otherwise have seen and enables me to waste endless time that could otherwise be productive -- what’s not to love?

DON’T:
• DON’T only post content that’s self-aggrandizing (links to your own work, for example). It’s bad etiquette and can be dull. Tweet about what matters to you: links to things you’ve read/seen that are interesting, retweet something that resonates with you, tweet an observation about something going on around you, and so on.
• DON’T post 10 things at once - too easy to skim over and makes it likelier that your tweets will be skimmed over (or not read) in the future. If you use a batching mechanism like twitterfeed, try to schedule gaps in your postings.
• DON’T publish private info if you want it to remain private. Remember that anyone, anywhere can see the tweet. You can privately tweet someone (meaning that it only shows up for them, in their timeline), but I’m not sure how “private” that really is.
• DON’T let it overwhelm you. Between RSS feeds, tweets and emails, I drown in digital info most days. If you really, really need to know about something, you’ll find out -- it’s OK to ignore tweets for hours on end.
• DON’T obsess over follower numbers. Yes, Stephen Fry (British comedian) has over a million followers; but he’s famous and tweets about football, darts, comedy and all sorts of stuff. Follower numbers go up and down as bots sign on, hoping you’ll follow them back (don’t) and then ditch you when you don’t. Does the sheer number matter more than the quality of the readers? Not to me.

DO:
• DO lurk for a while before you start tweeting. Twitter allows you to open an account and follow people so you can get to understand the etiquette and figure out what to post.
• DO stay within the 140 characters. I’ve never actually followed the link that some Twitter clients create if your message is longer than 140 characters. I do, however, struggle with getting something meaningful into those 140 characters.
• DO use a Twitter client (Tweetdeck, Tweetie, Seesmic are all desktop apps, none is perfect) to automate link shortening, keep you within 140 characters, manage lists and handle the vast number of daily tweets in your timeline. Twitter.com’s user interface is getting better but it’s easier if you use a client.
• DO start storing up tidbits for later posting. Quotes, links, retweets all help you come up with something to tweet when the well is dry. Some experts suggest that 1/3 to 1/2 of your tweets should be retweets or replies to keep things conversational, but I find that nearly impossible to do.
• DO realize that tweets, like emails, are easily misunderstood: you can’t see the wink or smile or hear the tone of voice of the writer. Don’t react too quickly to something you read and do watch what you say. It might not be amusing to all.

The best tweet I’ve seen so far: @stephenfry “A dream evening. Watching grand slam darts and popping bubblewrap. What more could life offer?” I don’t get darts, but like the idea of bubble wrap!

Update on IBM/Siemens PLM: it’s going well

Mon, 23 Nov 2009 11:13:04 -0500

My recent conversations with IBM about the change in its relationship with Dassault Systèmes naturally led to questions about how the closer integration with IBM and Siemens PLM is going. No details were provided but it does sound as though the partnership is at least meeting expectations: the team is actively engaged at a number of accounts, in various industries, all around the world. There may soon be a two to three success stories in automotive; in addition, two to three more engagements are underway in new solution areas in automotive and aerospace and one in an electronics account “where Siemens was not the incumbent.”

That’s pretty good, considering that the partnership was only announced in June, with product releases following this summer.

IBM speaks: The DS/IBM PLM deal from another perspective

Mon, 23 Nov 2009 10:57:13 -0500

IBM still believes in PLM -- but now sees a different way to interact with what it sees as a large, lucrative and diverse market. Its partnership with Dassault Systèmes is still strong, but the change in their business relationship allows IBM to enter a customer or prospect account as a more neutral partner, able to better address the customer's needs with a broader portfolio of possible solutions.

I've had several conversations over the last few weeks with IBM representatives, and all are puzzled over the perception in the market (and within IBM) that this announcement signaled the end of its involvement in PLM. Not true, said Michael Wheeler, vice president, IBM Manufacturing and Supply Chain Solutions: IBM still maintains a staff of global business services consultants, software developers and services specialists with a deep knowledge of manufacturing company concerns, the PLM software space and how to best leverage IBM's solutions to bridge that gap. Going to DS are the sales and contract management assets; reorganization within IBM makes it seem as though the rest of its PLM expertise is disappearing but that is not the case. Wheeler said that "PLM is a critical growth area for IBM” and that IBM is “more focused than ever” on the manufacturing market.

It's more than words: last week IBM announced that it is launching a global network of Product Lifecycle Management centers "designed to help customers launch new products more quickly by leveraging proven business methodologies and software development models". Through the centers, clients will have access to over 10,000 (yes, probably not all dedicated 100% to PLM, but still …) researchers, software developers and consultants that help clients "integrate all aspects of a product's lifecycle into other critical enterprise systems often leveraging a service-oriented architecture (SOA) as a way to reuse a company's existing technology to more closely align with its business goals."

Wheeler sees the DS/IBM PLM transaction as the natural next step in the evolution of both DS and IBM within their respective spheres. DS will grow as a company that wants to manage its business relationships with customers; IBM is changing to focus on building out frameworks to support the exchange and analysis of corporate data. The IBM Product Development Integration Frameworks (PDIFs) are standards-based integrations of IBM SOA and partner assets, services and data models to support business processes. In other words, rather than supporting only PLM or back-office apps in an account, IBM wants to tie together design, engineering, test, manufacturing, accounting, sales and all of the other parts of an enterprise using some sort of computer technology using bundles of application software and supporting middleware, bolstered by best practices and consulting to implement whatever vendor's approach most resonates with a particular client.

My take: IBM sees its potential as limitless as it builds technology layers that can be used by all PLM (and many other business software) suppliers. It can most credibly address users of all the PLM brands if it is agnostic, and gaining a bit of separation from DS will only help there. That said, DS is still an important partner for IBM and the knowledge its developers and consultants have of that brand's solutions can't be ignored; but IBM is now free to develop a commensurate level with Siemens, PTC, MSC Software and others.

Q3: So, how did we do?

Wed, 18 Nov 2009 10:56:21 -0500

It’s always hard to create context around companies whose businesses, and business models, are so different but we can draw a couple of conclusions now that Autodesk, Dassault Systèmes and PTC have reported for the summer quarter:

• Starting at the top: all three companies reported seeing signs of stabilizing economic conditions. Autodesk and PTC reported flat to slightly up sequential revenue; DS reported an 8% overall decline.
• Still struggling: new license sales. Across the board, new customers are hard to sell as they hold down employment pending a recovery in their end-user markets. New license sales were down 44% from a year ago at Autodesk, down 35% at DS and down 32% at PTC even as Autodesk and PTC saw a sequential increase. PTC’s is likely due, in part, to strong incentives offered for the company’s September year-end.
• Maintenance revenue has long been the backbone on which software companies depend. Maintenance, however, is heavily dependent upon prior license sales, on the number of seats in use (and that customers therefore pay to keep current) and on the customers’ perceptions of the importance of that software to their ongoing business. Autodesk saw maintenance revenue decline year/year for the first time since at least 2005 (when it was first broken out as a revenue category) because of lower seat sales in prior quarters; PTC reported a 75 y/y decline as its maintenance base shifted from more expensive (CAD and high-end Windchill) seats to less-expensive seats. DS reported a 6% y/y increase.
• Mainstream/mid-range/mid-market CAD/CAM seat sales are down; in some cases, way down. Inventor revenue was down 29% y/y, SolidWorks was down 10% y/y, yet CATIA was down 3%. [PTC no longer breaks out desktop/MCAx per quarter, but it is a declining proportion of total revenue (though still significant at perhaps 60%).] As Autodesk pointed out yesterday, CAD seats are closely tied to jobs; until companies start hiring again, these numbers are unlikely to grow.
• On a geo basis, all companies struggled in Europe, with Autodesk reporting a 38% y/y decline; DS an 8% drop and PTC, a 29% drop. All, however, saw slight a sequential increase, leading to cautious optimism. The Americas was a more mixed bag, with Autodesk down 24% y/y, DS down 12% y/y and PTC up 1%; sequentially, Autodesk and PTC saw growth while DS did not. No one had a good quarter in Asia, with only PTC reporting 4% sequential growth, as the Japanese economy continues to drag down the region.

In addition to reporting the common items such as new vs recurring revenue, each company also highlights particular areas that are noteworthy -- and, while not comparative, help to explain the market a bit more:
• Autodesk said that Moldflow showed sequential growth (by implication, a year/year decline); DS signaled that Simulia revenue is at least holding steady. Both are signs that manufacturing companies continue to invest in new product development -- perhaps not detailed design, yet -- for an eventual economic uptick.
• Emerging markets continue to be important for future growth but don’t seem to be contributing much right now; Autodesk in Q3 2009 saw about half of the total revenue from the BRIC countries that it did a year ago. China, however, seems to be a bright spot across the board, with comments suggesting that business there is very good.
• DS believes there will be rapid rebound in maintenance revenue once things improve, as customers pay up back-charges to reactivate licenses; all vendors should benefit from this.
• All three companies remain cash positive (thank that lovely maintenance stream) and even added a bit to the bank in Q3.

So the news isn’t all bad. Autodesk made clear yesterday that it is now recalibrating for growth (and stock analysts were not impressed, worried about how this will impact the company’s cost structure); PTC made similar comments a few weeks ago during its earnings call. DS, of course, is preparing to digest the $600 million acquisition of IBM PLM in 2010.

For Q4, Autodesk sees a slight to 6% sequential increase in total revenue; DS an 11% to 22% increase and PTC, a sequential decline of between 7% and 3% from its traditionally strong fourth quarter. This would mean that Autodesk would exit 2009 with roughly a 27% revenue decline for the full fiscal year, DS a 6% decline and PTC, a 13% decline. Only PTC has forecast 2010, and it sees a total revenue increase of about 4%.

Will 2009 prove to have been a challenging year? Of course. Did the PLM companies come out of it unscathed? No. But all, as Autodesk CEO Carl Bass said yesterday, are now smaller versions of what they used to be: leaner, more agile and, one can hope, more able to respond the next time there’s a global financial crisis.

Autodesk rev flattening out, license up seq

Tue, 17 Nov 2009 17:49:12 -0500

Autodesk reported surprisingly solid results today, as FQ3 was the first quarter in 5 that showed sequential stabilizing in almost all categories of business, the exceptions being Asia Pac and Manufacturing. The outlook is improving too, as the company gave a modest growth forecast for the January quarter.

