The CAD Insider

PTC Succession Plan was a Succession Episode

In the HBO hit series, Succession, the CEO of a company that WayStar RoyCo was going to acquire, turns the tables, jump over everyone who thought they were next in line to succeed Logan Roy and secures the CEO post for himself.

It was a tale that played out in real life in our industry just last week when it was announced (titled “PTC Announces CEO Succession Plan,” no less) that Neil Barua, CEO of ServiceMax, acquired by PTC, was going to be the company’s next CEO, jumping over many a PTC executive who thought they had the inside track.

Nobody saw either the Succession or the PTC outcome coming. Lukas Matsson, usurper to the WayStar RoyCo throne, admitted his company, GoJo, had “questionable numbers.” It’s subscriptions in key geographies had been wildly inflated. Matsson was a Swede with a dot com. What did he know about America, the business of a media company. Barua, born of Indian parents, has a finance background. What does he know about design and engineering software? ServiceMax’s subscriptions may not be inflated but the last quarterly statements found (September 2021) show quarter after quarter of losses.

Yet, Logan Roy chose to pay a premium for a company that would expand his reach beyond it core businesses. Similarly, Jim Heppelmann, CEO of PTC, paid $1.46 billion for ServiceMax, about 10 times ServiceMax’s estimated annual revenue.

And this Month the PLM Leader is… Siemens

Siemens is busy congratulating themselves on Twitter for being the leader in PLM, citing a Data Quadrant by Software Reviews that placed them far and away better than their competition in terms of “product features and satisfaction” and “vendor experience and capabilities.” Far ahead of Dassault Systèmes’ ENOVIA,  Autodesk (though Fusion 360 is not a PLM product), Arena (SaaS PLM acquired by PTC) and even further ahead from PTC's Windchill.

Only late last year, PTC CEO Jim Heppelmann joyfully discovered his company was the the PLM market leader after combining the number of users of Arena and Windchill.

Not much is known about SoftwareReviews. Are they yet another algorithmically judgmental all-purpose social media scraper of comments from which product quality is somehow derived? Are they legit, basing their result on the collective considered reviews of bona fide PLM users, or industry experts (like Gartner with their Magic Quadrant) or – perish the thought—journalists?

Another review site, G2 reviews, has been used by so called winners as proof of their superiority. G2 also has their own quadrant for PLM and also has a Siemens Teamcenter as a leader in "market presence" but practically even with Arena PLM in "satisfaction."

Heppleman’s Shiny Objects Pay Off as Rockwell Buys in for a Billion Dollars

How shrewd is Jim Heppelmann? He has sold a minority stake of PTC—about 9%—to Rockwell for a billion dollars. By contrast, Tony Affuso, CEO of UGS, makers of NX and Teamcenter, had to give up his entire company—100 percent—to Siemens for $3.5 billion in 2007. In other words, while Affuso got about 3 times the revenue for UGS, Heppelmann got almost 10X the revenue for PTC per equity dollar.

But after the Rockwell deal, PTC is still Heppelmann’s to run.

“At around nine percent ownership, Rockwell does not control PTC, nor [does it] have the ability to block or force any strategic moves that PTC might consider down the road,” Heppelmann stated in an article in engineering.com.

Why is Heppelmann smiling? CEO of PTC, Jim Heppleman (right) on stage at PTC’s LiveWorx recently concluded in Boston, announcing a sweet deal for PTC. He got a billion dollars from Rockwell, while retaining almost total control of his company. (Image courtesy of engineering.com.)

Shares of PTC shot up 10 percent after the announcement as investors saw a definite value in the partnership with Rockwell. Rockwell shares, if they moved at all, went down a bit.

It used to be that industrial companies sought to rid themselves of their homegrown CAD software. Dassault Systèmes spun out to Dassault Aviation. McDonnell Douglas spun off Unigraphics (UGS). Now that UGS was acquired by Siemens and Rockwell bought a stake in PTC, are we to believe that the pendulum swings the other way, that CAD companies are all to go back to being part of industrial businesses?

Rockwell is a Fortune 500 company, with annual sales of $6.3 billion. As big as that sounds, Siemens AG is far bigger, an order of magnitude bigger, annual sales of almost a $100 billion.

Rockwell will buy the 9% equity with a $1 billion in cash. PTC will use the cash to buy back stock, preventing dilution for existing stockholders. The deal is subject to regulatory approval. .

In many ways, the Rockwell deal validates PTC's path toward emerging technologies. Historically, PTC has been seen by CAD insiders as chasing business far from their core competency (CAD). First there was PLM (Windchill), then Mathcad , desktop publishing, more... CAD was never enough for PTC, it seemed. The latest of “Heppelmann’s latest new, shiny objects,” as one analyst put it, were augmented reality(AR) and Internet-of-Things (IoT). PTCs announcements of acquisitions in AR an IoT sent some of us Googling what those terms meant—and questioning the merits of one deal after another.

