Feeling negative repercussions from major changes in its sales channels, Dassault today reported slowing sales and earnings for its fourth quarter, which ended Dec. 31, 2007.
The provider of 3D design and product lifecycle management (PLM) software tools reported fourth-quarter revenue of €363.1 million, up 4% compared with the €349.4 million in revenue the company reported for the fourth quarter of 2006. An 8% quarterly improvement brought software revenue to €308.3 million.
Dassault reported a 2% drop in net income for the quarter to €76.6 million, compared with net earnings of €78.2 million in the like period a year ago.
For the year, Dassault reported a 9% rise in revenue to €1.26 billion. The company's 2007 software revenue grew by 10% to €1.06 billion, while its net income of €178.5 million was off 0.7% compared with 2006.
Dassault reported that services and other revenue, which account for 15% of the company's total revenue, decreased 7% during the quarter, excluding the impact of currency changes. Dassault blamed the drop on a strong base of comparison with the year-earlier quarter.
Company officials noted that the quarter saw a €4 million shortfall in expected revenue from services delivered through its indirect distribution channel. That shortfall was blamed on unexpected consequences of Dassault's decision earlier in the year to take over management of its PLM indirect distribution channel from partner IBM. That shift, said Dassault President and CEO Bernard Charles, in remarks Wednesday to financial analysts, meant that Dassault was forced to spend more time and resources supporting its VAR channel partners than delivering services.
During the fourth quarter as well as the full year, Charles noted, Dassault also needed to make additional investments in its sales channels, increasing the capacity of its direct channel as well as increasing the capacity of its indirect channel, particularly in South America and other developing geographies.
Charles said much of the investment required by Dassault channel expansion strategy is now behind it.
"Over the last three years, we have devoted significant time and made financial investments to expand our market reach," Charles told analysts. "When we look back in a few years, I believe it will be clear that this period marks the most important investment phase in our history."
In the fourth quarter, Dassault saw revenue from its mainstream 3D software tools grow by 9%, while revenue from its PLM software products rose 7%. Within the PLM product line, revenue from the CATIA product line rose 8%, while revenue from the ENOVIA line was up 12%.
During the quarter, Dassault saw revenue from its Asia region grow by 21% in constant currencies and in the Americas by 10%. Revenue grew by 6% in Europe in constant currencies.
Charles noted that Dassault's revenue picture was affected by weakening currencies in the United States and Japan.
Dassault predicted subdued results in 2008. The company said it expects 2008 non-GAAP software revenue to grow by 12% in constant currencies. That compares with a 16% growth rate in 2007. The company, however, predicted somewhat stronger earnings results, saying 2008 non-GAAP earnings per share will be up by 10% to 12%. That compares with a rise in 2007 of 8%.
Charles told analysts the company had not factored into 2008 revenue expectations significant contributions from the recently announced Version 6 of the company's PLM product line.
For the first quarter of 2008, Dassault said it expects non-GAAP revenues of €305 million to €310 million.