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Issue #494 : : November 7, 2006
C o n t e n t s
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The conference calls that public companies hold with financial analysts are a rich source of information not generally found elsewhere -- particularly when analysts get to ask questions, and we get to hear the answers provided by upper management.
This quarter, however, we missed Q&A sessions with two CAD vendors. Intergraph didn't bother having a call, because they will soon be taken private. Dassault posted a podcast-like recording of the company's CFO discussing financial results. No Q&As to listen in on.
Intergraph's Q3 revenue was US$156.9 million, up 4.7% from a year ago. Net income was $20.6 million, up from $13.8 million a year ago. I wonder if it's time to stop thinking of Intergraph, one of the pioneers of CAD, as a CAD company anymore. For some time now it's been referring to itself as "a leading global provider of spatial information management (SIM) [mapping] software."
Dassault's Q3 revenue was approximately US$330 million (e276.3 million), up 29% from a year earlier. Some of the increase is due to new revenue from acquisitions. New SolidWorks licenses increased by 9,544, an increase of 19% over a year ago. (Comments about Catia's 4% decrease appear later.)
PTC wowed analysts by a burst of sales that will make the company reach its $1-billion revenue goal a year early. Fiscal 2006 revenue was $854.9 million, up 19%.
Q4 revenue was US$245.5 million, up 26% from a year ago; some of the increase was due to the acquisition of MathCAD. Net revenue was $42.6 million. Executives from the company believe they have these points working for them:
[The Q&A recorded below is paraphrased.]
Q: Competitors are seeing a decline in the sales of high-end CAD packages. Is PTC?
A: Catia declined 4%, UGS [NX] declined 3-4% for the last several quarters. The organic Pro/E growth is in the high teens [16-19%] so we're capturing marketshare, because the others are declining.
[Dassault reported that new licenses of Catia seats in Q3 fell 4% over last year, but year-to-date new licenses increased 4%. Note that "decrease" refers to a smaller increase -- 7,431 new licenses in this case.]
Q: How is your relationship with IBM, now a year old, shaping up versus your expectations? Where do you think it's going?
A: If we can have a green playing field [huh?], where IBM is no longer helping Dassault, that's going to be an advantage to us. We have accomplished that in certain markets, where IBM and Dassault no longer work together. Dassault's decline is much more severe than 4% year-over-year, because they've taken over some business from IBM.
We want to sell our products, and we want IBM to sell their great middleware and hardware, and together we provide a complete solution to the customer. I wouldn't point to any great revenue from the IBM relationship, but it has given us a more neutral or green-field approach vis-a-vis [face to face with] our competitors.
Q: The Dell deal was a replacement deal [where software from competitor(s) is completely replaced by PTC]. Why doesn't this represent signal of the beginning of the change in the market where PLM niche 1.0 guys start to get bounced out of customers who may have bought the product four or five or six years ago?
A1: A year ago, Windchill [PTC's PLM software] couldn't manage Pro/E files in a way that customers could use. But Windchill 8.0 completed our vision of one common executable for all aspects of the company. During an evaluation of PLM, Dell last January standardized on Windchill 8.0, upgraded to Pro/E Wildfire 2.0, upgraded to PDM Link 8.0. Based on that success, they bought Arbortext so that they could have a custom document set that ships with the PC.
So I think the problem with the Agiles, the Matrices, the companies that are sort of in the middle, they don't have any heritage of the CAD side, they don't have any heritage on the ERP side.
A2: Some of our [CAD] competitors are buying the same thing over and over, and they don't really get anything more than they had in the first place. We've being making very strategic acquisitions. Customers do not want a whole new data model in the middle of this already complicated problem. We had a significant number of Matrix, Agile, and UGS replacements [with our PLM], even an Enovia replacement this quarter. With Windchill 8.0, we haven't even scratched the surface of the installed base; we're at 1% of the installed base of old IntraLink users. So we see a lot of upside as we go to the installed base, upgrade them to Windchill, and then upsell them the enterprise version of Windchill.
Q: I noticed that Japan was flat sequentially. Can you tell us what the status is in Japan?
A: In general, technology companies across the board, have had difficulty in Japan. When IBM made their announcement, they said they grew in Japan for the first time in five quarters [15 months]. SAP's had problems in Japan. Our's has been further complicated by the wrong leader as the head of Japan, who wasn't a Japanese national. This contributed to a higher rate of turnover, and so we lost some momentum in our largest accounts. We've replaced that person with a Japanese national, which I think is really going to help with the culture.
Q: How will he deal with Japan.