Heppelmann didn’t need us to validate his visions. Not with companies like Rockwell willing to buy a stake in the technologies PTC was able to establish leadership in. The Rockwell money is redemption for the PTC leader. Heppelmann inherited a company that was a tired, old, two-trick pony. One trick was the venerable Pro/ENGINEER, reincarnated as Creo. It had little hope of regaining its number one spot solidly (pun intended) by SolidWorks. The second trick was Windchill, a PLM product whose biggest benefit may have been the incorporation of Jim Heppelmann, Windchill’s founder, into the PTC fold.

Rockwell Inevitable only in Retrospect

Everyone was caught flatfooted by the Rockwell deal. There was smart money on GE buying PTC. After all, both companies were singing an IoT tune. GE was like Siemens AG in the United States and represented a too-easy parallel to the Siemens/UGS acquisition. But GE has been busy imploding. From the height of Jack Welch leadership, it had seen its global empire crumble, divisions sold off and its share price become a shadow of its former self and all followed by talk of going back to its core businesses. It was certainly not a climate for expanding into CAD and PLM.

Rockwell, much smaller than GE at its prime, may have been far down the list in terms of acquisition or investment but seems like they were hungering for exactly what PTC was cooking. Rockwell paid almost 9% more than PTC stock was selling for. 

Bottom of the 9th, PTC Hits One to Win It

A great fourth quarter give PTC a 2 percent increase in revenue for the year, despite the losses for the previous four quarters. PTC has not had a quarter this good since Q3 of 2015, over two years ago, when it made a $17 million profit. Are PTC’s investments in advanced technology finally paying off? CEO Jim Heppelmann certainly seems to think so.

A great fourth quarter puts PTC in the black for the year. (Chart by TenLinks.)

Another high point at the financial call was the subscription mix, which is at 72 percent of revenue for the quarter.

“We’re a year early on reaching the goal of 70percent,” saidHeppelmann, who then promptly raised the goal to 85 percent. The company strives for moving to full subscription by Q2 for 2018 for the Americas and Western Europe.

The company couldn’t stop talking about ThingWorx (mentioned 39 times) and Vuforia(seven times). By comparison,CAD was mentioned 22 times, including Creo by name once. Windchill got six shout-outs while PLM in general got 30, putting PLM in second place.

CAD and PLM continue to be the main breadwinners, and Creo revenue may have surprised by growing 14 percent for the year.That is many times more than market growth for CAD, according to Heppelmann.

“Growth for PTC was rock solid and has seven consecutive quarters of double-digit bookings growth in our retailer channel,” he said.

Some of the growth in the CAD business may be attributable to PTC’s aggressive plan to go after IoT and AR business, a plan questioned by many CAD insiders but one that may now be paying dividends. Firms may sense PTC is in the right place for high technology beyond CAD, such asIoT and AR, and forcing their CAD departments to follow suit.

The IoT is taking off. Customers that have bought into Vuforia and ThingWorx are doubling down.

“For the full year, expansions comprised 70 percent of ThingWorx bookings,” Heppelmann said.

Hislong-term goal is for PTC to be a $2 billion, subscription based, industrial software company by 2021. He noted their emphasis on industrial software, not CADor design, for which PTC has traditionally been known. The company projects made $1.16 billion in FY2017, so making $2 billion in 2021 would require an 11percent growth each year over year for the next four years.

Geographically, Europe gave PTC the best gains, with 39 percent. Americas grew 10 percent. PTC seemed to think it was lucky to have Asia Pacific show positive growth at all and only because of turnaround in Japan following a management shakeup.

PROSTEP PDF Generator 3D Receives Best of Show for PTC Live Global 2014

BOSTON (PTC Live Global 2014) - PROSTEP, headquartered in Darmstadt, Germany, is founded and is still owned by major automotive OEMs and suppliers. They have cared enough about CAD and PLM data migration, conversion and collaboration for over 20 years, making them an international standard. With their PROSTEP PDF Generator 3D, they leverage an interesting file format that allows to display and share 3D data very easily.

 

PROSTEP PDF Generator is a 64-bit server based application for enterprises and can interface with ERP, PDM and PLM software. It can accommodate large volumes of data and up to 50 users. It is priced at 10,000 Euros ($12,000).

 

 Nominated for Best of Show for PTC Live Global 2014 by TenLinks judge, Ralf Steck

For more information

http://www.prostep.com/en

KeyShot Nominated for Best of PTC Live Global 2014

BOSTON (PTC Live Global 2014) - Luxion has developed a game-changer in the visualization area with KeyShot and there's more to like with version 5. KeyShot has managed to modernize the UI without loosing its unique style with as few buttons as possible. A library of materials on the cloud has been added. The user has the option to get new materials when needed from the cloud, instead of trying to clutter the interface with millions of  different materials.

