Job Cuts Comingto PTC

Carl Gutierrez of Forbes reports:

Parametric’s chief executive officer, C. Richard Harrison, said the company is responding to the licensing issues by implementing cost-reduction initiatives in the fourth quarter.

Harrison did not elaborate though but [company spokesperson Meredith] Mendola said some of the cost-reduction initiatives include reducing travel, cutting the number of employees and shifting some of its resources overseas.

The lower revenue was due to some large deals not going through. Financial analysts see an extended problem: if fewer licenses are sold, then there is lower future income from maintenance.

With its market capitalization now 20% smaller, one financial analyst sees PTC as a more attractive takeover target. The only CAD vendor I could see being interested in PTC is Bentley Systems, but they don't have the needed $2 billion in spare change laying around. The other possibilities are a private equity firm or a Siemens-like corporation.

Comments

[Mike]

This is typical PTC, next quarter they will be announcing that they have turned the corner based on good executive leadership.

Maybe Dick Harrison should send his job over seas.
It seems to me that PTC started going down when Steve Walski was driven out. Share holders should take a hard look at leadership here.

[martyn day]

Bentley was once in MCAD with MicroStation Modeler. The company pulled out when it sensed they could not compete with SolidWorks and all the other players. Bentley has never reignited the ambition to get back into this market.
I don't see how Bentley could afford to buy PTC even if they wanted to. It would kill them, absorbing a company the size of PTC. There's little to no corporate fit between the firms. Bentley is a one product company, everything is based on MicroStation. Bentley has had digestive problems buying the small tech firms it's acquired recently.
I couldn't think of a more alien concept.
The current trend is for firms to buy themselves back out of their public offerings. When I talked to Greg and Keith recently I found little appetite to for for an IPO. They were more interested in buying slightly bigger firms, up to $20 million, not billions. If they did want to go pubic, there are cheaper ways to do it than 'reversing' into PTC.
It's a bit weird that one quarter of not meeting expectations and everyone is nailing PTC's coffin shut. The company went through (yes, self-imposed) hell for years, losing money and market share hand over fist - but has recently shown consistent better form. I think PTC set itself ambitious targets in its come back and is being hoisted by its own optimism. It's absurd to think this the end of PTC. The share folks are looking for underlying trends but it's too soon to work out what they are. It is more worrying that PTC initiated a job cut, indicating that forward projections are being revised - but Jay at ML pointed out that the head count has swelled with some of the company's recent acquisitions. It's going to take 2 or 3 quarters to see if this is a trend or just poor prediction by the management.

[ralphg]

Martyn:

Bentley lacks a presence in MCAD, and likes to expand through acquisitions. Buying PTC does both.

Plus, acquiring PTC would allow Bentley to go public the easy way: Buy 51% of PTC, and then change PTC's name to Bentley Systems.

[Martyn Day]

Why would Bentley be interested in PTC? Not a chance. Autodesk perhaps but they are doing well without. Autodesk has shipped a Pro/E to Inventor translator, it's going to be hard fo PTC to compete at the SolidWorks/ Autodesk end of the new seat market..... and with that translator, Autodesk is hoping to crack into the Powertrain departments of an Automotive of two in the coming years... home ground for PTC. Swapping the Granite kernel for RealDWG seemed like a great idea of PTC at the time, especially as it's concentrating on the Tech Pubs market. I just wonder if they have underestimated yet another mid-range developer. SolidWorks was the first, Autodesk has certainly upscaled its intentions in the MCAD market with the Alias acquisition and now has a direct automotive sales team.

[Nat]

Again PTC is missing the big picture. Instead of trying to show profits by only reducing the input costs, they need to get back to their basics. For a sample here are somethings that they need to ponder over:
1. Why is Wildfire not as well accepted as the old Pro/Engineer?
2. What are the benefits a 'maintenance' customer gets due to investment in Wildfire?
3. PTC is known for its CAD product. Why are they trying to throw this out and start afresh with PLM - Windchill. Surely out of focus.
4. What is Arbortext doing in their portfolio? You do not buy companies just because one of your top customers wanted better synergies between Wildfire and Illustrator tool !!
5. Why was the cash in bank not used for funding development of a better CAD product that is almost 20 years old now?
6. PTC will be staring down the barrel if it does not do some honest introspection!
7. Or the hype of quarter-over-quarter growth was more to get 'sold' in the market for a higher price so that the investors or money-spinners at PTC can go home happier with wads of Dollars?
PTC should not become a 'classic' management study of 'what went wrong for PTC?' for the MBA's. It would be a shame. Is Harrison and his Team listening? Do they have the passion and burning desire to Innovate and Improvise, that existed in the founding team of PTC? NO? Maybe they are ready for a takeover now, 'at the right price', as their EVP and Chief Product Officer Jim Heppelmann put it sometime back as 'becoming a subject of consolidation.' Then let a Banker buy it!! Or one of their Largest User Corporation?