A: He comes from HP, with 30 years experience. He's going to adopt to the tactic we use the rest of the world, with a larger presence in our biggest accounts. But our sales force was not necessarily targeted on those largest customers. Automotive and high-tech are the two biggest verticals there. Toyota now has close to 2,500 users on Wildfire 2 and Windchill. Japan is generally slower to move than other countries.
Q: How big are competitors on your PLM space? What about Dassault's acquisition of MatrixOne?
A: Agile and Matrix combined did about $250 million in revenue, with about 1/3 in our space, 1/3 in the Dassault space, and 1/3 in the UGS space. We're going back to capture ours because of our integral model. We haven't seen a lot of momentum with Matrix since the acquisition, and we don't expect them to.
It's the exact opposite strategy from the one we have: Matrix represents yet another enterprise offering [from Dassault] to go along with SmarTeam, Enovia, and so forth. They are further complicating their message to the installed base. I think they are going to have to rationalize that, because the customers don't want three or four data models, when they can go to PTC and get one. That's what's really driving the CAD business: our desktop [CAD] group grew in the high teens [percentage] in the 4th quarter. Pro/E has grown in the last six months at a rate close to Inventor and SolidWorks, and 80% at the high-end of the market. We're replacing UG and Catia seats at the high-end at a pretty fast rate.
Q: The high-end CAD market has historically been very sticky. Once Pro/E or Catia get in, it is very hard to displace them. You say you're having marketshare gains. Is there a change in that dynamic, or is there something else?
A1: As people want to put in efficient processes, like they want to globalize their operations, they look at their mixed CAD environment and it's very problematic, because they can't easily and readily exchange data back and forth. So we're seeing two different things that affect your question: (1) we see a lot of standardization within accounts that have a mixed CAD environment; (2) there are some other events, such as UG killing the I-DEAS product line, and that's throwing some customers into discomfort around "What's our go-forward strategy?" Switching from I-DEAS to UG [NX], switching from I-DEAS to Pro/E are viewed as the same effort, so we can displace some I-DEAS accounts.
A2: Our acquisitions are also helping. You put MathCAD next to Pro/E, the output from MathCAD drives the geometry of Pro/E. Those little applications strengthen the overall position of Pro/E. Also, all this off-shoring, this globalization -- the customers have to do it, and it's really hard in a mixed environment. In some cases they find it cheaper to just standardize.
A $20 billion industrial company had 200-300 seats of UG products and 500 seats of Pro/E. The CIO came on a visit last June and said, "I want you to help me get this UG stuff out of here." Now that company has 800 seats of Pro/E with Windchill. We're now talking to them about Arbortext and MathCAD.
Q3 revenue was US$77.4 million, up 98% due to the acquisition of Fluent. Net income was $18.2 million, up from $11.9 million a year earlier.
Q: A story in the Wall Street Journal seemed to indicate that quality control problems at Toyota were due to an over-reliance on simulation software. What's your view?
A: I don't know that you can say that one factor causes this. I don't know about this particular article, but I can understand: I see all the upsides, I see all that works with simulation. What you're talking about is, don't go for quantity of simulation over quality of simulation. You have to understand the tools you're using. We do a lot to advance the usability and the predictability of the tool. You can use any good tool in a wrong way, and get wrong results. I don't want to insult anyone, but GIGO -- garbage in, garbage out.
But there is still a lot of fertile ground to make these tools broadly used. I can maintain my confidence in the proper use of simulation to have dramatic impact. You need the best simulation tools in the hands of the best engineers.
Q: How are you going to put together the fluid and Ansys products?
A: In general, we have a broad suite of simulation tools, not a feature-function package -- being able to simulate complete products and give broad access to people. It's more workflow oriented than interface oriented.
Intergraph -- www.intergraph.com/investors
CIS/2 (CIMsteel Integration Standards) is the product model and data exchange format for structural steel project information. It has been adopted by AISC for their interoperability initiative and has been implemented by many steel analysis, design, detailing, and fabrication software packages.
VRML is the Virtual Reality Modeling Language, a standard method to view 3D models on the web with freely available VRML plugins <cic.nist.gov/vrml/vbdetect.html>.
Some possible uses of a VRML file of a steel structure are: model checking, design review, walkthroughs, RFIs, model coordination, and sales/marketing. The translator also creates a summary table of all of the steel which can be used as an ABM and imported to Excel. Many sample VRML files are available at cic.nist.gov/vrml/cis2.html#VRML
The IFC (Industry Foundation Classes) are the product data model developed by the IAI (International Alliance for Interoperability) to facilitate interoperability in the building industry. IFC has been implemented in many CAD packages used in the construction industry. An IFC file generated by the translator can be imported to Architectural Desktop, ArchiCAD, Bentley Architecture, Revit Structure, or other IFC applications for model coordination with other parts of the building such as windows, walls, doors, floors, cladding, HVAC, and MEP.
