the business of cad
Issue #764 | February 12, 2013
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In This Issue
1. PTC Q1 2013 Results
- What Ralph Grabowski Thinks
2. Out of the Inbox, our other regular columns.
PTC Q1 2013 Results
The company that in 1985 put the 'parametric' into CAD, this month took the 'parametric' out of its name. No longer Parametric Technology Corporation, the company changed its name to just plain PTC, Inc. -- what we'd all being calling it, anyhow.
During his earnings call with financial analysts, PTC ceo James Heppelmann started off with this caution: "The global manufacturing growth rate is now at the lowest we've seen since the 2009 global economic crisis." A caution because it affects the company's revenue from CAD and PLM.
He summarized the world's economies this way:
But he is hopeful the economy will improve later in 2013, along with PTC revenues: "If these improvements materialize, that we would see a corresponding upswing in our growth rates."
Even in a down economy, there can be good news for a software company if its offerings are wide enough. "I remember talking to a large truck manufacturing customer back in 2009 about how their new truck sales were down 70%," he reports, "but their spare parts sales had gone through the roof." Trucking firms would rather repair than buy new. This sort of scenario lets PTC sell its Service Lifecycle Management software for servicing customers, like sending out repairmen.
Helpfully, Mr Heppelmann defined the meaning of 'domino' accounts -- now that the company no longer reports statistics for them. They are "wins in competitive situations at very large accounts where PTC had no meaningful incumbent position."
For FY13, PTC expects revenues of $1.34-1.37 billion, up 7% to 9% over last year.
Naturally, the emphasis by PTC of the conference call was on SLM, not CAD or PLM. The briefest of mentions was made of the next Creo 3. But the first questions from analysts dealt with CAD and PLM:
Sterling Auty (JP Morgan Chase): "...what is it that customers are particularly saying? Are they worried about long implementation times and taking on a considerable project like that? Or what are some of the things that the customers want to see before they're ready to engage?"
Heppelmann: "...there's been a move toward smaller upfront commitments, so I think some orders that maybe we envisioned were going to be a larger upfront deal turned into a small.
"Let me just net that out. That ends up being a delay tactic at the end of the day."
Auty: "...could you contrast that with CAD?"
Hepplemann: "...with CAD, there are two sorts of bottlenecks: One is headcount, because new seats really are generally tied to an expanding business, and there aren't so many expanding businesses right now.
"The other thing is there's a lot of new capability in the Creo versions of the software that didn't exist in the Pro/ENGINEER versions of the software, but in order to get there, we need to get the customer to go through an upgrade.
"Now CAD upgrades are not huge projects, but they are projects that have to be planned and funded and scheduled and so forth. So the element of new modules tends to sit on the other side of a project that has to be done. And now we get into the discussion of when are we going to do that upgrade and might there be a delay in that, because the company is worried about dedicating resources to anything that they might view as discretionary."
Jay Vleeschhouwer (Griffin Securities): "How are you thinking about the Creo 3.0 launch later this year and the apparently imminent launch of PDM Essentials, Windchill Light, so to say, as possible revenue events for this year?"
Heppelmann: "I don't see either one of them as major events, to be frank. The issue with Creo is we need to get the customer base upgraded, and that's happening actively as we speak. But we're still in the first quarter of that, let's say, and I think Creo 2.0 is a pretty good product that people are upgrading to get their hands on.
"Creo 3.0 is just more of that, but I don't think it's a disruption or a step-function different than Creo 2.0 in terms of its ability to generate revenue.
"PDM Essentials, there's a lot of pull for that from our channel... The deal there, though, is the channel has already been doing pretty well with PLM. So that's icing on a pretty good piece of cake they already have."
Vleeschhouwer: "...could you talk about pricing pressure in the CAD market? As best we can discern from ... your CAD business and competitors who are converting that to ASPs, it does look as though there's been some broad pressure, particularly in the last year."
Jeffrey Glidden (PTC cfo): "I think we're selling largely to our installed base. They're used to our products. There's no big displacements. Larger orders get better discounting, typically. That said, we're not seeing that many of the larger orders. ...we're seeing some additional discounting to drive closure rates, probably in the mid-market as well or in the average market."