The details:

• total revenue was $417 million, flat sequentially and down 31% from a year ago as growth in license revenue offset the decline in maintenance
• license revenue as $236 million, up 2% from the July quarter; even better (although unquantified), the company saw a 4% sequential increase in revenue from new commercial seats
• maintenance revenue was $181 million, down 2% sequentially and 3% from a year ago, while maintenance billings declined 4% sequentially and 10% year/year. That both are down makes sense, given that fewer new seats have been sold in the last year, but the company reports that renewal rates appear to have stabilized in Q3 and that the installed base of commercial maintenance customers was approximately flat sequentially
• the company reported that economic conditions in its core markets were “increasingly stable relative to the conditions experienced in late calendar 2008, and the early part of calendar 2009”. The Americas and Europe appear to have bottomed out, with revenue of $164 million (up 3% sequentially) and $159 million (up 1% sequentially) respectively. Revenue in the U.S., Brazil and Mexico increased while Canada declined sequentially
• Asia Pac revenue declined 5% from the July quarter to $94 million, as strong sequential growth in South Korea and India was offset by sequential declines in most other countries -- although “there’s no sign of a recession in China,” according to CEO Carl Bass
• revenue from emerging economies is considered to be a key measure of future success for Autodesk, as it brings pirated copies under license and as those economies grow. That business had been growing nicely but now accounts for 15% of total revenue or $62 million
• the Platform group showed growth of 6% sequentially to $154 million; Building Design held steady at $125 million but the Manufacturing group saw revenue fall to $90 million. CEO Carl Bass said that AEC firms seem to be consolidating around a single vendor, which results in large deals; manufacturers, on the other hand, are embarking on smaller pilot programs -- but Autodesk believes that the Manufacturing decline is an anomaly and that “we shouldn’t read too much into it”
• 3D products continue to grow in importance to Autodesk’s overall revenue stream and now account for 29% of its business, or $120.6 million. In dollar terms, that business, too, has fallen off a cliff over the last year, falling from a high of $164 million a year ago. Autodesk reported that sales of Inventor and Revit declined in CQ3 2009 while Civil 3D, Navisworks, Robot Structural Analysis and Moldflow grew on a sequential basis. Civil 3D revenue increased 8% sequentially (but was down 18% year/year) while revenue from Revit declined 2% percent (31% percent year/year). Inventor revenue decreased 6% sequentially and 29% compared to the third quarter last year. Moldflow growth is good news: it means that the products are reaching more customers and that existing accounts are continuing to support Autodesk’s acquisition of the product a year ago
• upgrade revenue was $26 million in the quarter, down 37% from a year ago and flat with FQ2.

Autodesk said that it is now shifting gears from cost reduction to accelerating growth. The company issued guidance for the fiscal fourth quarter of total revenue between $420 million and $440 million, which would be a slight to 6% sequential increase and would lead Autodesk to roughly a 27% revenue decline for the full fiscal year, at $1.69 billion. That’s actually pretty good, when we consider that 70% or so of Autodesk’s customers are small to mid-sized businesses, which are most stressed right now and have likely had to shrink their design departments until end-consumer demand picks up.

It was interesting to hear Mr Bass say that Autodesk is glad that economists are issuing positive news about recessions ending but that “the loss of jobs in [its] primary markets of architecture, construction and manufacturing continues to create a headwind for [its] business.” Essentially, Autodesk revenue is tied to the number of workers -- more workers: more seats sold or under maintenance. So until the unemployment numbers decline, Autodesk is wary of predicting the timing of a solid recovery in it business.

Tomorrow: how Autodesk’s results compare to the rest of the engineering software space and what we can expect in Q4.

Avatech sees sequential growth and returns to profit

Mon, 16 Nov 2009 13:02:52 -0500

Avatech reported today that there are signs that the US is in the early stages of a recovery that “could take some time,” according to President and CFO Lawrence Rychlak. The company still sees a tough sales environment in many areas, especially in Florida and Michigan on a geo basis and in building design on an industry basis.

For the 3 months ended September 30, the company’s fiscal first quarter, Avatech reported total revenue of $7.8 million, a decrease of 28% from a year ago but a sequential increase of 16%. The sequential improvement was led by a 17% increase in software and commissions while services revenue was up 14% from the June quarter.

Cost reductions implemented earlier this calendar year led Avatech to its first profitable quarter in a year, as the company reported net income of $127,000.

During the analyst conference call, Mr. Rychlak commented that the company is actively investigating acquiring weaker competitors who did not make the cost adjustments necessary to withstand the drop-off in orders, noting that Avatech's balance sheet is strong, with $2.8 million in cash bolstered by a $5 million line of credit.

"We are beginning to see some improved market conditions as customers' budgetary constraints loosen and they express greater interest in our software and services... We remain cautiously optimistic about the future and know that we are well positioned from an organizational standpoint to execute our strategy and provide outstanding value to our customers," said Mr. Rychlak in a prepared statement.

Autodesk reports results tomorrow. Clearly, the 28% decline in revenue seen by Avatech isn’t good news, especially since reports from other resellers are even more negative on a year over year basis (depending upon the VAR’s exposure to the building and automotive verticals and their geographic locations). But the sequential flattening suggests improvement; we’ll know in slightly more than 24 hours.

AVEVA: Lower costs, resilience in oil & gas, cautious 2010

Thu, 12 Nov 2009 08:49:09 -0500

AVEVA Group gave further insight into its business performance in the last six months, reporting that revenue had declined 6.5% to £69.9 million as “challenging” market conditions affected its end-user markets. Though decline is markedly lower than that seen by other engineering software vendors, the company said it remains cautious in its outlook for 2010 even as it looks to capture business in developing countries where growth has not slowed.

The details:
• recurring revenue grew 18% to £48.1 million on strong growth in the annual lease and periodic rentals businesses and now accounts for 69% of total revenue. To show just how much AVEVA’s business has changed, in 2008, 55% of revenue was recurring.
• new/initial license revenue fell by 44% to £16.2 million
• service revenue was essentially flat at £5.6 million
• unlike its counterparts in the US, AVEVA issues a dividend to shareholders; this as increased to 3.0 pence per share from 2.86 pence a year ago
• on a geo basis: revenue from Asia Pacific declined 24% to £23.5 million in the six months to September 30 due to the decline in initial licenses in the marine industry. While not separating the data into sectors, initial license fees in this period were half of what they were a year ago, not offsetting modest growth in recurring revenue streams. AVEVA sees future growth potential in the power sector in China
• revenue from EMEA was up 3% to £34.4 million due to strong growth in Russia and Eastern Europe, but the company saw a decline in Central Europe’s oil and gas and power markets
• AVEVA continues to struggle in North America, as strong performance in Latin America offset declines in North America and Canada. Revenue from the Americas increased 15% to £12.0 million, helped by favorable exchange rate changes in the last year
• For those keeping track, AVEVA has a strong cash position, £126.2 million at the end of September 2009.

But the bottom line (pun intended) for investors, and the reason the share is up 7% at 9AM Eastern, is that AVEVA recorded a smaller drop in pre-tax profit than expected as restructuring lowered costs and resilience in the oil and gas sector partly offset weakness in shipbuilding.

AVEVA does not give specific guidance, but analysts in the UK expect revenue for the full year to fall 15% to £140 million. That would require H2 revenue to fall 20% from a year ago to £70 million -- certainly possible but perhaps unlikely given the positive indicators from other engineering software companies and from the economists on the nightly news.

New alliance shakes up plant design CAD world

Wed, 11 Nov 2009 09:21:14 -0500

Intergraph and Autodesk announced today that they have reached an agreement that allows Autodesk to embed Intergraph ISOGEN into AutoCAD Plant 3D. ISOGEN, with about 50,000 users worldwide, is often considered the industry standard for the automatic production of piping isometrics and bills of materials, critical documents in the fabrication of process plant components and the construction of plants themselves. Without products like ISOGEN, isometrics and bills of material must be laboriously extracted from 3D models; manual methods often led to fabrication and construction errors. According to Intergraph, today over 80% of all the digital isos generated globally are produced using ISOGEN.

ISOGEN was originally developed by Alias Ltd., a UK company acquired by Intergraph in 2006. Intergraph first partnered to connect its 3D plant design offering with ISOGEN in 1993; today, ISOGEN is embedded in almost all major 3D plant design packages. (The rest do not include an embedded ISOGEN but rather create an output a file that can be processed using a separate, standalone application. Either way, ISOGEN is integral to the production of fabrication documents.)

The benefits of this deal to plant design software users is undeniable. ISOGEN’s interoperability means that users of Autodesk Plant 3D, Intergraph PDS and SmartPlant, and other major plant design products can easily share information -- a critical asset in the very fragmented plant design industry.

Autodesk could have built the expertise to create its own iso package, but elected to partner with Intergraph to quickly ramp up its offering in the 3D plant design space. Embedding ISOGEN serves to make the new AutoCAD Plant 3D product more credible and expands its reach and audience. Too, it bolsters Autodesk’s claim to openness and interoperability, key decision attributes in selecting a vendor as the buyer is likely to be in a consortium with a new set of partners on every project.

Under the agreement, Autodesk will provide front-line ISOGEN customer support for for its end-users. The only concern is that this could take off too quickly and overwhelm the support team’s resources -- but AutoCAD Plant 3D is new in the 2010 lineup, so use and support should be able to grow in tandem.

Autodesk SketchBook Mobile nearing 1 millionth download

Tue, 10 Nov 2009 12:09:37 -0500

Autodesk’s Manufacturing business unit held an analyst event last week in Portland, OR. Lots of interesting stuff under non-disclosure that I can’t write about until we get the all-clear. Not under NDA is the fact that right about now the 1 millionth buyer will download Autodesk’s SketchBook Mobile for the iPhone. That’s 1 million people, CAD users and not; artists, designers or normal people, using what could be considered an engineering tool. The average age of downloaders: under 16. How cool is that?!

I don’t have an iPhone, but saw a quick demo of SketchBook Mobile last week. It opens to a blank, black canvas. You can select brushes, a pencil, spray gun or other drawing tool from a tiny palette on the bottom of the screen, customize it with a color wheel and other controls and start on your creation. Put stuff on layers, change colors, add textures ... A trained artist can create stunning works of art -- clear in some of the examples Autodesk showed, such as superimposing stylized people on a bus stop or designing retro advertisements. A novice like me? It’s fun but it clearly takes practice to create anything recognizable. I’m not the type to sketch on paper napkins, but I can definitely see the appeal for those who do.

The revenue impact to Autodesk is likely negligible.The full app is available for $2.99 and a less-featured version is downloadable for free, so the max of $3 million in new revenue for a $2.3 billion company isn’t even rounding error.

