November
23, 2004
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408
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O N T E N T S First
Mover Advantage Financial
Report: Autodesk 3Q05 Write - - - Donate
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First Mover Advantage:
Dassault Systèmes and Microsoft held a pair of press conferences last week to announce an agreement whose terms left the media scratching their collective heads. You can get a sense of the puzzlement from the Q&A summary posted at our Weblog: worldcadaccess.typepad.com/blog/2004/11/the_point_being.html Since then, we have reviewed hours and pages of press material and arrived at this summary of what the agreement means: This is a five-year agreement that allows Microsoft to better understand the collaboration needs of the high-end 3D CAD and PLM market. For Dassault, it permits input from Microsoft to make their PLM software work better on platforms provided by Microsoft, such as dot-Net and SharePoint. It also involves a secret sum of money. In our opinion, the benefits to each company are:
Analyst John Moore of ARC Advisory Group thinks that large customers pushed Dassault to do more with Windows: "I bet it was Boeing. They're using the Dassault platform for their 7E7 initiative, and probably didn't want to glue together Enovia on WebSphere and SmartTeam on .NET." The agreement ensures that Dassault's CAD software is the first to benefit to changes in Windows and other Microsoft software. As emphasized by William Gates, from now on it's Dassault first, other CAD vendors next. Hence, first-mover advantage. The Microsoft-SAP Agreement In May, Microsoft announced a similar agreement with Germany's SAP. The information at www.microsoft-sap.com sounds similar to the agreement with Dassault, but with more detail:
And there is fluff that we editors skim past without reading: "...promises to make business integration faster, cheaper and easier, and further unlock the value of business information to enhance productivity and spur better business decision-making." Expectations of the DS-MS Agreement The DS-MS agreement helps Dassault port its products to 64-bit CPUs and to Microsoft's next operating system ("Longhorn"). Based on details in the MS-SAP agreement, we could expect the following for PLM-oriented products:
Paris Q&A Some in the media speculated William Gates was in France to improve Microsoft's poor relations with the EU. He took part in photo opportunities with the head of UNESCO on Wednesday, and the president of France on Thursday. Dassault CEO Bernard Charles drove over to the Microsoft France office to have Mr Gates join him making the agreement. Here is a paraphrase of the Q&A session from www.3ds.com/fileadmin/flash/microsoft/ms_videos/index.htm : - - - Q: All ISVs have agreements with Microsoft, so what's really new today? DS: Yes, there was a partnership before. We have been delivering solutions on Microsoft for years now like, I would say, many other software companies. In this alliance, we are changing the mode of operation. This is about creating the future together in terms of what we have described here. So, instead of receiving everything defined, everything delivered on the market, Microsoft has offered us to be part of the work process, so everything which is done related to the application of delivering to the customers will be consistent and well-architected at a high level of services to make it a high value for the customers.
Q: DS is not the only PLM company. Do you intend to sign the same agreement with others? MS: We're making a bet on each other. We're betting that Dassault can help us guide our platform in the right direction. Although DS will be able to do leadership things and take advantage of that, over time those will be open capabilities that other companies can come in and use as well. Likewise the 3D standard [3D XML]. We are hoping to have some compromise or whatever -- we hoping to achieve the vision that it not be fragmented. We need to sit down with the other companies and understand what their interests are, and on that I'd be fairly optimistic. It's not exclusive in some deep sense, but we have bet on each other. That means we'll do some of our early innovative work; they'll do it on Windows early on, and we'll do it supporting their products. DS: We have never asked for any exclusivity on anything. The question is on the speed of innovation: How much do you value what we can create for the customer so they will select, love, and deploy our solutions better than anyone else. It's about leadership, innovation, and speed to market.
Q: What are MS's development efforts in the 3D PLM market? Do you intend to acquire a company, such as SolidWorks, as you did with Great Plains? MS: There is no overlap between our product lines, nor do I expect that in the future.
