PRO-E AND CATIA

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ALL DATA FROM DARATECH
  
PTC  
   
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  PTC released its third fiscal quarter earnings on July 16, 2002. The company reported results ahead of Daratech’s forecast, with revenue for the quarter ended June 29, 2002 of $182.5 million and a net loss of $24.6 million, or earnings per share of $(0.09). The pro forma net loss, excluding non-recurring charges and the amortization of intangible assets, was $5.8 million, or $0.02 per diluted share, compared to pro forma net income of $6.7 million or $0.03 per diluted share for the same quarter a year ago.  
   
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  A confident Dick Harrison, PTC’s president and CEO, said that he was pleased with the company’s execution in a difficult technology market. "We are confident in our business model, achieving out third quarter profit and revenue objectives while also achieving our cost control objectives. Our products are maturing to the point of excitement while our distribution model continues its evolution into direct sales to large accounts and channel sale to the mid-market. Customer satisfaction is increasing as a result of decreased sales turnover and improved product quality."  
   
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  MCAD revenue was $135.8 million, down 6% (from $145 million) from the previous quarter and 22% from last year. MCAD license revenue continues to decline, to $37.4 million this quarter, down 19% sequentially, while services revenue was $98 million, down 1% from the March quarter. A total of 3100 new seats and 565 new customers were added. The average selling price was $12,200, down from $12,400 in the prior quarter.  
   
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  Windchill revenue was $46.7 million for the quarter, up from $40 million last quarter or a strong 17% sequential increase. Windchill license revenue was $18.8 million, up 71% from the previous quarter; services revenue was $27.9 million, down 4% from last quarter. The company reports that 13,500 seats were sold, as the ASP decreased to $1,400 (from $2,100 last quarter), and that it added 39 new Windchill customers. The sequential improvement in Windchill license revenue is impressive and likely due to the company’s improved execution and well-articulated product strategy. On a year-over-year basis, however, Windchill still must make up quite a bit of ground: overall Windchill revenue for the quarter declined 16% from last year while license revenue was down 21%.  
   
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  Total license revenue for all products in the third quarter was $56 million; total services revenue was $126 million. Overall license and services revenue were each down 1% sequentially. This is a marked improvement in that sequential declines had averaged 14% for license and 2% for services revenue for the prior four quarters. This turnaround could indicate that PTC’s sales execution has stabilized, but we will need several more quarters to determine that the corner has been turned.  
   
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  On a geographic basis, North America accounted for $76 million of sales, representing 43% of sales, down 5% sequentially; Europe accounted for $57 million of sales, down 3% sequentially and Asia Pacific was just under $50 million, up 8% sequentially.  
   
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  The company reported that the reseller revenue contribution was flat at about $10 million for the third quarter. Rand’s contribution continued to decrease, from 35% in the second quarter to about 30% this quarter. Harrison commented that he sees Rand’s contribution continuing to decrease; a PTC spokesman later indicated that this would probably level out at $2-$3 million per quarter. She also told Daratech that the number of resellers has not changed over the last several quarters, and stands at about 180--but that this will decrease to a smaller, more productive set that is vertically and regionally targeted.  
   
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  PTC ended the quarter with $204 million in cash compared with $196 million at the end of last quarter.  
   
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  Days sales outstanding was 78 days, flat with last quarter. Deferred revenue stayed relatively stable at $190 million this quarter.  
   
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  Ed Gillis, PTC’s CFO, gave revenue guidance of $180 million per quarter for the "next two quarters." He added, "Spending in our sector is weak and this is likely to continue for the next several quarters. We are unlikely to see revenue or profitability growth. There are definitely sales leads in the pipeline, but we don’t know whether or when they will close." Gillis also indicated that the company was poised for a break-even at these levels.  
   
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  Both Harrison and Gillis voiced their strong belief that the company was poised to succeed once the spending environment improves. Said Gillis, "I’m convinced that the product develOPMent category is under-penetrated. We need to improve our execution to capitalize on this opportunity." Harrison, in his opening remarks, put it more strongly: "We have great staying power as a company in this market. We have great assets, a strong and large customer base in manufacturing and the buzz among corporate executives in manufacturing is about products. This supports our leadership position in this space--both in terms of product vision and revenue."  
   
  
Dassault Systèmes S.A.  
   
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  Dassault Systèmes S.A. reported another solid quarter on July 23, 2002, with total revenue for the second quarter of 2002 up 8% year-over-year to EU191.3 million. Software license revenue increased 10% over last year and represented 87% of total revenue, while services revenue declined 4% from a year ago. Net income on a U.S. GAAP basis, including acquisition costs, was EU27.7 million, or EU0.24 per share, up from EU12.6 million and EU0.11 per share in 2001.  
   