Render in real-time with KeyShot through LiveLinking of PTC Creo data and mechanisms. Model by Micael Villena / GrabCAD.

Nominated for Best of Show for PTC Live Global 2014 by TenLinks judge, Ralf Steck.

For more information

www.keyshot.com

KeyShot 5 Adds Support for PTC Creo v3.0 - press release from Luxion

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PTC Finally Plays Well With Others - Creo 3.0 Unite

If any CAD company could be diagnosed with ADHD, it would be PTC.

A company has to grow. This can be done by acquisition. I get that. But PTC's acquisitions have been... how should I say? ...varied. At its core, a CAD company, PTC has sought to grow with such diverse applications as Arbortext (desktop publishing), MathCAD, others... but most recently Altego (MBSE) and ThingWorx (IoT)

If you are wondering what those last two acronyms mean, I have proved my point.

Expansion from its core users of CAD by PTC has been explained by a very loose interpretation of "adjacent" technologies.

Day 1

As expected, PTC CEO James Heppelmann, touted his recent acquisitions with an evangelical zeal to the 2,000 plus assembled at PTC Live Global. Engineers, as a rule, are not the jump-up-and-down types.

They were waiting.

Day 2, Creo 3.0

On day 2, PTC rolled out Creo 3.0. The salad plate, barely touched, is removed. Here was the meat and potatoes. Thousands of Creo users are paying attention. Veteran Brain Thompson, VP of product management, reveals what they could expect in the next release of Creo (due mid July).

Chief among the enhancements as Unite, which lets Creo read native files from major MCAD products.  If you wondering "can't they all do that?" then I should have emphasized read -- versus import.

"Importing a file means making a copy of the geometry," says Brian. "We leave the file in its native format."

PTC acknowleges the need to read and write to rival CAD formats in Creo 3.0

Truly, most CAD programs will import a rival's CAD file. Nobody reads in a model in someone else's format. Until Creo 3.0.

Creo can also save as other file formats. But it is a one way street. CAD programs have typically never acknowledged a need to go back -- something users see as a trap, an arrogant assertion that if you are now where you should be all along. Why would you want to go back?

But for what may be the first time, PTC takes on a coexistence approach to other CAD systems, in effect saying that you may choose to use Creo to whatever advantage it affords, but you are free to retreat to your comfort zone, even if it is another CAD program.

Caveats

Although you can read can read a file from another CAD program without translation, once it is changed (as was a Siemens NX part in a Creo assembly), the part is translated. Any design intent imparted during the change (parameters or relationship) will not be preserved when the part is saved back in its former format.

Only SOLIDWORKS, Siemens, CATIA (V5?) will be read without translation. Inventor and Solid Edge will be imported via data translation.

Not all read and write as features will be available at Creo 3.0's initial release in July, but may roll out by the end of the year.

Will GE Buy PTC?

COLORADO SPRINGS, CO - Dennis Nagy, head of BeyondCAE and industry veteran, predicted to those assembled for the joint CIC2104/NAFEMS 2014 show that GE will acquire PTC. Dennis was later to admit he had no real insider knowledge of this acquisition. However, what might be pure conjecture is worthy of consideration:

1. Siemens (likened to the GE of Europe) acquired a major CAD company with UGS in 2007
2. PTC has been seen as an acquisition target as early as 2009 (see DATAMONITOR report)
3. GE and PTC are already in bed, see GE and PTC Expand Collaboration...

A Quarter of PTC Users on Creo, Goal is 50% by End of Year

You would think that after making a product that everyone says they want, that product would be automatically and universally accepted. Not true. Ask Coca Cola, whose "new Coke formula" introduced in 1985 after millions of dollars of market research including thousands of taste-tests, met with lukewarm welcome and had to be embarassedly withdrawn.

In our industry, this is happening with Creo, a direct modeling, easy to use, 3D MCAD package, meant to replace Pro/E Wildfire, old history-based software. It was exactly what customers were saying they wanted. 

Creo was introduced with much fanfare, an overly theatrical prison break, symbolic of the constraints of the old CAD parametric, history-based systems. Here was direct modeling. Freedom.

Two and half years later, only 25% of Wildfire users have converted to Creo. PTC hopes 50% will do so by end of 2013.

"The SMBs [small and medium sized businesses] are doing much better [of converting], says PTC CEO Heppelmann. "It's the enterprise customer that is lagging. We won't be able to convert them until all the data they have can transfer."

Understandable, as design data for a big company is a vast investment. You are not going to convince John Deere (one of PTC's biggest customer of Pro/E) that it should switch to Creo for a few bells and whistles. I imagine they are quite comfortable in their "jail."

