In a critical step to expand its product development portfolio with higher-end design capabilities, Autodesk Inc. has agreed to acquire Alias, a Toronto-based privately-held maker of 3-D graphics software, for $182 million in cash.
For its manufacturing customers, particularly those in automotive and consumer products sectors, Alias' software suite, specifically its StudioTools package, brings industrial-strength design and high-end visualization capabilities useful in the conceptual design phase, prior to engineering or production. With these kinds of capabilities, car manufacturers or bike makers, for example, could tap the Alias product to build highly detailed and realistic prototypes of possible designs, prior to moving them into the engineering or even production stage.
Current Alias customers in this space include Trek Bicycle, General Motors, Mattel, and BMW, among others.
"Manufacturers in the automotive and consumer products space are increasingly using software for conceptual design work rather than physical prototyping, and they want full integration with tools like Inventor," explained Carol Bartz, chairman and CEO of the $1.2 billion Autodesk (San Raphael, CA), in remarks made at a press conference announcing the deal. "A lot of the design that happens in the conceptual phase has been isolated and recreated when it comes over [to engineering]. This helps extend that digital pipeline."
While Autodesk officials declined to provide specifics, they said the two companies' software lines would remain independent to serve different audiences and different phases of the design effort. However, they said plans were already underway to create tighter integration for sharing data and models between the myriad packages.
"Alias is not an engineering system, it's a design system," said Buzz Kross, Autodesk's vice president of manufacturing solutions, in a separate interview. "Our customers today are engineers who are not concerned about how something looks, but rather, how it works. They're focused on function, while designers are focused on aesthetics. We see a great opportunity to tie the two things together."
Another benefit to integrating both product lines is the ability to leverage Autodesk's Vault product data management system to manage and store Alias design files. "One of the problems Alias has had is there is no system to manage all that conceptual design data," Kross added. '... and Vault will be evolved to manage Alias files."
Alias, which recorded $83 million in fiscal 2005 revenue, is said to have considerable R&D talent among its 600 employees, although officials confirmed there would be cost cutting and organizational changes to bring efficiencies to the combined company. The acquisition should be completed in four to six months, and despite the relatively high price tag -- Alias was sold to an investment group by Silicon Graphics Inc. last year for only $57.5 million -- Autodesk officials said they expect to recoup their investment quickly, with Alias contributing to the company's earnings by 2007.
As with any sizable acquisition, there are bound to be challenges. In particular, analysts said Autodesk will face some technical challenges creating a tight integration path between the two product lines, as a result of having different data structures. Distribution, meanwhile, is bound to be another hurdle.
Autodesk officials said that the majority of Alias products would be sold through Autodesk's indirect channel, but some experts have their doubts about that strategy. "I don't think they can push these Alias tools through the Autodesk resellers -- they are too high end and it's a different sell," noted Gisela Wilson, director of Product Lifecycle Management, at market researcher International Data Corp. (Framingham, MA).
Kross conceded some Alias products were not a fit for Autodesk's resellers, although he cited the company's DesignStudio tools as an example where there was synergy.
Even with the integration challenges, Wilson remains bullish on the acquisition and sees the move as a way for Autodesk to close in on territory owned by PLM competitors with higher-end CAD tools. 'This definitely opens up the high-end of the conceptual design market for Autodesk and maps nicely into their long-term strategy," Wilson said. 'It gets them into the consumer products market, which is new for them and is just being opened up by Dassault and PTC."
In addition to manufacturing, the Alias product suite is a draw for another major Autodesk market segment: Media and entertainment, where customers like DreamWorks SKG and Nintendo are already employing the Alias tools to create animation and special effects for major motion pictures as well as video games.
The deal is Autodesk's second acquisition disclosed in the last few months. In August, the company revealed plans to buy SolidDynamics SA, a small French purveyor of design simulation software and services.