WorldCAD Access

The IBM PLM Revenue Boost to Dassault -- Not So Much

Jay Vleeschhouwer reminds me that not all of the roughly $550 million in IBM PLM revenues will be added to Dassault's, since Dassault was already getting about $330 million from IBM.

I was double-counting.

ConstructWare Very Much Not Dead

Autodesk's Constructware was the victim of a flurry of dismay earlier in the year when someone in the industry suggested that ConstructWare  might not be getting any more updates. "No updates" is read as "nearly dead" in the software world. The claim resulted in a "No, not dead" response from Autodesk. This week, more proof it is not dead.

This week, this year's second update to ConstructWare:

• Reporting data download

• Bundled reports 

• Upgraded viewing of CAD files*

• User interface configuration 

Since this is Web-based software, the update is available the next time "members" log on.

www.autodesk.com/constructware

- - - 

*) Curious lack of support for Autodesk's 2010-line of DWG-based software:

A hallmark feature of Autodesk Constructware is the flexibility to view, mark up and upload not only Autodesk file formats, but also other CAD files and office documents.

Constructware 2010 continues this tradition ... including an upgraded viewing component that now supports AutoCAD 2009 files and the latest formats produced by other design tools in the market.

Ugh 2: Dassault Q3 Revenues Down 8%

Dassault Systems reports its revenues are down 8% overall, but the really ugly number was the 35% drop in new license revenue. Total revenue for the quarter was e291.7 million, down from 318.3 a year ago. In US$, that's roughly US$437.55 million.

Who's Gonna Be #1?

Releasing the number means we can take a stab at calculating whether Dassault will be the world's largest CAD software company, once it completes the $600-million acquisition of IBM PLM next year.

IBM PLM would contribute an estimated $530 million to Dassault. Let's assume conservatively it earns around US$1.9 billion next year without IBM PLM, or $2.4 billion with IBM PLM.  

Autodesk last year earned $2.3 billion, and maybe will do the same next year (after dipping below $2 billion this year). So the acquisition could well put Dassault over the top.

Source.

PTC Conference Call Notes

We used to look forward to hearing the ceo of PTC slag his competitors during quarterly conference calls with financial analysts, but yesterday Richard Harrison disappointed us by making merely neutral comments against Autodesk and Dassault.

On the Dassault Deal

Ross MacMillan of Jefferies & Co asked, "Just any implications from Dassault's yesterday to kind of buy out their PLM sales force, any implications for Parametric?"

Mr Harrison replied: "I think we're going to learn more about that in the coming quarters. I think it's something ...that we sort of saw happening eventually.

"...a simple level it's going to level the playing field. And so SAP, Siemens, PTC, and Dassault will now compete on an equal playing field.

"I think Dassault had the advantage of IBM [as its sales force], which is a great partner. And they're no longer going to have that. It's going to make our job of talking about our benefits with customers easier when we don't have to overcome the presence of the IBM company and their footprints in all of these large accounts. So it's, I think it's positive news for the market."

On PTC Sales

"The channel business was challenging for us in the fourth quarter and it was probably down about 25% year-over-year. The channel business actually performed better than the direct business for the first half of the year, and then worse than the direct business in the second half of the year."

"The best performing business for PTC this year ...was SMB [small and medium business] and PLM [product lifecycle management]. ...Arbortext is probably our third largest product line behind Pro/ENGINEER and Windchill.

"So we've seen in channel what some of our competitors have seen there, maybe Autodesk would be a good example, which is the low-end MCAD business has been impacted relatively significantly by the macro-economic environment."

On Not Hiring Americans

"Head count will increase slightly. Not a lot, probably 2% to 3% over the course of the year. Most of that increase, if not all of it will be driven by continued shift to low cost geographies. PTC's head count today, 36% of the head count is in low cost geographies compared to about 20% two years ago." 
 
On the Impending Recovery

"We would expect that that recovery would be in the second half of our next fiscal year."

PTC figures the recovering will come in waves, by world regions and by industries: "North America is starting out, China maybe is right behind there, in Europe and rest of Asia will probably follow."

On the Domino Theory

"And I think as investors, you are sometimes scratching your heads saying, 'I don't get it. Why are you so excited?' So let me first say, the number one reason fundamentally is because today's domino becomes tomorrows annuity.

"So, we are excited because it says that there is a big technology gap, that the gap is big enough that it's worth switching vendors and in most cases switching products. And it takes a big gap, because nobody likes to switch until -- or unless the gap is big enough that -- the system you thought was supposed to be helping you in our view is hurting you.

"The second thing, each domino win in turn influences so many other sales campaigns. I can't tell you how many deals entered our pipeline on the back of the ABS wins. Everybody said, 'If PTC can win, in that fairly hardcore environment, European company, co-ownership with the Dassault family, all that stuff. Then PTC must have something special, I better take a look at it.'"

