u p F r o n t . e Z i n e
celebrating the 16th birthday of upFront.eZine
Issue #693 | May 31, 2011
In This Issue
1. The Sorry think3 Story Gets Messier
2. Excerpts from Autodesk's Q1 Conference Call
3. Out of the Inbox and other regular columns
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The Sorry think3 Story Gets Messier
It's an anti-fairy story ending for an MCAD company that one-time ceo Joe Costello was thrilled to make the greatest in the world. That was the late 1990s, when he gave away $50,000 in a renaming contest (from Cad.Lab to think3), and knew he could change CAD education forever with a Doom-game-like "The Monkey Wrench Conspiracy" tutorial. Mr Costello was fresh from a 13-year stint in turning Cadence Design Systems into the #1 EDA vendor, and so assumed that with the same kind of hard work he could do it again, turning Cad.Lab into the #1 MCAD vendor. Instead, think3 is now the #1 mess in the CAD industry.
Within five years of Mr Costello taking over, the company closed most of its offices in the USA, and then retrenching to its home in northern Italy. Things got worse; last year the company was $23 million in debt, primarily due to Italian taxes owing. In October, turnaround company ESW Capital purchased think3 USA for an unknown amount, and then sold think3's IP to sister company Versata FZ for $3 million -- source code, documentation, and customer database -- all under a fellow by the name of Joseph A. Liemandt.
(The way these things get calculated, the "actual" purchase price was $26 million: $3 million for the internal transaction + $23 million of debt.)
Mr Liemandt is the controlling shareholder of Trilogy, is based in Austin TX, and is the sole manager-member of ESW Capital. From an SEC filing, we learn the following:
- ESW Capital does the investments.
- Versata Enterprises provides enterprise software products and services to end users.
- Trilogy provides technology-powered business services, and owns Versata and ESW Capital.
Through his trio of companies, Mr Liemandt has investments in nearly two dozen other companies, including Corel and Auto-trol. There are many sub-companies with similar names, such as Versata Enterprises, Versata Software, Versata Development Group, and Versata FZ-LLC. ("FZ" refers to a company set up in one of Dubai UAE's many tax-Free Zones.) It was this latter one who thought it had bought think3.
Over the last number of years, Trilogy developed a system for turning around under-performing software companies:
- Lays off many acquired employees.
- Outsources the coding to its devFactory (aka dDev and oDesk) of India, which boasts a yucky-sounding "assembly line model of software development" where employees are contractors who bid on programming work
- Centralizes support at its "WOW" portal (cloud9.versata.com)
- Changes pricing and product support
- Places its managers in charge, Austin Scee in the case of think3
But then I think that the Italian government became unhappy over losing $23 million of owed taxes. The bankruptcy court in Bologna, Italy seized control of the Italian assets of think3, including the all-important domain name, www.think3.com. Over in the USA, Versata immediately switched to www.think3.versata.com, and now the two sites engage in blog-posting battles with one other.
The Italian court says it took the May 2 action on behalf of the creditors' committee, because "the price agreed has not been fully paid," and because Italian bankruptcy law gives trustees the right to terminate agreements when they are "not yet completely performed by both parties." The court terminated Verstata's technology license agreement with think3.
The next day, the Italian court set up a temporary management team to continue running think3 until August 5 (or longer), to maintain employment for needed workers, and to compensate redundant ones.
On May 11, think3 in Italy issued a press release stating that they had restarted operations and -- most crucially -- that it is the only owner of the software and its intellectual property. Bloomberg reports that the Italian trustee also took over company bank accounts in the USA.
In the USA, Versata fought back, saying the Italian actions were not permitted under USA law, and claimed that the Italian trustee would now attempt to terminate other license agreements.
One week later, Versata filed for emergency bankruptcy protection for think3 in its home town of Austin TX, which was given a $1.05 million of interim financing. Versata-think3 is now run by the AP Services division of AlixPartners, a firm that specializes in running bankrupt firms. I think Versata took this action to protect its think3 assets being grasped by the Italian think3.