However, the business impact could be enormous. 1 million users is a remarkable addition to the potential audience for Autodesk’s more traditional design tools. Further, the fact that most who have downloaded the app are quite young means that these people will be buying and recommending software purchases for a very long time to come.

Note: Autodesk did pay for travel and accommodations at the event; however Schnitger Corp. is not compensated by Autodesk or Apple for the contents of this blog.

Is SAP debuting new licensing schemes?

Tue, 10 Nov 2009 09:57:07 -0500

Sort of. Over the last few months, SAP and its customers have made the news by signaling changes in the way the software giant licenses its product and prices maintenance. The most recent news has SAP experimenting with flat-rate pricing and extended payment plans for its largest customers, clearly in response to lagging license salEs. While interesting, these models are nothing new in the software world, even though they may be new to some SAP customers.

In early October, Information Week reported that SAP is trying out what used to be known as “site licenses,” a flat-rate, fixed price for unlimited access to SAP software. According to comments by an SAP representative in the German magazine is report, SAP believes that such a move would focus customers on the value of the software, rather than on price. This scheme would also enable SAP to sell entire software suites rather than engage with clients in individual product negotiations, which lead to piecemeal implementations. With the site license approach, customers know their costs in advance while SAP can better project revenue. Neither the original article nor the InfoWeek piece indicated how widespread this trial is.

As many PLM companies have found found, site licenses carry enormous risks, perhaps not during the initial term of the license but in negotiations in subsequent years. It is very difficult to upsell, as customers feel entitled to new versions and new products -- and at the same pricing -- as part of their original agreement. This could lead to problems having the client recognize the full value of the products should SAP ever try to change its license structure in the future.

The other licensing “innovation,” allowing SAP’s largest customers to spread the initial license payment across multiple years, is a cross between vendor-provided financing and a lease. SAP’s Q3 earnings call cited the obvious: large deals are very hard to close right now, requiring a very long signature process that often gets derailed. As a result, said SAP CEO Leo Apotheker, “We are driving more multi-year agreements ... This model is good for both SAP and our customers... Customers want to buy a continued software based on our long term strategic roadmap over several years. We are now taking this concept down to the next 500 from the 80 largest customers. We expect this to open up tremendous opportunities for growth going forward. We believe this model of continued software over multiple periods that we are driving is an important trend in our industry.” Reports indicate that SAP will allow select customers to spread their upfront fee over five years; users speculate that maintenance may also be rolled into the same payment structure.

In this model, the risk is mostly financial. The move from large-and-lumpy upfront payments to a smaller-but-more-repeatable lease business depresses total revenue in the current period but creates a larger cushion for future periods: a tough sell for some investors.

Both strategies show that SAP is trying to find ways to stay relevant to its customers -- and that a notoriously inflexible company is working hard to change its business model to adapt to economic stresses. From a competitive standpoint, this can only be good for SAP as it takes on Oracle: it makes SAP seem more willing to bend to its customers’ needs.

What do you think? If you’re a vendor, the transition to a lease model is tough -- but may be just the thing your company needs to attract new customers. If you’re a buyer, would a 5-year payment plan sway you to consider an alternate to your current supplier? Email me at monica AT schnitgercorp DOT com.

ANSYS Q3: Short-term caution, long-term optimism?

Mon, 9 Nov 2009 16:01:16 -0500

By now, you’ve undoubtedly seen ANSYS’ Q3 results (press release PDF, 10Q PDF). To quickly recap, revenue was $128.2 million, up 5% from a year ago and at the high end of guidance -- but disappointing nonetheless as organic revenue (without Ansoft) fell 5.5% and total software license revenue declined 5% from a year ago. The contribution from the Ansoft business overall continues to be below expectations because it derives a higher percentage of revenue from sales of perpetual licenses. Even so, ANSYS forecast Q4 revenue of revenue between $136 million and $142 million, for a 2009 total of between $502 million to $508 million or an increase of about 6%, and initiated guidance of 8% to 13% GAAP-basis revenue growth for 2010.

Both the 2009 and 2010 growth figures are low for ANSYS, which had produced profitable revenue growth that averaged over 20% per year for the last decade. Over that time, ANSYS has acquired growth whenever trailing patterns started to lag: When growth dropped from the teens to 7% in 2002, ANSYS acquired CFX; when it declined from the 20s to teens in 2005, it acquired Fluent and, most recently, when growth fell from over 40%, ANSYS acquired Ansoft. Given the company’s current growth forecasts, it may be time for ANSYS to fire up the acquisition engine again -- but what to buy? Too, the company is still integrating the underperforming Ansoft acquisition and dealing with $230 million in debt still on the books from that deal. Of course, ANSYS has been husbanding (hoarding?) cash, leading to nearly $300 million in cash and short-term investments as of September 30, 2009 that provide it the flexibility to purchase growth if it feels the need to do so. The question of what to buy, though, is problematic. Unlike its competitors, ANSYS has never really spoken about “technology tuck-ins” or used other euphemisms to refer to a smaller, cheaper acquisition to help plug a technological gap -- it has usually gone for the grand gesture and made a substantial buy. A substantial buy, profitable, fills a product or distribution gap .... Hmm ....

But first to deconstruct Q3: ANSYS reported software license revenue of $76.4 million, down 5.5% from last year. Software license revenue is further broke down into $31 million in paid-up license fees (down 12%) and $45 million in lease payments (essentially flat). In a bit of disingenuous reporting, ANSYS provides data comparing 3 months of Ansoft contributions to Q3 2009 to 2 months’ contributions in 2008 (since the acquisition was closed on 31 July 2008); this makes it look like Ansoft revenue is growing nicely. Guessing at a third month in Q3 2008 paints a less rosy picture -- but not necessarily an accurate one, so we’ll stick to reporting core ANSYS data: core/organic ANSYS revenue was down 8%, only partly offset by a 6% increase in maintenance. Services, the smallest component in ANSYS’ overall revenue picture, declined by 37% from a year ago.

From a geo perspective, ANSYS is successfully bringing Ansoft products to a wider audience. Again comparing 3 months of Q3 2009 to 2 months of Q3 2008, Ansoft revenue was up nearly 50% in North America and 21% in Europe -- both largely new to Ansoft -- and even showed growth in Asia, where it has always been strong. Trying to create and apples-to-apples comparison shows growth, but not nearly as strong. Organic ANSYS had difficulty across the board, with flat results in North America not offsetting a 7% decline in Europe and a decline of 11% in Asia.

As is the case for all other software companies, slowing sales of new paid-up seats will slow the future revenue from profitable software maintenance, a factor in ANSYS’ announced decision to continue its cost-cutting initiatives. So far in 2009, ANSYS has trimmed 8% of total headcount, or about 130 people. R&D spend is down 4% from a year ago (to 16% of total revenue YTD 2009) while sales, general, and administrative costs are down 12%. Both serve to highlight ANSYS’ focus on bottom-line profitability, something that makes investors very, very happy and contributes cash to the company coffers. (For those keeping score, ANSYS has 16% of its total assets in cash and short-term investments as of September 30, 2009, on par with PTC but well below Dassault Systèmes in September 2009.)

It will be interesting to see how ANSYS adjusts its 2010 forecast in the coming months: will it be boosted by an acquisition to reduced, if need be, to a more modest level. But ANSYS is typically cautious in providing outlook, so I’d bet on the former.

WSJ: Jittery Companies Stash Cash

Tue, 3 Nov 2009 08:03:58 -0500

The Wall Street Journal had a great article yesterday on the apparent hoarding of cash by America’s public companies. According to the piece, “in the second quarter, the 500 largest nonfinancial U.S. firms, by total assets, held about $994 billion in cash and short term investments, or 9.8% of their assets... that is up from $846 billion, or 7.9% of assets, a year earlier.” Of the 500, 248 have reported Q3 results; “their cash increased to 11.1% of assets, from 10.1% in the second quarter.” Looking only at the tech sector, the Journal found that IT companies had, at each Q2, about 9% of assets in cash in 1989 (or $25 billion), 17% in 1999 and 27% ($280 billion) in 2009. The article goes on to say that companies are holding on to cash, even reducing dividends paid to shareholders, as a reaction to the credit crunch of a year ago when it was often difficult and expensive to borrow money. Tech companies often have higher cash positions “because they are riskier and have less access to capital markets.”

But “tech sector” and “IT companies” covers a lot of territory, from Google to eBay to SAP and PLM companies. How do engineering software companies stack up against the norm and what can we infer from this?

The engineering software space has consolidated a lot in the last 10 years, so finding a statistically meaningful sample isn’t as easy as it sounds. I tracked Q2 data from 2000 onwards for ANSYS, Autodesk, Dassault Systèmes, Moldflow, MSC Software, SDRC and Unigraphics/UGS (all while they were publicly-traded).

It seems that engineering software companies have been quite conservative all along: 23% of assets were cash in 2000, trending upwards to a high of 38% in 2008 but then dropping to 28% in Q2 2009, likely as the rapid decline in new license sales limited their ability to add cash. Too, the sample size had shrunk dramatically by 2009, with Autodesk, PTC and DS weighing heavily on the overall result. Over the same period the proportion of cash plus short-term assets as a portion of total assets remained more consistent, at between 32% in 2000 and 39% in 2008 -- but down to 33% in 2009.

What does it mean? It could well be that, as the Journal postulated, engineering software companies have a harder time gaining access to credit than does a more traditional enterprise and so need to keep cash easily available. But I think the cash positions are more attributable to the consolidation we’ve been seeing: companies need to move quickly when they see an opportunity to grow by acquisition -- ready cash allows almost instant action.

As for Q3, only PTC and DS have reported so far. PTC has had roughly 17%-19% of assets in cash and equivalents for the last two years, down from a recent high of about 25%. DS has a much higher portion of cash, at a steady 36% for the last two years -- but that’s about to be drawn down in DS’s purchase of IBM PLM. We’ll see what ANSYS and Autodesk report on Thursday and November 17, respectively.

Bottom line: Software companies don’t have the types of assets a lot of other companies need to conduct business (think factories or tankers) and are usually immensely profitable businesses that plow money back into R&D, acquisitions or stock buybacks. Cash allows that to happen quickly which may lead to a lower price and doesn’t expose the company to interest rate risks. And that’s all good.

Quick hits: news roundup

Mon, 2 Nov 2009 13:19:11 -0500

We’ve been so focused on the big news of last week (in case you missed it, Dassault Systèmes is buying the DS-focused IBM PLM division of IBM and PTC and DS announced earnings) that a lot of other noteworthy items slipped under the radar. A quick recap:

• How long should a company support a product?