On Wondering Where the Lions Are

James [Jim] Heppelmann: Neil, you just want to add to that?

Cornelius [Neil] Moses III: I couldn't have said it better myself, Jim.

James Heppelmann: Good.

Cornelius Moses III: Where are you Jim?

James Heppelmann: I am in Europe

Operator: Your next question comes from Steve [inaudible].

James Heppelmann: I am with an important European customer, Dick [Harris].

- - -

You can read the entire transcript at http://seekingalpha.com/article/169498-parametric-technology-corporation-q4-results-call-transcript

How Many Different Ways Can You Say It?

Here's a collection of headlines of Dassault buying... wait, I'll let them say it:


Australian IT: IBM sells unit to Dassault for $US600m

Michigan Technology News: Dassault Buys PLM Group From IBM For $600 Million - Ends IBM CAD Era

The Hendersonville Times-News: Dassault Takes I.B.M Unit for $600 Million

ChannelWeb: French Firm To Acquire IBM's PLM Sales, Support Business

Crain's Detroit Business: Parent of Auburn Hills-based Dassault Systemes Americas to buy IBM Corp. sales unit

PC World: Dassault Buys IBM's PLM Software Distribution Activities

The Register: Dassault picks up PLM unit from Big Blue

Zacks.com: IBM Selling Operations to Dassault

InformationWeek: IBM Spins Off PLM Unit To Dassault

Ugh! PTC FY Down 9% From Last Year

PTC is the first publicly-owned CAD vendor to report financially each month, and so becomes the canary for the industry. I'll let ceo C. Richard Harrison chirp the song for Q4 and FY09:

Our constant-currency [meaning, ignoring the difference in exchange rates] non-GAAP [not generally accepted accounting principles] FY'09 [revenue for fiscal year 2009] [of $246.3 million] was down 9% compared to last year.

While license revenue was down 34%, maintenance and services revenue were up 3% and 1%, respectively...

We again delivered license revenue growth in all of our major geographies except Japan.

We had better license and total revenue in North America than we did in Q4'08, which was PTC's best revenue quarter ever...

For the year, the company made $938.2 million.

The company expects Q1 next year to produce $230 to $240 million in revenue, and to continue avoiding re-admittance to the billion-dollar club with expected annual revenues of $980 million.

Source.

Live: DS Conference Call

8:39am -- Alright, I'm here with the Dassault Systemes conference call explaining their acquisition of IBM PLM. 

8:41am -- Bernard Charles is explaining that by 2007 Dassault and IBM began to realize that the sales arrangement of PLM sales was getting complicated -- after 28 years of working together. Dassault began to take over some of IBM's sales.

As they were thinking of the next ten years, they realized that all of Dassault's software is getting so integrated that the parts cannot really be sold separately. One driver was customers wanting an easier way to integrate.

8:44am -- The slowdown of the last 12 months is getting consumer goods companies and others to adopt PLM faster. The question then became, who would invest writing software for new sectors -- DS or IBM?

Came to the conclusion that simplification and expansion required a single direct sales force. This was the right moment to transfer 700 professionals in 60 countries to Dassault, all of them dedicated to large companies.

8:46am -- This is also building up the future of Dassault, even as it is a very large [financial] investment. Will continue to work with IBM as a Global Alliance partner, but no longer need to share royalties on applications.

Customers are very pleased, no negative comments.

8:49am -- Deal to conclude probably in Q1 of next year, the major job being integrating IBM employees with DS. It could not happen unless one was ready to sell and one ready to buy.


Q&A Session

Steve Wolfe: Clarification on remark that this simplifies the customer engagement process. In the past, IBM has decided on a case-by-case basis whether to carry a new Dassault product, even if the customer wanted it. Will this change?
Answer: Yes. 

Wall Street Journal: What % of revenue was sold by IBM last year?
Answer: About 30-35%.

WSJ: Does this make IBM freer to work with rivals like PTC, and you freer to work with IBM rivals like Oracle?
Answer: There never was exclusivity in our contract for the last 20 years. IBM allowed customers to use Oracle and non-IBM hardware.

Managing Automation: IBM is a partner in your cloud computing. Does this increase the level of IBM's involvement?
Answer: Cloud is important for providing subscription-based services for small and medium size companies who could not otherwise afford our software. IBM is a great company to lead the activity on private clouds. But it is still up to the customer to choose; nothing exclusive.

Simply Media: It is not clear to me how this changes for customers. Does this mean they go to an office with 'Dasasult' on it instead of 'IBM.'
Answer: That is a very simple way to put it. We have six Dassault brands right now. But IBM focuses mainly on CATIA and ENOVIA, marginally on the others, and not at all on SolidWorks. It is not the plate on the shop, but the simplification of the contract for the customer. 