Versata also launched a law suit against Italian-think3, of which I have no further information. My guess is that they are suing to get back the domain name and other IP.
From http://www.archive.org/details/gov.uscourts.txwb.262995, we learn that the largest creditors of Versata-think3 are the following, each with a million or more dollars owing:
1. Equitalia Polis* of Bologna, Italy: tax debt of $26.3 million
2. Think3 of Bologna: intercompany debt of $11.3 million
3. Think3 Designs Private of Bangalore, India: intercompany debt of $2.8 million
4. Think3 Gmbh of Munich, Germany: intercompany debt of $1.1 million
5. Bologna Group: trade debt of $1.1 million
*) Equitalia Polisis in charge of national tax collection in Italy.
The company also owes money to think3 in Japan and France, Siemens and Datakit (royalties, I am guessing), Dell (for computers, I guess), Lighworks Design, Adobe, Audi, Buell Motorcycle Company (a think3 poster boy, but went bankrupt itself in late 2009), Cimdata, Toyota Caelum, TechSoft 3D, USA IRS, OpenMind, and many others. Interestingly enough, it also owes $118 thousand to Versata Enterprises, and an undetermined amount to Versata FZ, pending the outcome of the lawsuit. Adding it all up comes to over $40 million debt. No wonder employees were not paid!
The legal papers do not mention the bankruptcy proceedings in Italy, and declares that ESW Capital is 100% owner -- not Versata FZ (which owns only the IP).
Between the two declarations of bankruptcy, Versata-think3 held a Webinar to explain how it was excited about supporting think3 customers. You can download a PDF of Versata's turnaround plan for think3 from here: http://www.rallypointwebinars.com/webinars/think3/2011/think3englishq22011slides.pdf . I think it is significant that Versta's think3 blog has zero comments so far.
upFront.eZine first wrote about CAD.Lab in 1998: "TCFKAC Gets $17.5m Funding" <http://www.upfrontezine.com/1998/upf-132.htm>.
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Excerpts from Autodesk's Q1 Conference Call
Here are a few items from Autodesk's conference call to financial analysts about its Q1 earnings:
- Platform (AutoCAD) division grew 15%
- Media division grew 15%
- Manufacturing division grew 14%
- AEC division grew 3%
- Cash holdings are $1.5 billion
Carl Bass (chief executive officer, Autodesk): "We are really the disruptor in that market. And we continue to win business, both new business, converting some of our customers to new 3D technology, but most often, winning share from other competitors."
Steven Ashley (Robert W. Baird & Co.): "I actually just like to drill down again on the AEC business. Can you give us any kind of metrics around, if we look at the Civil 3D and some of the infrastructure products, how they were year-over-year? And in contrast maybe how Revit or some of the Revit Suites performed in the period?"
Carl Bass: "I don't want to break down individual products. And as we move to suites, it becomes less important."
Jay Vleeschhouwer (Griffin Securities): "It looks like your average active license fee for all products is somewhere around $400 or so, give or take, per year. And I'm wondering if over the next couple of years -- as a result of suites, better attach and mix -- you can add potentially couple of hundreds of dollars per active license under maintenance?"
Carl Bass: "Subscription prices for Suites are higher than individual products, as you would imagine. So I won't -- at this point, I wouldn't say exactly how much I would raise, but -- how much I would expect that to rise, but I do expect that as the attach rates for Suites goes up, you will see the increase in this number."
Jay Vleeschhouwer: "Since you talked about the infrastructure business, would it be fair to infer that the business what you used to call ISD [Infrastructure Solutions Division] is somewhere in the range of $100 million to $200 million a year?"
Mark Hawkins (chief financial officer, Autodesk): "We typically don't really break that out at that level of granularity."