When asked about IBM, Dassault replied, "IBM is our distributor. This agreement is okay with IBM." Statement from IBM We asked for statements from IBM, Autodesk, and UGS. IBM responded: "The DS-MS announcement is complimentary to the existing DS/IBM technology partnership. Ultimately, customers will have a choice of platforms to implement the DS PLM solutions on. They can choose to implement the DS PLM solutions on either the IBM middleware stack or the Microsoft middleware stack -- or a combination of both. Overall, it obviously makes sense for them to share in R&D development with regards to 64-bit and Longhorn, but other then that it is business as usual. Here are some examples of DS products that exploit IBM's middleware:
Financial Report:
We listen to quarterly financial reports to hear what is said; sometimes, though, it can be more interesting to listen to what isn't said. For example, during Autodesk's call last week, ADT was praised several times, but Revit went unmentioned. Or, take DWF numbers. CEO Carol Bartz proudly announced that 4.5 million copies of the free DWF Viewer software had been downloaded. This is a remarkable number. Ms Bartz then noted that DWF Composer sells for $200 and has met sales expectations. The actual sales figures were left unstated; that's a clue to low sales. And, its list price may be $200, but it continues to be priced at $99 at Autodesk's Web site. Autodesk likes customers to whom they can upsell. One customer was using AutoCAD, which gave Autodesk $400/year.seat revenue. They upgraded to Inventor ($1,100/hr), then upgraded to Inventor Pro ($1,500/yr), and recently added ProductStream ($1,800/yr). This customer increased its payments to Autodesk from $400 to $3,300 per year per seat. It's stories like that one that help explain Autodesk's tremendous quarter, which drove its stock price to peak at a new all-time high of $66.45. That's causing Autodesk to split its stock 2-for-1 on Dec 20, but then to halt dividend payments after Q4. Why? "The company believes that shareholder interests will be better served by eliminating the payment." Okay. The move is a surprise, considering the pressure placed by shareholders on Microsoft to finally start paying dividends. Our guess is that Autodesk wants to build up a warchest for buying more companies for their technology. Autodesk had Q3 net revenues of $300 million, up 28% over the same quarter a year ago. Net income was $74 million, up 228%. Other stats:
Q&A (Paraphrased) Q: About the Dassault Systèmes and Microsoft agreement: how substantial is Microsoft working with other CAD vendors. A: I'm glad Dassault is talking about democraticizing 3D -- those are our words. They don't have the technology to approach the market -- technology we've had all along. I call it the Barney relationship. [CEO sings:] "We love you, you love me." I don't know that there is going to be a whole lot of business out there, so we'll just go along our way.
Q: About DWF versus PDF v7? A: I don't have a song for Adobe. DWF is better for engineering drawings; PDF is better for 8-1/2x11 documents. PDF is an important format, but so is DWF.
Q: What percentage of customers are on 3D? How many customers are you losing to competitors? A: Ten-15% of customers have converted to 3D. The competition is getting some 2D seats.
Q: How many upgrades are you expecting from the new obits? [AutoCAD 2002 is next to lose its upgradability.] A: We'll tell you at the analysts' meeting in March.
Q: Your dollar sales are flat in the Asia market for the third quarter in a row. A: We consider the numbers up. Flat we consider up, because it normally falls at this time of year. We're adding more sales people in India and China. We're not gloomy about Asia.
Q: Any plans to sell Discreet? A: It's business as usual for us.
Q: If productivity for customers has increased, doesn't that call for prices to increase? [A recent productivity study claims AutoCAD 2005 users gain 14 hours a week.] A: Sure, but there is a lot of dollars from upselling [getting customers to buy more expensive software]. Our ASPs [average selling price] have risen slowly and steadily over the years.
Q: What are you doing in China to protect software from copying? A: It's a matter of education and enforcement.
Q: Which products and geographies have the most strength in new seat growth? A: Pretty consistent in all verticals and geographies. Nothing unusual. - - - For fiscal year 2006, Autodesk hopes revenues will reach $1.33-$1.38 billion. Due to the length of today's articles, most regular columns are canceled this week.
'Multi-CAD' is no longer a print magazine; it was the last CAD magazine still published in Australia. The typical combination of decreasing ad revenue and increasing production costs forced the husband-wife team of John and Susan Teerds to shut down their magazine. The www.multi-cad.com Web site continues to operate.
www.dilbert.com/comics/dilbert/duh/
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customers therefore we are unable to offer a completion date." Notable Quotable "It's the first quiet November leading into [American] Thanksgiving I've had in 23 years." -
Richard Doherty, relieved that Comdex/Fall is canceled this year.
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