"We knew they weren't going to jump onto Creo 1.0," says Hepplemann. "Or 2.0. But by 3.0, we think they will come."

Creo 3.0 is not due til later this year

The risk to PTC is that their best, most high profile customers, will be stranded on an island from which PTC has sailed. They may well see Creo off in the distance, a very different CAD system which will get more different with each release. If they have to learn and transfer their data to a very different Creo, why not evaluate competive CAD programs, too?

 

Virtual Reality: You Can DIY or Call Virtalis

ANAHEIM, CA (PTC Live Global 2013), June 12, 2013 - You would think Paul Ewing's job at Virtalis would be easy. All he has to do is let people know that computer-generated virtual worlds in which you can immerse yourself -- a concept we have been promised since the onset of computers and by countless sci fi books and movies -- have arrived. And he can deliver it to you and set it up. Shouldn't that make us all reach for our wallets?

Virtalis is in the business of selling a system that, depending on how immersed in 3D you want to go, will let you feel like you are in a virtual world. This virtual world will appear in 3D in varying degrees of believability, ranging from a wall with a 3D image to a 6-sided "Cube" that you step inside for a "fully immersive" effect. This is the world of virtual reality, or VR. It's here, not just in movies, and Virtalis will sell it to you.

Users at CNH interact with the Virtalis ActiveWall, a virutal reality display, like the one shown at the PTC annual user meeting (image by Virtalis)

The fact that you don't know a company exists that actually makes virtual reality real for you is what makes Paul's job hard.

"We met a company that said they were going to try to build their own VR system," says Paul. "They would have had to buy the projectors, the screens, build the room...they would have to research how to set it up, what to buy, how to get all the different parts speaking to each other and how to get their software working. And this is an industry that is moving fast. What if you need a new 3D projector after a few years? Would you know the best one to get?"

I get it. Virtalis has been building 3D immersive environments for years. Wouldn't a company want that expertise and get a turn-key VR environment, made by one-stop shop experts who know about the hardware needed, the software, the integration, the interior design, etc., rather than having people figure it out by themselves?

I'm reminded of my first furniture project 20 years ago. We needed a folding futon couch but I got sticker shock in the showroom. "I can make that," I said. Ten months and thousands of dollars of shop equipment later, a couch was actually delivered.

Behind the curtain. Virtalis assembles the machinery required to show the VR, a combination of 3D projectors, screens, other hardware.

Maybe Virtalis' high-end ActiveCube systems, which can cost $150,000 up to $1,000,000+, inspire the same sticker shock but Virtalis will send their people to your location, help you design your VR room, do the installation and training and hand you over a working system. So reassuring… Entry level ActiveWall/ActiveMove systems can be had for as little as $25-30K and their experience means that it’s almost as simple as plug-and-play.

If your company wants to immerse and interact in 3D and virtual worlds, swallow your DIY urge and give Virtalis a call.

For more information visit www.virtalis.com  

PTC Loses $84 Million. Who Cares?

PTC announced their quarterly results last wee week. No matter how financial news is framed in a press release sent to us, our news service is trained to distill 3 key items to formulate a headline: revenue, change in revenue and profit. I'm not a financial analyst but I hold profit as the most important parameter of a business. The bottom line. Checking over the PTC press release, I see the revenue dipped a bit, from $339M to $325M, down 5%....but where is the profit, AKA net inclome? There is no mention of it in the headline, not in the body. I look all the way down to the tables....and Whoa, baby! PTC lost a whopping $84 million. I can hardly believe it. How can this escape being mentioned?

PTC loses $84M for quarter. At least GraphicSpeak noticed. 

I rush to see the transcripts of the call (Seeking Apha transcript), fully expecting the analysts to have flayed PTC management for such a performance Granted, the executives would not lead the discussion of the loss. Who would want to? But there is no question of it. In fact, nowhere in the whole transcript does the $84M figure come up. Rather,  the analyst seem to be a bit upbeat about the company. I'm thinking PTC has somehow transfixed the audience... maybe served them some Kool Aid. Then, to further my confusion the next day, PTC stock rises.

All my knowledge of finance, or just the basic principles, limited as they are to revenue and profit (which have served me since I had a paper route) all must have been turned on their head. If the analysts (financial whizzes, unlike me) don't have a problem with losing $84M, I have to be doing something wrong. I must find out why there is no hue and cry over the enormous loss. Is it because the company still paid a dividend to its investors? There is a a tax item of $120M that seems to me to have singlehandedly given PTC this huge loss. Was a one time occurrence and it is ok to ignore it. Inquiring (non-financial) minds need to know. Or does it have to do with the $230M PTC paid to acquire Servigistics. I hope its not because PTC still has almost $500M in the bank, because they could lose money at this rate for several years before people get worried.