Jay Vleeschhouwer: "It appears that PTC is going to retire their ProductPoint offering based on SharePoint. They are addressed more or less towards the SMB [small and medium size business] market. I'm wondering if you could just talk about what's driving your opportunity, the growth that you're now referring to in data management?"
Carl Bass: "Aren't we competing against all older products? That's the polite way of saying what the competition is in data management. I think you have to break our data management activities into two different parts:
"One is in manufacturing, where we're seeing really good adoption. I'd say if you look at the part of the market that we're concentrated on, it would be more of the M out of the SMB part of the market, and the work group out of the large enterprise. So it's a slightly different take in the competitors: they're looking at enterprise PLM systems; we're trying to increase the efficiency of individual work teams and workgroups.
"[Two] is the desire to have greater data management capabilities in AEC. So we've been talking about new product introduction and rejiggering some of our product lines that already exist, and we've been doing a lot more work on data management.
"Again, I think it's the same underlying root cause, is that as people adopt model-based design and they had simulation and other capabilities, the amount of data just goes up exponentially, and the need to both control it and manage it, as well as distribute and collaborate on it goes up.
"Some places, we're using share technology. Other places, we're building things from scratch. But I'm optimistic about data management in both those markets."
Michael Olson (Piper Jaffray Companies): "On the BIM and simulation and visualization fronts, do you feel that you have all the technology and product portfolio in place or are there holes that you still feel that you need to fill?"
Carl Bass: "I think we have a long way to go before I'd say we have a complete portfolio. we think analysis and simulation is a growing market and that's true across all of our verticals, not limited to manufacturing. And we'll continue to invest in that."
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Out of the Inbox
COMSOL has a new Microfluidics Module for studying microfluidic devices and rarefied gas flows: "Target application areas include lab-on-chip devices, digital microfluidics, biosensors, electrokinetic and magnetokinetic devices, inkjet technology, and vacuum system design." http://www.comsol.com
CIMdata research firm acquires Collaborative Product Development Associates, formerly D.H. Brown Associates.
Vladimira Grosmanova tells me that his VariCAD 2011-1 3D/2D mechanical CAD system how has better support of 2D NURBS objects, a nicer user interface, and improved DWG and STEP translation. No-charge 30-day trial from http://www.varicad.com
Wrap OEM Edition is a special version of Geomagic Wrap that generates 3D polygonal models direct from 3D scan data, and is meant be included with hardware scanners -- six are already signed up -- at a market-changing low price point. http://www.geomagic.com
Austin Silver Software launches McDwiff for viewing, converting, and printing DWF files on Macs ($9.99) and iPads ($6.99), using Autodesk's Freewheel as the backend DWF processor. http://www.macdwf.com
Elmo Solutions' Agni Link Connector is a bidirectional ERP-CAD connector for SolidWorks, Inventor, AutoCAD, SolidWorkds PDM and one of several accounting packages. In short, connect your CAD to your accounting software. http://elmosolutions.com/cad_erp_integration/agni_link.html
JTB World's JTB FlexReport is updated to version 6.2 for doing flexible license reporting with charts, lists, and HTML reports of license or application usage. http://www.jtbworld.com/jtbflexreport/index.htm
CadFaster announces that its CadFaster|Collaborate software now works with Revit, SolidWorks, and MicroStation. "CadFaster|Collaborate is a plug-in cloud software tool that solves these problems by allowing distribution, annotation and co-viewing of diverse 3D designs in real time using portable executable files with fast and efficient 3D visualization technology." Download a no-charge trial from http://www.cadfaster.com
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These were some of the news items that were posted during the last week at our WorldCAD Access blog <worldcadaccess.typepad.com>:
- 13 Autodesk trademarks that have died
- With 123D, is Autodesk taking on Google? (part 4 of the series) by Roopinder Tara
- ZStore where zee apps cost $4,000
- RhinoFabLabs Help Rhino Users Fabricate by Roopinder Tara
Letters to the Editor
Re: BIM Discussion Gets Heated in Russia
"I wonder why BIM pushes so many buttons. What would be your best estimate of the percent of construction spend in 2010 that was designed using any BIM software? And just to top it off could you break it down by NAFTA, EMEA and ASEAN â€“ what the heck I might as well ask. Thanks for any insight, SWAGs, best guesses, etc. that you can provide."