DS said that it will continue to support CATIA Version 4 Release 2.5 until December 31, 2011 (rather than the end of 2009 as had previously been announced) for customers who are current with their maintenance payments. The company cites regulatory issues in some industries that require customers to maintain operational seats of CATIA V4 even if they have standardized on another product for new work. V4 will be nearly 20 years old when finally retired; I can’t recall any other product supported for this long.

• Autodesk cracks down on software piracy

Autodesk seized pirated copies of AutoCAD 2007 worth AED 1 million (about US$270,000) from an engineering firm in Abu Dhabi, United Arab Emirates (UAE). Autodesk had discovered that around 70 employees of the firm were using AutoCAD 2007 without legal licenses and had sent warning letters asking the firm to resolve the matter. The engineering company didn’t respond, leading Autodesk to work with the UAE Ministry of Economy to take a more drastic action. News reports of seizures are relatively rare; it seems companies are walking a tightrope to get markets to understand the value of intellectual property while not alienating a culture where the concept has never existed before. Then, too, there’s the fact that pirated software can build a user base -- that can freeze out competition and lead to sales in the future as companies legalize their usage.

• Regional licensing scheme

From the AllPoints Blog comes interesting news of Bentley Systems: Bentley has announced the creation of a license pooling scheme that enables companies with several offices in a country to create a “pool” of licenses to allow users to share licenses across locations. Site licenses are fairly common in engineering software; this is the first I've heard of regional pooling. It's an interesting way to listen to customers, whose budgets are stretched but are constrained to move projects and staff as workloads shift. As AllPoint notes, this is a variant on software as a service (SaaS), a more flexible way for vendors to deal with their clients' ebb and flow.

• VARs seem to be holding on

PTC said during its earnings call last week that September-quarter channel revenue was down 25% from a year ago. While VARs are clearly stressed, none selling PTC products have have failed. Recent conversations with resellers indicate that those who were able to find new ways to interact with their clients (design consulting, for example) or create product/service bundles as new revenue streams are likely to make it through - if the economy in the US continues to improve. PTC’s report shows that September-quarter channel revenue was flat when compared to the June quarter; perhaps business will finally start to turn around for the channel.

Lots more happened -- and this week continues the earnings stream -- so stay tuned!

DS: Holding steady

Thu, 29 Oct 2009 08:40:39 -0400

Good things come in twos (so far): Dassault Systèmes reported that Q3 performance was as expected, with total revenue of 291.7 million euros and software revenue of 255.6 million euros, both down 8% from a year ago but essentially flat with Q2. Keep in mind that Q3 is typically very challenging for DS, as the selling season is shortened by vacations and sales teams do not have the year-end incentive programs that helped PTC’s strong Q4 results. This means that sequential flatness is modestly good news.

DS makes available a great deal of data - following are my highlights:

• Total Q3 software revenue declined 8% from a year ago; new license revenue declined 35% to 59 million euros while recurring increased 6% to 196 million euros. For the 9 months of 2009 so far, new license revenue declined 34% while periodic licenses, maintenance, and product development revenue grew 14%.
• For comparison, PTC’s (new) license revenue was down 32% year/year while maintenance (recurring) declined 7%.
• New license revenue declined most sharply in the US, with a 47% drop year/year due to deal timing -- but this isn’t a trend, says CFO Thibault de Tersant: “It is less good performance than in the first half for the US, but it is very much linked to just this quarter because there are no signs of continuation of weakness.”
• Recurring software revenue growth is slowing because of low new license revenue in the first half of the year, an effect that is likely to continue for the next few quarters. But when the economy improves, DS believes there will be a catch-up in back-charges (as licenses are reactivated) of maintenance which should cause a rapid rebound in maintenance revenue.
• DS said that customer sentiment in September showed some improvement, but DS prefers to remain cautious and not extrapolate this improvement into Q4.
• DS’s PLM revenue declined 7% to 195 million euros, led by a sharp 32% drop-off in ENOVIA software revenue. This is the lowest level of Enovia license revenue since the rejigging of DS’ accounting categories in 2007; DS ascribes this decline to the fact that the V6 roll-out is in its early stages and some large clients are deferring purchases in advance of their transition to V6.
• CATIA software revenue fell 3% to 119 million euros while Mainstream revenue declined 10% to 60.9 million euros.
• SolidWorks seat sales seem to be stabilizing as (bear with me) the decline in unit growth is getting less steep: down 25% year/year in Q3 year/year as compared to declines of 35% in Q2 and 30% in Q1. In Q3 2009, 8,661 units were sold at an ASP of 4,723 euros, down 4%.
• On a geo basis, both North America and Asia declined 16% in constant currencies (to 89.1 million and 67.8 million euros, respectively), while Europe declined 7% to 134.8 million euros. The company reports that it is seeing growth in China and Southeast Asia, but that the difficult climate in Japan weighed down overall results. In commenting on the global economy, CEO Bernard Charlès said that “Japan is still very tough; China has been showing a double digit dynamic (that we need to leverage); Brazil also has double-digit growth; India has high potential and we need to strengthen our team there -- there is no reason why this growth should not continue.”
• The V6 roll-out is growing (CEO Charlès believes P&G is likely the largest single customer) but, in general, deals are still small, although transaction volume is good.
• Lots more detail at DS’s investor page.

For fiscal 2010, DS forecasts revenue to total between 1.24 billion euros and 1.27 billion euros, down 10 million euros from its most recent forecast, with Q4 revenue expected to be between 325 million euros to 355 million euros. DS says it is lowering its forecast because “preparation for the closing of the IBM PLM acquisition could have an impact on our revenue results over the next two quarters.” [Note that the IBM acquisition is not expected to close before Q2 2010.]

This was an upbeat call, albeit not as bouncy as PTC’s yesterday. A significant amount of time on the call was spent on the planned acquisition of IBM’s PLM business, but there was no real new news. Management was consistent in its cautious outlook, highlighting its cost control programs and speaking optimistically about its products and approach to the market, but saying that sales cycles continue to be long and unpredictable.

PTC: Things are looking up!

Wed, 28 Oct 2009 08:26:56 -0400

The good news: things are looking up enough for PTC to forecast actual growth for next year - not couched in terms of “constant currency” or using non-GAAP measures. Actual growth! The bad news, of course, is that 2009 was a dismal year by many measures. PTC issued a great deal of detail on its fiscal Q4 and 2009 results, so this piece will cover what I consider the highlights (or lowlights):

• Total Q4 revenue declined 18% to $246.3 million but came in a touch over the high end of PTC’s guidance (which topped out at $245 million) due to stronger than expected license sales. That’s the first positive surprise from license sales in quite a while.
• PTC sees the most strength in “large, Windchill-led engagements, notably in North America, while our SMB (Small and Medium Business) customers around the world still seem to be constraining spending given the ongoing macroeconomic climate.” That’s likely because PTC targets the hard-hit SMB market through channel partners and with Pro/Engineer and Microsoft Sharepoint-based Windchill products.
• The channel struggled in Q4, with revenue down 25% from a year ago and essentially flat with Q3. PTC has seen no bad debt issues despite the challenges partners have faced and believes the channel will recover more slowly than the rest of the business. But it should return to health b the end of fiscal 2010.
• Large deal activity was strong, with 19 large deals coming into Q4 for a total of $50.1 million in license and services. This is a nice recovery from earlier in the year but is still down by 17% from last year. For fiscal 2009, large deal activity was down 23%.
• License revenue in Q4 was $70.7 million, down 32% from a year ago but up 43% sequentially due primarily to orders by large, North American customers.
• Maintenance revenue in Q4 was down 7% year/year to $123.9 million but up 2% sequentially. Windchill and “Other” seats under maintenance declined sequentially and year/year; Pro/E seats declined year/year but grew slightly on a sequential basis. The only way to reconcile the decline in number of seats with a growth in revenue is that Pro/E maintenance brings in more revenue.
• Services revenue in Q4 was down 18% year/year to $51.7 million. Not surprising, training was down 33% year/year, while consulting was down 14% year/year.
• Lots more detail, including geographic info, at PTC’s investor page.

For fiscal 2010, PTC expects an economic recovery in what the company describes as “waves”: with North America recovering first, followed by Europe and Asia. PTC expects revenue in the first half of the year to be relatively flat with growth accelerating through second, as a recovery in license revenue is followed by maintenance and services.

Breaking it down, in FQ1 2010, PTC expects license revenue of $50 million to $60 million, essentially flat year/year and following the typical seasonal pattern. For the full fiscal 2010, PTC expects license revenue to be up 20%. PTC expects another slight sequential increase in maintenance revenue in FQ1 but that the low new seat sales in 2009 will lead to flat year/year maintenance revenue of about $500 million. For services in Q1 PTC expects revenue to total $50 million to $55 million as lower Windchill license revenue in prior quarters starts to affect services/implementation revenue. That said, PTC indicates that it has recently seen an increase in services bookings leading to optimism of improving utilization as 2010 moves forward. In total, FQ1 revenue is forecast to be between $230 million and $240 million; fiscal 2010 is expected to be around $980 million.

PTC was asked on the earnings call how it views the DS/IBM deal. CEO Dick Harrison responded that he likes it, that it make PTC’s job of selling the benefits of its products easier when compared to going up against an IBM sales rep and that it put Siemens, PTC and DS on a level playing field.

This was an upbeat call, a pleasant change from recent quarters. The company execs seem confident that their “domino strategy” will accelerate growth in new market areas, that their product strategy is sound and that the company does not depend on acquisitions for revenue growth. Even so, CEO Harrison ended the call by saying that “Q1 is going to be an interesting quarter. We have a nice pipeline but it’s hard to predict how quickly those wins will come.”

The DS/IBM deal changes the PLM sector

Tue, 27 Oct 2009 13:32:48 -0400

Regardless of whether you like the deal DS struck to buy the IBM PLM business, it does change the dynamics within the PLM sector. From a competitive perspective, DS will now face the same issues of access that PTC and Autodesk face: can their sales reps get in to see the people who make decisions and sign checks? IBM has historically been seen as not having any problems with access a the highest levels. Siemens has a slight advantage in traditional PLM markets in that its giant corporate parent has tentacles into many aspects of manufacturers’ operations, but that advantage disappears as PLM reaches into new market areas with less of a focus on heavy-duty industrial processes.