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  Despite the good performance during the second quarter, Dassault lowered its revenue outlook for the remainder of 2002, citing currency fluctuations, continued weakness in Europe, and the extension of its relationship with IBM for the reduction. New guidance is for total revenue in the range of EU800 million to EU810 million, for an overall growth rate of 8%.  
   
Other revenue highlights include:  
   
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  Process-centric revenue, including CATIA, DELMIA, Spatial, SRAC and PDM products, increased 10% to EU158.9 million and represented about 83% of total revenue for the quarter.  
   
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  For the quarter, 8,656 CATIA licenses were sold, up from 8,006 in the second quarter of 2001, an annual increase of 8% but slowing to 4% sequential growth. CATIA V5 made up 54% of new licenses sold this quarter. The overall ASP was EU17,478, an increase of 4% from a year ago and up from EU16,804 last quarter. The revised guidance for 2002 includes a 6% growth in the number of CATIA units sold, or a forecast of about 36,000 unit sales in 2002.  
   
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  SOLIDWORKS revenue decreased 1% from the year-ago quarter to EU32.4 million. "Design-centric" revenue accounted for 17% of total Dassault Systèmes revenue for the quarter, roughly constant with a year ago. A total of 6,257 SolidWorks seats were licensed during the quarter, a 7% increase over the first quarter of 2002 but still 3.8% below sales a year ago. Year-to-date, unit sales of SolidWorks are down 2%. Dassault Systèmes president Bernard Charlès indicated that he believed this decline was due in part to aggressive pricing by a particular rival, and was likely to continue for perhaps a few more quarters. But he believes that customers were beginning to understand that this will, over time, affect the competitor’s ability to invest in its product development, ultimately leading to a stronger SolidWorks product. He also believes that a closer connection to the SolidWorks sales channel partners will help to stabilize the situation.  
   
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  Total PDM revenue in the quarter was up 19% to EU17.4 million. Of this, an estimated EU3 million was from services. Dassault also reports end-user spending for its PDM software, which the company now estimates to be on the order of EU28.6 million.  
   
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  Software license revenue was reported at EU166.7, again up 10% over last year and up 5% sequentially.  
   
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  Services revenue was EU24.6 million, a decline of 4% from last year’s second quarter but a 6% sequential increase.  
   
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  On a geographic basis, the company reports that 28% of revenue was generated from the Americas, 28% from Asia and the remaining 44% from Europe. Dassault reports that Americas revenue increased 4% sequentially or 7% over 2001 to EU54 million; European revenue decreased 2% sequentially but increased 2% from last year to EU84 million, while Asia grew a strong 37% sequentially and 29% annually to EU53 million.  
   
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  Recurring revenue accounted for 48% of software revenue, slightly below the 49.5% of software revenue reported during the first quarter.  
   
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  Net income more than doubled from the year-ago quarter to EU27.7 million. The second-quarter 2001 results were affected by writedowns of goodwill from acquisitions.  
   
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  Currency fluctuations hit Dassault particularly hard this quarter, accounting for a net swing of EU5 million. On a constant-currency basis, total revenue would have increased 11% over last year’s second quarter. The company forecasts that, for the second half of this year, currency effects will cause a revenue shortfall in the range of EU16 million to EU36 million.  
   
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  Charlès and CFO Thibault de Tersant announced a new agreement with IBM PLM Solutions that will see IBM increase the resources dedicated to PLM by approximately 40% by the end of 2003.  
   
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  Separately, the French government announced last week that it was seeking investment banking advice on the divestiture of the 15.6% stake it continues to hold in Dassault Systèmes. Company CFO Thibault de Tersant announced on Tuesday that he expects the government review to be completed by this fall, and that news will be forthcoming at that time.  
   
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  A week earlier, on July 10, the Paris Bourse announced that it would drop Dassault Systèmes from the CAC-40.  
   
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  In discussing the operating environment for the rest of the year, Charlès said the company continues to be cautious, noting that the second quarter was "a period of very good progress at Dassault. We largely met our targets and gained market share. We believe our focus on development is correct. The future is bright as we take the right steps to grow our business."  
   
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  This quarter marked Dassault’s second outlook reduction in as many quarters. While the company reported slightly lower second-quarter revenue than was forecast by Daratech, the company is well positioned to take advantage of its market opportunities. Daratech’s revenue forecast has been lowered to EU803 million for the full fiscal year, with a forecast of EU184 million for the third quarter. Our SolidWorks revenue forecast of EU138 million has been lowered as well, to EU130 million, essentially flat with 2001.  
  

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