For example, a structural steel model from SDS/2 or RAM could be exported as a CIS/2 file, translated to IFC, and imported to one of the CAD packages. We are very interested in getting user feedback about this use case. Some sample IFC files and screenshots of IFC models in the CAD packages are available at cic.nist.gov/vrml/cis2.html#IFC .
Version 7.00 of the CIS/2 to VRML and IFC Translator can be downloaded free at ciks.cbt.nist.gov/cgi-bin/ctv/ctv_request.cgi .
[Robert Lipman is with the Computer Integrated Building Processes Group of National Institute of Standards and Technology.]
A summary of CAD industry news you may not have read elsewhere, or that I found interesting:
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Adobe last week began shipping some versions of Acrobat 8: Pro and Standard are available now. Reader is not yet shipping and the 3D version won't ship until next year. www.adobe.com/downloads/#acrobatfamily
Cimmetry Systems announces AutoVue v19.1 Client-Server, Web Edition for SharePoint 2003. www.cimmetry.com/sharepoint
CD-adapco this week releases STAR-CAT5 v4.10 for performing CFD [computational fluid dynamics] within CATIA V5.
Geometric Software Solutions ships NestLib v19 for automated nesting of 2D shapes on sheets. It's available as a static library, DLL, COM DLL, or .NET, and runs on 32/64 Windows, Solaris, and Linux platforms -- and will be ported to Mac OS on demand. nestlib.geometricsoftware.com
New features in TurboCAD v12.2 include applying material properties to individual facets of the same object; previewing blends before committing; exporting paper space to PDF, and 3D to DWF; customizing PDF, TrueType, and SHX fonts; improved DXF, DWG, and DGN support; and more. www.imsisoft.com
3D QuickTools ships a beta of the 64-bit Windows XP version of 3DQuickPress software for 3D die designs. www.3dquickpress.com
GEOMATE introduces InventBetter Suite 2007 (US$299) with GrafiCalc 2007, ToleranceCalc 4.0, and SectionCalc 4.0. www.inventbetter.com
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These news items were posted during the last week at the WorldCAD Access blog <worldcadaccess.typepad.com>:
NVIDIA's new MAXtreme v9 driver increases scene creation performance of 3ds Max v9 by up to 100%, when running on NVIDIA's Quadro FX 5500 graphics board; overall increase is 16%.
Their POWERdraft 2007 driver improves AutoCAD 2007 performance up to 73% on the 3D Gouraud Index test; 22% overall. (The increases are over the drivers provided by Autodesk.) The new drivers can be downloaded free from www.nvidia.com/content/drivers/drivers.asp
Seminars & Conferences
PTC World France 2006 is Nov 16 in Disneyland Resort, France. www.ptcworld.org
Patrick Emin's CADxp.info lets you read all of Autodesk's blogs at www.cadxp.info/autodesk_blogs+main.html or through an RSS feed at www.cadxp.info/moray/Moray.php?conf=adeskblogs_conf
People/Companies on the Move
Patrick Mays is Graphisoft's new vp and general manager. Mr Mays was most recently at Herman Miller.
After Thomson announced it was looking for a buyer of its Thomson Learning division (which includes Autodesk Press), Prism Business Media revealed it is acquiring Penton Media for US$530 million, of which $336 million is debt.
Trimble acquires XYZ Solutions, whose software generates real-time 3D data of construction projects.
RAND Worldwide intends to acquire the Autodesk-related business of CAD/CAM Systems, located in far eastern Canada.
Gibbs and Associates opens a new office in Seattle WA USA. 800-777-8383 or Gibbs-Seattle@GibbsCAM.com
Nemetschek reports Q3 revenues were up by 7.7% to e74.8 million (approx. US$90 million).
3D Systems will restate its financial statements for Q1 and Q2 of 2006, and will delay its Q3 filing.
Brand New CAD Books/eBooks
"Doctor Walt's Math Magic, Book One"
"TurboCAD for AutoCAD Users, 2nd Ed."
Letters to the Editor
"We a not-too-young startup with a 3D visualization technology
most people claim is transformative. We think there might be a use
for it in the CAD/CAM (I guess it's PLM, now) world, and would be
interested in your feedback at www.lightspacetech.com"
Re: IntelliCAD for Everyone Else
Re: Alibre's Plan to Replace LT
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"Keep up the great work."
Spin Doctor of the Moment
"Any irregularities on our finished products are inherent to our brand
and are not a defect." Tag affixed to my new Diesel sneakers;
if only software was granted such latitude.
"We have hundreds of journalists in China, and some of them
have legal problems. It has nothing to do with freedom of expression."
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