The best plus for DS may be its gain of control. By having the sales resources in-house, it can strike the deals it wants to -- to make a quarter or win a strategic account or to implement with a non-IBM SI. With this control, though, comes the issue of managing channel expansion (direct sales are expensive resources) and conflict with its existing sales mechanisms. DS has been gaining experience here and is bringing aboard the VP of the IBM PLM organization so it could be argued that DS can withstand this 20% increase in direct sales/support capacity at one stroke.

From a customer perspective, the deal is both very good and just OK. On the very good side is the leverage gained by dealing with only one vendor: there’s a clear source of problem and resolution. Of course, some customers will always seek a non-IBM/DS implementation partner, so for them this is no different. With IBM lessening its presence in PLM, its also possible that we’ll see the emergence of a strong PLM implementer not closely coupled with any software house. One can hope that a strong, neutral SI might be able to break some of the logjams of proprietary software and closed systems that can hamper current implementations.

Investors seem happy with the deal, although I’m still not sold. As DS suggested, I’m looking for a comparable business to see how it might be valued and what kinds of infrastructure costs DS must add to the business as it separates from IBM. But I may yet be won over as more information is released. DS shareholders seem to like the deal; DS’s share price in Paris is up 6.65% for the day.

For IBM, the sale of the PLM business is probably just a natural part of their business expansion and contraction. Their history with DS has, at times, been harmonious and, at others, fractious. IBM had been contributing less and less to DS’ revenue as DS took on more of a sales role for certain customer sets and geographies, so the importance of PLM to its overall business has been declining. Too, IBM inked a technology pact with Siemens earlier this year that raised questions about its commitment to DS. All said, IBM can now focus its resources on partners that may be less contentious and technology areas that it sees as having greater potential across more diverse customer segments. [I have questions in to IBM regarding its continuing support of Siemens, PTC and other PLM/engineering software vendors and will update once that conversation happens.]

One interesting area of speculation opened up by this announcement: is the industry again veering away from an indirect sales model? Over the years, vendors have played around with their sales models, sometimes focusing on direct, at other times opting for indirect or tele-/e-sales. In general, direct sales are expensive, so the deal value must be high; indirect sales are cheaper, can reach more prospects but are harder to manage; tele- and e-sales cost the least and offer the least amount of control but can have unlimited reach. The proper balance of the three will reach each prospect at a level where cost to the vendor is commensurate with the deal value, and with the correct amount of hand-holding given the product’s level of sophistication. It will be interesting to see how PTC (aiming for a higher indirect proportion of revenue) and Autodesk (increasing its direct sales) comment during their earnings calls over the next few weeks.

I’m sure there’s more to say but I’ve got to move on to other topics for the day. Send me an email (monica AT schnitgercorp DOT com) if there’s something specific I can address.

Some questions resolved in DS/IBM deal

Tue, 27 Oct 2009 10:32:31 -0400

But some questions remain. First the answers from today’s analyst call. Keep in mind that DS couldn’t answer some of the most pointed questions because IBM PLM is a non-reporting piece of a public company and, as such, DS can’t disclose the unit’s financials.

• This is an all cash acquisition of about $600 million. On June 30 DS had 850 million euro in cash on its balance sheet, or about $1.2 billion, so DS will still have a strong cash position after the deal closes.
• IBM PLM’s named accounts revenues were about $400 million for the nine months ended September 2009; DS characterized full-year revenue at around $600 million. The unit has a high level of recurring software revenue (perhaps as high as 2/3) and “solid operating profitability”. DS therefore expects the acquisition to be accretive to earnings and operating margin.
• Aside from customer benefits articulated by DS, a practical result of the acquisition will be to strengthens direct sales in certain countries in Europe, where DS doesn’t currently have much sales or support capacity.
• IBM PLM includes roughly 700 people in sales, pre-sales, customer support, etc. but, as part of a larger corporation, no back-office staff. So part of DS’ acquisition process will be to build out this infrastructure.
• The two companies have signed a master agreement; now separate deals must be made in each country to satisfy regulatory and labor relations requirements around the world.
• Chronology: IBM in 2007 took the initiative to work with DS on their 4th generation indirect channel and, apparently, contacted DS two months ago about how to adjust their partnership to take advantage of cloud computing (for a 5th generation). Whether the cloud is private or public, implementations will need lots of consulting. [That’s what DS CEO Bernard Charlès said. So it appears IBM contacted DS; DS didn’t seek this out.] Analyst extraordinaire Jay Vleeschhouwer has an interesting take on this: in 1982, IBM sold CADAM to DS but then built a large distribution channel around DS products. That business has been shrinking; now it sells off its DS-related PLM business. Why do they keep divesting here?
• One apparently key element in the deal was the ability to provide financing to customers, should they need it. IBM Global Financing (IGF) has been working with IBM PLM and its customers; some variant of that infrastructure will stay in place so that DS can call on IGF.

Analysts on the call had trouble with the valuation: why $600 million? In one view, it’s roughly 1x annual sales. But since IBM pays DS a royalty of about 50% on software sales, DS is essentially buying the other half of software sales as well as the services on which it doesn’t currently get compensated. Too, profitability is hard to gauge, since DS will have to add infrastructure to the existing business. CFO de Tersant encouraged analysts to think about this as a “distribution business with yearly revenue of around $600 million, more than 2/3 being recurring.” DS says all will be made clear when it issues 2010 guidance in February, after the deal has progressed and it feels more comfortable with the cost side of the equation. DS did reiterate that it believes the acquisition is accretive even after it adds supporting staff.

DS did not address alternative uses of its cash other than to say that this acquisition is attractive, in part, because no software roadmap has to be integrated. A number of software companies are on the block (and have been for a while), so DS clearly chose this option as the best way to grow its business and reward shareholders.

Stay tuned -- more information may come out when DS announced Q3 results on Thursday.

Largest deal in DS history: buying part of IBM

Tue, 27 Oct 2009 08:21:38 -0400

In the largest deal in its history, Dassault Systèmes announced that it is acquiring the IBM sales and support operations for DS's PLM application portfolio, including customer contracts and related assets, for approximately $600 million in cash. One stated goal of the acquisition: to simplify customer engagements. Said DS CEO Bernard Charlès, “We are creating a globally efficient sales organization to bring the value of V6 PLM applications to every enterprise in every industry... Looking forward, the wide adoption of 3D lifelike experience and PLM will require the combination of direct sales, our network of partners and online communities."”

At the same time (and likely as part of the agreement process), the companies have worked out the plans to expand their services partnership and to establish DS as an IBM Global Alliance Partner and expand their services partnership. Under this agreement, IBM and DS will continue to “jointly invest in developing, deploying and supporting client PLM environments, delivering integrated PLM solutions to their clients worldwide.”

The transaction is expected to be completed in the first half of 2010, subject to the execution of local agreements and completion of regulatory processes and applicable labor relations requirements in various countries."

It’s an interesting development. One first has to wonder about the price: $600 million is a lot of money to pay for a sales and services organization of unknown revenue and profitability. DS will justify this purchase to its shareholders in a conference call at 10AM Eastern. But Paris shareholders seem to like it; DS’s share is up 6% so far.

Next, the relationship between the two companies has been rocky for years, as DS took more and more of the IBM channel into its own operations. So this is, in some ways, a natural next step. But, again, the $600 million price tag seems steep.

Finally, companies generally make an acquisition when organic growth slows. Purchase accounting allows companies to show a giant bump in revenue in the year following an acquisition, making it appear as though the company is outperforming all others. Profitability is also important, and leads companies to acquire, when possible, “accretive” growth -- meaning adding to the bottom line as well. I’m not sure how profitable a blended sales/services organization is -- software margins are on the order of 80%, with services coming in significantly lower. If DS felt the need to make an acquisition to show growth, was there no profitable software company is could buy? No technology hole to fill with an acquisition?

We’ll know more after the analyst call at 10AM Eastern.

Earnings preview: good news ahead?

Mon, 26 Oct 2009 11:41:27 -0400

PTC, Dassault Systèmes (DS) and ANSYS report third quarter earnings over the next ten days, so it’s time for a preview. Each company has kept a tight lid on things, so only insiders know what will be reported but we can look to other company’s reports for prognosticating clues.

IBM reported that business is picking up, as companies finally loosed the strings on previously delayed IT spending in advance of a wider recovery. IBM did, however, report that the level of signed contracts slipped 7 per cent in the quarter, which investment analysts took to mean that any recovery is still in the early stages. Another case: AVEVA, the only engineering software company to say anything recently, indicated that existing projects continued to support modest near-term optimism even though sales to large new capital projects are stalled by global uncertainty. Stalled -- not cancelled.

Bottom line: There’s cause for cautious optimism as delayed technology spending may be pulled into 2009 rather than returned to corporate coffers for 2010. Too, the sense of impending recovery may lead some manufacturers to ramp up production in advance of consumer demand -- all good for engineering software suppliers.

Did any of this optimism translate into increased revenue in the third quarter? The summer quarter is typically the weakest for all of the companies we cover. It’s vacation season, economic data released earlier in the summer in the US was gloomy and no great technology innovations led to major hardware upgrades, which would require buying new software. But it’s also PTC’s fiscal fourth quarter which means that sales incentives kick in and spur the company to better performance than its peers. PTC had guided to total revenue of $240 million, which would be a hefty 20% drop from a year ago but a sequential recovery to 10% growth. Continuing to lead the way will likely be license revenue, typically up 30% or so from the June quarter to take advantage of year-end bargaining.

DS guided investors to revenue of about 292 million euros, a decline of about 8% from a year ago. This would be a steeper decline than is typical for DS’s summer quarter and will likely be due to the very low proportion of new license revenue and which leads to lowered periodic revenue in following periods. In Q2 2009 new license revenue was 26% of total software revenue for DS; it’s typically closer to 35%. But this, too, is improving, as it was up a few points in Q2 2009 over Q1 2009.

ANSYS, finally, has so many moving parts that it’s hard to see what will win out. On the one hand, the outlook for mainstream CAE software sales is solid; it appears less affected by economic turmoil than other parts of the engineering software world. On the other hand, ANSYS’ Ansoft acquisition has been beaten up by problems in the electronic sector, causing it to underperform all expectations. The company guided to revenue of around $126 million, which would be an on-par sequential performance (when comparables aren’t skewed by acquisitions) but still well below typical year-over year growth. ANSYS seems to be holding its own, likely capitalizing on the uncertainty surrounding MSC’s ownership during the summer.