Ray Kurland: Do all 700 IBM PLM employees have to join Dassault? What is IBM's ongoing involvement -- can you detail it? Where is IBM middleware going?
Answer: IBM PLM is a well-defined entity; its head [Al ...] will join DS. We want to hire all of them, they are all welcome to Dassault. If they have contracts with IBM, they are required to join Dassault.
IBM middleware is a powerful organization, we need them for consulting and business transformation. 
Many of the 1000+ IBM PLM customers had already been contracting with us.

RK: Revenue is $400 million for nine months -- how much is license and how much service revenue?
Answer: It is mostly license revenue.

Kenneth Wong: My understanding is that PTC and Siemens are also IBM Global Alliance partners. How does this deal give you advantage over your two main rivals.
Answer: I think anyone can claim to be an IBM GA partner, but there is reality. I think this move makes it easier for us to work together. The question is How do you trust each other to move on? There was some activity by our competitors with IBM, but we don't care. I think there is significant value for IBM to be with us. As long as IBM applaud the move, it is a good sign.

9:14pm -- end of call.

From the content of this call, I see that the other advantage to Dassault is a $530 million pop to its annual revenues. Combined with Autodesk recently declining revenues, I wonder if this is enough to make Dassault Systemes the #1 CAD vendor based on annual revenues? We'll find out as DS and Autodesk reveal their quarterly numbers in the next month.

Dassault Buys IBM PLM: $600 million

In a late evening press release rushed out by Dassault Systeme's pr team, the company announces it intends to buy IBM "The Future is Bright" PLM for $600 million, cash: "We've just inked the largest deal in DS history."

The deal will take some time to complete, probably not until sometime in the first half of 2010. In return, Dassault becomes one of IBM's Global Alliance partners. 

The reason: Dassault wants all the direct sales it can get, says ceo Bernard Charles.

Looking forward, the wide adoption of 3D lifelike experience and PLM will require the combination of direct sales, our network of partners, and online communities.

Direct sales are more profitable when you don't need to share it.

The largest acquisition in CAD history was the sale of UGS to private investors, and then its subsequent purchase by Siemens PLM Systems -- around $2.4 billion. Another big one was Microsoft's acquisition of Visio (and IntelliCAD source code) for $1.2 billion a decade ago. 

Will this lead to other big CAD vendors feeling the pressure to make big, tactical acquisitions? Obvious big targets include ANSYS (FEA), SpaceClaim (direct modeling), and Bentley Systems (water and stuff) -- each of which could go for similar price tag, give or take a few hundred  million.

I am unfamiliar with PLM firms, but I wonder if some of them are up late tonight talking on their iPhones with acquisition advisors on how to pretty themselves up for potential suitors.

Updated: List of CAD Vendors Who Support Their Software Running On 7(*)

• Autodesk (now: Release 2010 of Inventor, Inventor LT, AutoCAD, LT, Architecture, Electrical, Mechanical, MEP, and Algor Simulation; others to be supported with their next updates.)

• SolidWorks (with SP 1.0)

• Alibre Design V12
• 
  SpaceClaim
• 
  MecSoft Corporation (VisualMILL, RhinoCAM, VisualMILL for SolidWorks, etc) 

• Solid Edge (early November with MP1).

• progeCAD and progeADD-on software.
  

(*) Actually, any CAD software that runs on Windows probably works just fine with 7. I've run AutoCAD, Bricscad, and others on 7RC.
.

3D Modeler Inside MS Office

Threedify of Canada has a 3D modeler running inside Office, Internet Explorer, or on its own using COM [common object model]. Jeffrey Nelson is vp of business development, and he explains how it works:

We can imbed our whole application and GUI inside Excel or a Word doc, or use it over the Web and users have full editing and Excel data interaction capability with the 3D model (as well as view/mark-up only if that's all that is needed) -- all under just a few megs.

We can run right out of the box for instance with applications like Expresso which is Excel service over the web. (Right Hemisphere with Corel Design is much larger and runs as a completely separate application.)  What we do is pure ATL based and is lightweight and efficient so our footprint is very small... we compress 3D object files by over 95% with 40 file formats available..

...six ways to collaborate in 3D: MS Office, Internet Explorer, 3rd-party plugins, Outlook email, Windows Explorer (peer to peer), and soon server-side live collaboration. 

We see ourselves as a Microsoft "3D Office" extending 3D collaboration to many more people who may only have Office but need to collaborate in 3D.  

The 30-day trial download is available from www.threedify.com

This is not new technology; heck, even IntelliCAD could be embedded in word processing documents ten years ago. The difference here might be the small size (5MB) for a 3D modeler.