- Gene Roe
Akos Pfemeter (Graphisoft director of global marketing) responds: "I think the best way to estimate would be by looking at various research data in the field. One you may find useful is by McGraw Hill that says <http://bim.construction.com/research/FreeReport/BIM_Europe/>:
Just over a third (36%) of the Western European industry participants reported having adopted BIM, compared to the 49% adoption rate in North America in 2009
"I think this only shows the portion of practices at which you may find BIM tools, but is a bit overestimation relative to the actual usage of BIM tools and workflows. My guesstimate would be that hardcore BIM usage (the project is on full BIM) would be way below 10%, and even those projects where BIM is used for parts of the project-workflow should be less than 25% of all running building projects in 2010."
H. Edward Goldberg also responds: "Autodesk, Bentley and Nemetschek should be able to give you an approximate number of companies that used their BIM software in different world regions in 2010. They may talk in terms of seats. If this is so, you will have to set an approximate value; perhaps $3 million per BIM seat per year of construction (based on the cost for a professional at average $60,000+ OH and Profit to operate a BIM program per year would be appropriate). In my opinion, this number would then be based on a percentage of the construction cost which is now approximately 2.8 % for Architecture (exclusive of MEP, Structural and Civil). I think this method would give you the best general approximation of the percent of construction spent in 2010."
"Having used Autodesk's Revit for MEP (Building Systems) design for over two years, now, I tend to agree with the skeptics. It does do some things very well, but other functions are astonishingly (aggravatingly) manual. Also, Autodesk refuses to offer any hope that the program ever will link to Word or Excel, which is just idiotic. In short, it is a very uneven program that, on balance, offers little real overall advantage as compared to previous products or suites.
"As designers, we are told that 'building owners want it,' and of course, the building owners are told that 'the designers want it.' Most building owners I deal with rarely even use CAD; paper drawings are still in broad use by facilities folks. The truth is that the only folks who unanimously want Revit are Autodesk's shareholders, which brings me to my point:
"Since the economy of Russia is so different from the West's, and since it's very difficult to tell prior to purchase if a program is mostly hype or actually a time- and money-saver, I would think that Russia would end up being a great proving ground for the claims of Autodesk's marketing army/hive-mind ('Resistance is futile, you will be assimilated--into the cloud'). That is, I hope Russia can be an area where the touted virtues of the program can be tested in a real world with fewer capitalistic pressures.
"Thanks as always, and I look forward to more of the conversation."
- Peter Lawton
"This is the first part of your eZine article on CAD & BIM translated into Russian: http://bauskas.blogspot.com/2011/05/cad-bim.html "
- Alexander Bausk
"My Revit 2009 and 2010 books have been combined and translated into Russian. I understand they are used in state schools in the Ukraine."
- Ed Goldberg
HEGRA Architects, www.hegra.org
"So, what you're saying is that these folks had a BM over BIM?"
- David Stein
"Your newsletter has been of immense value in the past. Keep up the good work."
- John Dwyer
SpinDoctor of the Momement
"SpaceClaim today announced a rapid expansion of the company's indirect channel network -- growing more than 200% in sales growth."
- From email accompanying a recent SpaceClaim press release
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Entire contents copyright 2011 by upFront.eZine Publishing, Ltd. All rights reserved worldwide. Letters sent to the editor are subject to publication. Article reprint fee: $250 and up. All trademarks belong to their respective holders. "upFront.eZine," "The Business of CAD," and "WorldCAD Access" are trademarks of upFront.eZine Publishing, Ltd. Letters to the editor may be edited for clarity and brevity. Translations and opinions expressed are not necessarily shared by upFront.eZine Publishing, Ltd.