This year, it’s all about the hockey stick recovery. Revenue is still down around 10% from last year, but with every quarter an improvement over the prior, the end to the downturn seem to be in sight. Look for PTC to release information after the closing bell on Wall Street on Tuesday and hold an earnings call on Wednesday; DS reports on Thursday and ANSYS on November 5.

Three tools to measure Twitter success

Sat, 24 Oct 2009 14:20:36 -0400

Many companies look at hits on a website, clickthroughs from advertising, numbers of “friends” and mentions in blogs (to name just a few) to measure the success of online activities. I’m not sure that these are meaningful, but how can you evaluate success without some sort of metric? You’re a very savvy bunch and probably know all about these, but I just came across three great websites/services that can help break through the noise, at least on Twitter. The sites are relatively primitive so far, but have the potential to help marketing managers figure out whether their product is a topic of conversation and, to some extent, if that chat is positive or negative.

The first is tweetvolume.com. Type in a few terms and it shows how often they creep up on Twitter, all in nice chart format. For example, type in PLM, CAE, CAD and CAM, and you get the following:

(Image is a screen capture from tweetvolume.com)

Of course, such short terms mean nothing in this context; who knows what other words can be abbreviated using these letter combination? (Also keep in mind that Twitter is language-agnostic, so a search for “cae” also turns up Spanish tweets, where it means “falls”.) One can play around (and waste lots of time) narrowing search terms to more meaningful levels. For example, type in product names and the game changes:

(Image is a screen capture from tweetvolume.com)

Interpreting these results isn’t so easy. It could be that SolidEdge users don’t tweet, that Inventor is a noun that represents both a product and a personal accomplishment or that tweetvolume’s search engine can’t correlate SolidWorks and SW, a frequently-used acronym for SolidWorks, and SE to SolidEdge. At this point, tweetvolume can really only be used to gauge if one term is being tweeted about more or less than it was before. (The site has flaws, such as not allowing chart customizing or set a time period over which this volume is discovered, but for tracking a term over time, would be quite useful.)

backtweets.com provides another popularity metric: how many tweets have linked back to a particular website. Running its search engine through autodesk.com, solidworks.com and solidedge.com finds that roughly 5.5 pages of links exist for Autodesk and 4.5 for SolidWorks for the period from October 1 2009 to October 23, 2009. (SolidEdge had no hits -- Twitter really doesn’t seem to be a focus for its users.) Interpreting, again, is the key: who is tweeting and are they original or retweets seems more relevant than pure volume. Too, the number of hits alone may mean nothing -- Autodesk supports lots of products via autodesk.com, so the comparison to solidworks.com is perhaps unfair. But backtweets could be helpful in judging changes over time during a particular campaign.

Perhaps the most useful site is tweetbeep.com, which purports to track not only mentions but also sentiment. Type in search terms and see how often they have recently turned up, either realtime or through an email alert. Most interesting is that the site will convey if the tweets in the search convey a positive :) or negative :( attitude or are asking questions. The site’s help wiki doesn’t describe whether sentiment is gauged solely by emoticon [ :) ] or if some sort of sematic algorigthm is employed; if it is only emoticons, the sentiment component won’t be terribly useful for PLM marketing. After all, how many adults use emoticons when typing even 140 characters about a work topic? But the utility here is in knowing that something is being said and gaining the ability to respond in public or in private to the conversation.

I still maintain that raw numbers of tweets are rather pointless, as are numbers of friends, clickthroughs or links. But when you have no information to gauge if a campaign is at least reaching people, these tools are better than nothing.

Innovation = Market Cap?

Fri, 23 Oct 2009 08:26:18 -0400

Does the use of any particular tool lead to recognition by the stock markets? During the opening sessions of the Invention Machine User Group meeting yesterday, VP Marketing Jeff Boehm said that the combined market cap of companies attending the event grew 4.2% in the last year, while the Dow declined 7.3% over the same period. His point, of course, is that companies using Invention Machine’s Goldfire product innovate more efficiently, leading to all sorts of successes that inspire higher market values.

It’s the right tone for a user conference: making loyalists comfortable with their choice, helping those looking for guidance to believe that persevering in their implementation is worth it in the end ...

But, in general, it’s not a great argument. No one thing can claim to cause an increase in market cap; that’s caused by a combination of a culture that brings great products to market, solid business execution, interested buyers, and investors with money to invest. Perhaps the best way to look at it is that companies investing in tools to systematize innovation are also likely to search out best practices for business execution, seek more customer input, look for new markets and the like.

From the users I spoke with at the event, the combination of Goldfire and process changes undertaken in parallel to the software implementation enabled them to incorporate more inputs into their new product development process, systematize more of the innovation process -- but most important, give broader access to corporate knowledge previously held in desktops and on servers. Hard to measure.

5 billion tweets -- and counting

Mon, 19 Oct 2009 20:44:19 -0400

According to Gigatweet, the 5 billionth tweet was delivered sometime today (maybe yesterday - we’re at 5,005,611,937 as I type). That’s a lot of people saying a lot of things, 140 characters at a time.

To put this in context, the one billionth tweet was delivered in November 2008; traffic since then has grown almost exponentially. How can a company’s message possibly stand out in that flood? What can a marketer do to attract attention and hold it? Not sure anyone has the answer yet since the medium is evolving so quickly -- but it does seem that we will require more sophisticated measures than numbers of followers or friends to see what works. Since it’s nearly impossible to tie a tweet to a sale, many people are looking at numbers of followers (or web page views or the like) to gauge whether a marketing campaign is successful. I would argue that pure “eyeballs” don’t guarantee that a message is getting through or even that its been read.

Lots of ideas, no answers. But 5 billion. Wow.

Do you tweet? How are you measuring to see if your message is getting through?

Good news from AVEVA

Fri, 16 Oct 2009 08:52:56 -0400

AVEVA Group today gave preliminary information on its results for the six months ended September 30 -- and it’s surprisingly good. In a press release, AVEVA says that large new capital projects are hard to come by, but that customers’ existing projects and favorable exchange rates brought the company results “slightly ahead of expectations.”

Even better, AVEVA says that it sees “indications of stability returning across certain sectors and geographies” but that global economic uncertainties cause it to remains cautious about the outlook into 2010. In particular, the company says that the oil and gas sector “remains relatively robust”, the power industry “continues to offer opportunities”, and marine customers “continue to concentrate on delivery of current order books, which supports existing usage, but yard capacity has been constrained and therefore new sales have been limited”.

The company will deliver full results on November 12.

Scary publishing news: BusinessWeek sold for <$5 million

Thu, 15 Oct 2009 11:22:06 -0400

I look away for a few days ... It was announced earlier this week that BusinessWeek was sold by McGraw-Hill to Bloomberg for under $5 million. BusinessWeek, founded in 1929, used to be the magazine of record of the business world (less opinionated than Forbes, more newsy than Fortune) but has been steadily losing readers over the last decade.

McGraw-Hill was able to generate some bidding between potential buyers, with Bloomberg coming out on top with an offer of between $2 million and $5 million. According to the Business Week website, the magazine has “more than 4.7 million readers each week in 140 countries” and “155 editorial employees at its New York headquarters, 19 correspondents in 9 news bureaus in the U.S., and 12 international correspondents in 8 bureaus.” All that for $2 million to $5 million? 
This is just the latest sign that the print industry is in dire trouble: an iconic brand was sold for peanuts.

Small world: Gallello takes reins at MSC

Wed, 14 Oct 2009 13:23:12 -0400

Symphony Technology Group (STG) announced today that it has completed its acquisition of MSC Software for a grand total of $390 million and that Dominic Gallello will be taking over as CEO.

According to the press release, STG "will build a stronger company, leveraging MSC's outstanding reputation, longstanding customer relationships, leading technology, and talented team. ... STG's outstanding track record of working with companies to improve their execution and innovation will help MSC truly succeed as a leader in simulation software for manufactured products."

Mr. Gallello has a long career in the engineering software world with notable stops at Intergraph and Autodesk and, most recently, Graphisoft. At Intergraph he was responsible for sales in China and Japan as the company was trying to grow its software business. At Autodesk Mr. Gallello led sales in Asia/Pacific, established the Mechanical (CAD/CAM) Division at what was then a primarily AEC-focused company and finally served as EVP for all design and engineering products. After stops at Autodesk spin-off Redspark and Macromedia, Mr. Gallello joined Graphisoft. He was with Graphisoft from 2003 to early 2009; while there, he restored Graphisoft to profitable growth that ultimately led to the acquisition of Graphisoft by German AEC powerhouse Nemetschek AG. Mr. Gallello is also on the board of directors at ThalesNano, a leader in bench-top flow chemistry reactors, and Blue Martini, a CRM vendor.

Joining Mr. Gallello in the MSC executive suite is incoming CFO Jim Johnson.

MSC had made a great deal of progress under interim CEO Ashfaq Munshi who energized employees, made it a priority to listen to customers and embarked on plans to realign the company’s products. While nothing has been said publicly about Mr. Gallello’s plans for the company, in his prior positions he built profitable, growth-oriented, solutions-based software businesses. Good news for the new owners and, one hopes, for employees and customers.

Shareholders vote today on MSC/Symphony deal

Fri, 9 Oct 2009 08:05:30 -0400

MSC.Software Corporation holds a meeting today at 9AM Pacific at which shareholders will have their say on the deal reached last month with Symphony Technology Group to buy the company for $8.40 per share in cash. The share closed yesterday at $8.41, so someone still believes a higher offer is possible.

Update: Surprising no one (except the speculator who bought shares yesterday for $8.41), a majority of MSC shareholders voted to accept Symphony’s offer of $8.40/share. The transaction is expected to be completed on Tuesday, October 13, 2009, subject closing conditions laid out in the agreement. Now comes the hard part: Symphony will take ownership and make determinations on restructuring the company, its staff and products.

Social media can lead to problems, threaten success

Wed, 7 Oct 2009 13:05:15 -0400

Interesting lessons to be learned as a vendor tiptoes the line between success and disaster: A vendor (nowhere near the engineering software/PLM world) sent out an email announcing the imminent release of a new product. With permission, this email was posted on a bulletin board frequented by buyers of similar products -- an interested target audience. The vendor was reluctant to answer the maelstrom of questions raised on the board, saying that all would be made clear at the official product launch a few days later. But a discussion ensued anyway, as people posted wishes and rumors about the new product. Finally, D-day: a product launch event at which the vendor announced last-minute changes in response to the chat on the bulletin board. On D-day plus 10, no product had been received as the vendor was overwhelmed with orders, had to put prospects on a wait list, engaged a fulfillment house to organize cancelled vs new orders ... A perfect storm of good things that caused disaster. It’s unclear if the vendor will recover or how profitable this product will ultimately be.