Blair Abernethy (Stifel, Nicolaus): "...on the Creo adoption in the base, Creo 1.0, Creo 2.0, and the direct modeling products. I wonder, Jim, if you can kind of give us an update of how that's going in the base."
Heppelmann: "...the gates that need to open to sell this stuff, we're somewhere around 20%, give or take, in the number of customers who have upgraded. And you might remember we said by the end of this year , we would expect that to be more like 50% to 60%. So there's a lot of upgrades happening as we discuss right now.
"...we have a fairly high closure rate of the new flexible modeling, direct modeling technology, amongst the customers who have upgraded. ...we're pretty confident that there's a sizable opportunity ahead of us. It will just take a little more time to kind of fully materialize."
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PTC Q1 2013 Results, continued...
What Ralph Grabowski Thinks
PTC began as the hardest of hard-core MCAD companies, and then spread itself into related areas, just like the other big three CAD vendors. This broad range that covers more markets than just CAD is smart; even I do it, calling it "many fingers in many pies."
CEO Heppelmann released a jolting bit of info, that only 20% of Pro/Engineer users have upgraded to Creo --
instead of the 50-60% the company had expected by now. [Correction: PTC tells me the 50-60% is expected by the end of 2013.] Both PTC and Siemens PLM made the same marketing error, assuming that a wild launch party would translate into change-overs. Siemens PLM found out that getting the word out on SynchTech is still a work-in-progress, five years later.
Switching to a new CAD package is no priority for engineers, even if the replacement is mostly a new skin, new file format, and a whole lot of modularization, like Creo. I would wager that it's the new skin that holds back upgraders the most.
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Out of the Inbox
Rihard Kovacic this week releases the new version of Module BASICS, package consisting of many useful LISP routines for doing 2D and 3D designs with BricsCAD. http://rihardkovacic.weebly.com/modules.html
Vero of England executes a second acquisition in a month, this time buying up the assets of SURFCAM from Surfware Inc of California.
IntegrityWare's new Power Surfacing for SolidWorks provides organic freeform surface modeling, and imports subdivision surface models from modo, 3ds Max, and or other sub-d sofware. $1495 from http://www.npowersoftware.com/pressreleases/pressreleasePowerSurfacing.html
IBM's new line of entry and midrange Power Systems computers are based on their new POWER7+ CPUs starting at $5,947. http://www.ibm.com
Lightworks updates Artisan by allowing lights to be edited inside BricsCAD. http://www.lightworkdesign.com
Adeon Software House launches BOMArchitect for creating and processing bills of materials by electronics manufacturing companies. http://www.bomarchitect.com
Intergraph releases PV Elite 2013 (vessel and exchanger design and analysis) with code updates, ribbon user interface, faster calculations, and CodeCalc component analysis. http://www.intergraph.com/ppm/analysis.aspx
IronCAD announced the relase of the beta of IronCAD Design Collaboration Suite 2013 Product Update 1, which consists of IronCAD, Inovate, Draft, Trans, and Compose. New functions include dynamic ellipsoid shapes, partial cut shapes in sheet metal, and 200 bug fixes. http://www.ironcad.com
Delcam Polska opens a third office in Poland, this one in Bydgoszcz, and appoints Tomasz Szynka manager.
K-TEK's president and COO Cathy Wagenaar has left, and is replaced by Lori Copeland as interim director.
SpaceClaim co-founder Blake Courter leaves the company to join GrabCAD as product manager. He already was on the GrabCAD advisory board. No word from SpaceClaim yet. http://cadinsider.typepad.com/my_weblog/2013/02/spaceclaim-founder-blake-courter-joins-grabcad.html
In other SpaceClaim news, the company added John Kawola to its board of directors. Mr Kawola is ceo of Harvest Automation, an agricultural robotic start-up.
Geomagic's Freeform software was used for the facial reconstruction of the remains of King Richard III: http://www.youtube.com/watch?v=ZrNSaE87IsM
On our Blogs
Here is the item that appeared last week on our WorldCAD Access blog at http://worldcadaccess.typepad.com:
Letters to the Editor
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"No longer in the CAD industry. But thanks for the many years of emails."
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- Ron Powell
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