This is a great example of how social media marketing can have totally unanticipated consequences. Perhaps a more savvy entrepreneur would have realized that emails can quickly become viral, or known enough to monitor the chat, or more accurately assessed her ability to make last-minute changes. We’ve all been involved in the rush just before launch: who has the time to monitor something as seemingly innocuous as an unaffiliated bulletin board?

But it’s absolutely critical and it’s clear that this entrepreneur, at least, will have learned a few hard lessons:

1. Know who the influencers are and where they can be found. The problem started at the bulletin board (bboard), with an innocent posting of an email. Seven hundred postings over 60 pages and thirty-six thousand (yes, 36,000) viewings later, the entrepreneur is in the midst of a PR nightmare.

2. Once you know where to look, look often to see what’s being said. As the storm built, it would have been a good idea to assign someone to monitor the bboard, collect issues and coalesce responses.

3. Reply in a way that is respectful of the bboard’s rules (some do not allow vendors to post directly) but ensure that your responses are made known. Perhaps set up an informational page on a site not affiliated with the bboard to make sure that there is one source of accurate, controlled information and ask the bboard’s moderators to post the link.

4. Prior to the launch, the entrepreneur had said product would be shipped on launch day. As a result, the bboard has seen daily postings of “Has yours arrived yet?” messages. The uncertainty and let-down have led a number of posters to say that they are canceling their orders, building a negative wave that could lead to more cancellations. The entrepreneur should have made every effort to get the product out as promised; had that truly not been possible, emailing buyers a new ship date would have been a good second choice, and a statement on the website giving new shipping info a distant third.

5. Be aware that buyers who frequent bboards are tech savvy enough to check other media as well. Look at Twitter, for example, to see what’s being said about the product, ship dates, receipts, etc. Set up an account to tweet official replies and defuse rumors.

6. Realize that once the email got “out there”, your business hit a crowd mentality. Crowds panic easily, follow leaders and act impulsively and emotionally. Crowds can be tiny or huge -- behaviorists say it doesn’t matter -- but their reaction is completely out of your control, so preventative measures take early are all you really have.

It’s unfortunate that this product got such a rocky start. It will have to be exceptional to erase the negative impression many of these early adopters now have, backed up by customer service that delights all who contact the company. These people will be the ones posting reviews on bboards, tweeting and discussing the product and the vendor -- at least until the next hot thing comes along.

What do you think? How would you advise this entrepreneur? Email me at monica AT schnitgercorp DOT com.

Maintenance: 7% or 22% -- or something in between?

Tue, 6 Oct 2009 11:44:15 -0400

InformationWeek last week published a very interesting article on the options available to software vendors as they determine how to price maintenance. In case you missed it: SAP customers revolted earlier this year, refusing to support a maintenance price increase for new customers until SAP proved the value of elements of the maintenance contract. SAP reached agreement with its user group to study the problem and work out a solution, while rates remain unchanged. Vendors, of course, rely on maintenance fees for much of their profit, so Wall Street hates any thought of maintenance fees going down. Maintenance pricing is also a competitive issue, as 10 years of maintenance at 20%/year mean that a company essentially pays for its installation three times before considering a significant upgrade or vendor replacement.

Since SAP’s closest competitor is Oracle, the InfoWeek article postulates 3 scenarios that incorporate the financial, investor and competitive aspects of the problem: no change (both vendors continue to charge 22% per year); one of the competitors offers a tiered maintenance structure (7% - 22%, depending on level of service), drawing the ire of Wall Street but possibly winning new customers; a third party enters and radically changes the game.

Clearly, scenario #1 is unsustainable in this economy. Companies are letting maintenance lapse rather than paying for something they feel delivers no immediate value, even if the employee using that license is still employed. This is tricky for the customer (how much will it cost to turn the license on again someday?) and for the vendor (who’s going to cancel today? how do I manage costs within an unknown revenue stream?). Too, a lack of “give” by the vendor can make customers feel abused and could lead them to explore alternate vendors in the future.

InfoWeek’s scenario #3 is based on the fact the ERP software is often implemented by a third party consultant and that these consultants could eventually replace SAP and Oracle in offering tech support. I don’t see this as all that likely in technical computing, although it does happen with enterprise PLM user.

I’ve always favored scenario #2: offering a tiered system of maintenance that allows buyers to select their level of service and pay for what they use. Requesting service above the current contract level would allow the vendor to charge a premium but customers won’t feel abused if all they ever want are the bug fixes. Of course, this kind of change would require vendors to rethink the value offered by their maintenance programs and, in essence, prove that value to the customer base. What would it say if very few went for the top-priced tier of support? Vendors would also have to adapt their business models to a far lower level of recurring revenue, offering less of a cushion for risky new product development. New license revenue would have to make up for any deficit, leading to the real question: how many new buyers would be lured by this approach?

What do you think? If you’re a vendor, 22% is perfect. But if you’re a buyer, would 7% sway you to consider an alternate to your current supplier? Even if that 7% ups their business risk? Email me at monica AT schnitgercorp DOT com.

Autodesk selects first Algor resellers

Mon, 5 Oct 2009 10:40:12 -0400

Autodesk is finally announcing that seven resellers have been selected and are qualified to sell the Algor product line. Before its acquisition by Autodesk, Algor products were available in the US through online and telephone sales and in the Europe, the Middle East and Asia from a small group of resellers. Adding Autodesk’s high-caliber channel capacity will help to grow the brand and bring it into more direct competition with similar caliber tools from Altair, ANSYS, MSC Software and others.

It’s interesting that Autodesk has waited so long to make this happen. Algor 2010 was announced in mid-September and reinforces Autodesk’s commitment to continuing to flesh out the brand’s CAE capabilities and its direct, associative data exchange with CAD beyond Autodesk’s own Inventor. In all likelihood, Autodesk wanted to ensure that the chosen resellers were well trained to support key customer accounts as well as having its own backup capacity in place to deal with customer requests.

The potential for Algor is huge. The product is solid though not well-known; with user-interface improvements to give it a more Autodesk-like look-and-feel and access to a broader sales platform, it could become one of the more successful CAE products on the market. Autodesk’s slow roll-out allows the code, organization and sales capacity to grow in synch, minimizing the risk of overwhelming the channel or internal capacity to support complex product.

AVEVA weighing acquisitions and cashback

Thu, 1 Oct 2009 12:27:01 -0400

We’ve been watching AVEVA’s share price climb on the London Stock Exchange and wondered why. The company hasn’t reported financials, no massive new wins have been announced, economic news is looking up but isn’t great... But now we have a clue: According to Investors Chronicle, AVEVA Group is actively searching for an acquisition but may return cash to investors if it can’t find something suitable by next March.

In the article, AVEVA’s CEO Richard Longdon says that he is "still looking" despite unrealistically high expectations by acquisition candidates. "If we can't do something by the end of the financial year, we will look at giving some cash back in some form or another," says Mr Longdon.

And that could mean a lot of cash to stockholders of record. AVEVA has said it needs roughly GBP 40 million in cash for operations, a fraction of the GBP 126 million in cash on hand at the end of March. Returning over GPB 80 million would boost the dividend well above the 9.36 pence paid last fiscal year

It’s a tough call, one that several cash-rich PLM companies face: hold on to the cash in hopes of a better acquisition somewhere down the line, hold on to cash in case the economy worsens and it’s needed for operations (not likely in AVEVA’s case, since it so far exceeds operating needs) or give it to shareholders?

Are we done? MSC accepts Symphony offer of $8.40/share

Tue, 29 Sep 2009 09:09:21 -0400

MSC.Software Corporation announced today that it has entered into an agreement with Symphony Technology Group at $8.40 per share in cash. Recall that MSC announced that it had received an offer from third-party private equity firms to acquire the company for $8.30/share and that Symphony had until yesterday to beat that offer. Per the press release, “On September 28, 2009, Symphony delivered to the MSC Board its revised offer to purchase MSC ... In light of the Symphony's revised offer, the MSC Board of Directors determined that the New Offer no longer constituted a Superior Proposal under the terms of the Symphony Agreement and authorized MSC to enter into the Symphony Amendment.”

MSC has scheduled a stockholder meeting for October 9, 2009 to vote on the deal.

it’s interesting to note that MSC’s share price fell steadily yesterday, closing at $8.25 as speculators must have been betting that Symphony wouldn’t exceed the latest offer. Interesting, too, that this latest offer is nowhere near what had been rumored late last week.

Update: Avatech sees signs of recovery after dismal FY09

Mon, 28 Sep 2009 08:17:19 -0400

Avatech reported results for the year ended June 30 that highlight the fragility of the VAR channel. For the fiscal year revenue declined 29% to $35.4 million, leading to a net loss of $313,000, or $(0.05) per fully diluted share for the prior year. For the fourth quarter, revenue was down 37%. As CEO George Davis told me earlier this year,cash management is critical to survival in an uncertain economy; the Company reported today that its balance sheet continues to be strong, with a cash balance of $2.7 million, with only $160,000 in long-term liabilities.

Mr Davis, in the earnings press release, said that “[t]he building and manufacturing markets were significantly impacted by the global recession throughout fiscal 2009, which resulted in an unprecedented reduction in spending on the types of software and services we provide. Through a proactive management approach, we quickly reduced our costs to adapt to the current business environment ... During the past year we have been developing our consulting and services offerings into a stand alone business, MSD Consulting, which taps into our highly-trained staff of engineers. While it was still in its early stages of development in the past fiscal year, this new initiative helped supplement our revenues for the year, generating approximately $1 million in incremental revenue.”

There is hope: “The economy is starting to show early signs of recovery and we are beginning to experience greater interest from customers in our software and services. However, while we are excited about these latest indicators, we are still taking a conservative business approach to fiscal 2010,” said Mr. Davis.

Update: CFO Lawrence Rychlak, citing data from Autodesk, said on the earnings call that Avatech’s 38% revenue decline in the second half of fiscal 2009 (through June 30) didn’t cause it to lose share to competitors. That’s good for Avatech but not for Autodesk.

Update: Investors seem pleased. Avatech’s share price was up 50% on Friday and is up another 2% this morning, albeit on very small volume.

Hmm: Some on Wall St think we’re not done with MSC

Sun, 27 Sep 2009 14:50:10 -0400

We’ll find out soon enough, but at least some investors think that MSC has or is about to receive an offer of more than $8.30 per share. The stock closed the week at $8.31 but dipped back to $8.26 in after-hours trading on Friday.

We’ve gone from a total deal value of $350 million in July to just under $380 million last week. Speculators are churning the stock like mad, as around four times the pre-deal number of shares changed hands last week. In all likelihood, trades were in response to rumors swirling around of offers significantly higher than the $8.30 per share last published (although the current NASDAQ price doesn’t seem to lend this rumor much credence) and naming the new entrants into the bidding. The rumors may be right or they may be wrong -- we’ll publish when the companies involved say something definitive.

What makes good Twitter?

Fri, 25 Sep 2009 08:59:53 -0400

Week two (week one) in the Twitterverse is a study in contradictions. There's almost nothing of a PLMish nature to report; none of the vendors I elected to follow tweeted anything of substance while companies more experienced in interacting this way did post compelling content. But a week of following random other tweeters yielded terrific insights into what people think on an average day. We all live inside our own heads, so seeing what someone else finds interesting was ... interesting.

The PLM companies I followed tweeted links to interesting case studies about their products, to upcoming conferences and the like. With the exception of SIemens, the companies averaged less than one tweet a day. I believe I clicked on only one of the links all week; that to find out more about a webinar.

The Twitter-savvy companies, on the other hand, tweeted relentlessly throughout the week. Southwest Airlines, for example, answered questions and responded to complaints (more below), congratulated employees that were up for awards, hyped their ad campaign (but in the quirky way most people associate with Southwest: “We're not saying other airlines are bad...we're just awesome”) and running contests. Google tweeted about outages in Google Mail (announcing the problem, describing progress they attempted a fix), that Life Magazine is now available in Google Books, and that new apps are up. Not as interactive as Southwest but still interesting. Dell was the most blatantly commercial (although, with close to 40 feeds to choose from, I may just be following the wrong one) but did have many tweets about innovative uses of their technologies.

Southwest (@SouthwestAir) has been cited often as an example of a company that uses Twitter to great advantage. Aside from perpetuating the singing flight attendants/”we love your luggage” vibe, they use Twitter to interact with customers individually. During this week, they dealt with a number of lost luggage claims, and helped people with bereavement flights and in-flight wireless access. In one example, a groom lost his luggage after the wedding, tweeting about it in his account using the @SouthWest tag to attract the airline’s attention. Southwest tweeted shortly thereafter, inviting him to a direct messaging session to exchange more details. Soon after that, the groom tweeted that Southwest had responded and the luggage should be delivered within hours and thanking Southwest for its prompt action. Lesson: one displeased customer turned around in a very public way.

I also followed individuals in order to see how they represented their respective corporate enterprises: Ann Curry of NBC News, KD Paine, who researches consumer response to advertising and a few others. And, finally, to see what an average person tweets about, I followed a couple of writers I enjoy. These are all adults, and literate, so the posts were good. Ms. Curry tweeted her take on key elements of President Obama’s speech before the UN, the writers tweeted about works in progress and Ms. Paine tweeted about personal and professional topics. Each represented the enterprise they work for but seemed completely unfiltered in the sense that they seemed to offer their genuine take on the topic without having passed the tweet through a marketing departments.

That, I think, is what makes good Twitter use so compelling. Tweets represent the enterprise’s personality (Ms.Curry’s calm, Southwest’s customer care, Google’s reach) as much as that of the individual. Since most people want to interact on a human level, creating that “face” for the enterprise is an important step in creating a closer relationship between buyer and seller.

Microblogging here to stay?

Thu, 24 Sep 2009 13:57:55 -0400

Wow. The Wall Street Journal says that Twitter is about to close a $100 million round of new venture capital funding that will value the company at $1 billion. The real problem, of course is that Twitter has yet to generate revenue or prove that it has any sort of sustainable business model. The new investors are rumored to include mutual fund firm T. Rowe Price and equity firm Insight Venture Partners. According to the Journal, these two are “atypical investors for such a company which has yet to generate revenue.”

Update: MSC gets yet another offer, postpones meeting

Tue, 22 Sep 2009 09:56:36 -0400

MSC Software announced today that it received a new offer from the unnamed party bidding on the company of $8.30 per share. Symphony now has until September 28 to make a “responsive offer”. Under the original deal struck between MSC and Symphony, MSC may terminate their agreement only if the MSC Board of Directors believes that the new offer is still a better deal even after receiving any responsive offer. Tune in again on September 28!

Update 12:45 ET 22 Sept: Interesting. MSC’s share price rocketed up to $8.31 after the revised offer was announced at around 9AM; it’s now settling at $8.29. Does Wall St think we're done? [FYI: arbitragers -- people who buy shares thinking the price is going to go up -- still need to pay taxes and fees on any eventual sale, so the trading price is usually a penny or two shy of the announced offer.]

Update 09:45 ET, 23 Sept: MSC just announced that the shareholder meeting set for September 30 has been postponed, with no new date set. Makes sense, since offers keep coming in and filings will need to be updated, possibly after hammering out the details with a new acquirer. Wall St does seem to think we may be near the end; the share closed at $8.28 yesterday and is flirting with $8.30 this morning.

Update 20:30 ET, 23 Sept: MSC shares closed at $8.28 again. Looks like the Street does indeed think this was the final offer. But Symphony has until Monday to meet or beat the latest offer.

Virtual conference: as good as being there?

Mon, 21 Sep 2009 09:23:47 -0400

Last week I attended my first virtual conference: Powering the Computational Ecosystem. From a technological, gee-whiz aspect, it was very cool: On24, an online event producer, created a virtual conference venue, complete with lobby, exhibit hall and auditorium. Since many companies are considering alternatives to expensive user conferences, this post will cover the event: how it felt to be part of a digital "happening". A possible future post will cover conference content.

The central hub of the event is a typical convention center lobby. Banners hang from the ceiling and people stand around. Once the conference went live, a movie played in a "diamondvision"-like pane near the ceiling of the lobby, giving an overview of the auditorium sessions, exhibit hall and resource center as well as a quick commercial for Sun (the main sponsor). Since I did not have a detailed timetable, I first went to the auditorium, where I saw people in seats and a screen with the presentation agenda. This showed that there was time before the keynote, so checked out the other locations.

One can either go back to the hub/lobby or navigate from a nav bar at the bottom of the browser window. First stop: exhibits. The exhibit hall has a booth list to take me directly to a specific vendor, or I can browse/stroll the aisles. Stopping at a booth, I can choose from presentations, white papers, chat with someone in the booth or ask a rep to contact me while I listen to a brief overview of the company and the material available.

Since my interest is in CAE, I headed to "HPC Solutions for Business-Ready MCAE". During the audio intro, I see that there are "stands" within the booth from Clemson University, ANSYS and MSC Software. I can again download presentations, data sheets and videos by clicking on the "stand.” I had a private chat with an MSC person, looked at the material provided by the vendors and moved on. At the Life Sciences booth, I was welcomed to the booth by a Sun person who offered to help find what I needed -- almost like being there! He also reminded me that the keynote was about to start so ...

I headed back to the auditorium (no need to get there early for a good seat ;-)). Real Player popped up to show a presentation by Andreas Bechtolsheim, apparently being delivered in real-time. Live "stage" video appeared early on but the bulk of the video feed was of presentation slides. The screen included a box to type a question; no questions were taken as part of the presentation although Mr. Bechtolsheim did take questions after the presentation in a virtual cafe.

Definitely missing from the event was any feeling of "buzz": how many people compared to last year, which booth has the most people, who's giving away the best bags or tchochkes, where to grab a cup of coffee. It's also disconcerting that the site is silent when no video is playing -- I buried the window under emails at one point, completely forgetting about the conference. Too, it felt "empty" -- there may have been hundreds or thousands of people online but it definitely didn't feel like it.

Should a company looking for alternatives to tight travel budgets and worries about H1N1 consider a virtual conference? Maybe.

This is likely quite attractive from a pricing perspective; although I don't have any idea what On24 costs, it can't be close to what companies typically spend on live events. After all, it's cool and appeals to the techie in all of us.

But since people aren't actually on-site, you'll have no control over their distractions. The content must be compelling enough for them to ignore their emails, phones and officemates. Make the content available afterwards (I stil can’t figure out how to get at a presentation I couldn’t sit through live). Time the event to be accessible to a global audience (perhaps 10AM Eastern). Since you'll know in advance who is attending; invite them to "meet" you at the exhibit hall; engaging with attendees is even more difficult for vendors at this type of event than in person, so plan out how to connect. Keep expectations low, commensurate with the investment.

Adventures in the Twitter world

Fri, 18 Sep 2009 08:12:57 -0400

Since I wrote earlier in the week about PLM and social media, I decided to step up to the bat and join Twitter. Signing up for the account was ridiculously easy -- which is why you occasionally see a celebrity announcing “that’s not me!” You might want to take a look at what is being Twittering in your name ...

The second my account was live, I was besieged by people who want to be my friends. Nice -- but oh so pointless. Several dozen people or bots must have been waiting for new accounts so that they can pounce the second they see one. It was strange but harmless. Twitter has since implement changes designed to prevent spamming (or whatever the cutesy twitter term is), so your mileage may vary.

Once an account is active, you decide whom you want to “follow.” I signed up to follow the formal feeds from all of the PLM-universe companies I could think of and paged through their recent posts. Quite a few hadn't posted anything in a while; those with recent content mostly announced things that linked to press releases, videos or blogs. Very little of the content seemed designed to initiate a conversation, so is probably missing the "social" aspect of the medium. I've posted several tweets myself and am still trying to get the hang of meeting all of the criteria: max of 140 characters, interesting, chatty ... it's not easy.

Now we get to volume. Between tweets, RSS (blog and other feed) subscriptions and email, I am DROWNING in stuff. One can't even call most of it information. I'm learning that hotel discounts for conferences I'm not attending expire at midnight, which new digital camera is HOT, that lots of people think Kanye West is a jerk (the last caused a Twitter overload). Business users are obviously still trying to figure out what their tweeps want to hear. (Yes, in Twitter, your followers are "tweeps". Very twee.)

Which brings me to the bottom line: Social media is good if it establishes a stronger connection between people or between a buyer and seller. But it's so unstructured that I don't yet see how a vendor selling corporate-caliber products can make it through the noise. Tuning in to specific feeds (for conferences, for example) makes sense since location and content updates can spur immediate action. I'm not convinced, though, that anyone wants to be interrupted during their day to read all of the tweets coming at them -- who can get anything done that way?

I'm going to stick with Twitter, though. Follow me and we can watch it evolve together.