PLM giant Dassault Systèmes yesterday agreed to acquire MatrixOne Inc. in a $408 million cash deal aimed at filling critical holes in Dassault's engineering-oriented, 3D design product line.
The acquisition, which should be completed in the second quarter of this year, provides the $1.2 billion Dassault with a broader set of applications built around product lifecycle technology, from requirements management through sourcing and compliance. It also gives Dassault critical business process modeling capabilities, packaged solutions for new vertical markets, and more scalable technology to meet the needs of large-scale customer implementations, particularly in the area of collaboration and document and workflow management.
"As we drive forward to build the future shape of this big market called PLM, we need to be able to serve both the manufacturers of extremely complex products like the Airbus 380, which we currently master, as well as companies making less complex products, but which have processes that are very complex," explained Dassault President and CEO Bernard Charles, in a press conference announcing the deal. "We have not been covering the full spectrum with PLM, and we plan to do so with MatrixOne."
Along with strengthening its PLM technology base, the MatrixOne deal should provide some operational efficiencies, Dassault officials said. For instance, Charles said Dassault foresees at least $8 million in savings this year and approximately $25 million in 2007. (A company document attributed projected cost savings to leverage achieved through the shared use of Dassault's corporate resources, infrastructure and public company status.)
Moreover, while he declined to divulge specifics about Dassault's management or product integration plans, Charles did say that the company has a track record of maintaining key management and employees from acquired companies and expects to do the same with MatrixOne.
PLM analysts were bullish on the deal, saying the acquisition benefited both parties and the industry in general. MatrixOne, which had revenues of $124 million in its fiscal 2005, has been struggling to compete in a segment increasingly dominated by big players like Dassault, along with PTC (Needham, MA) and UGS (Plano, TX). Now, as part of Paris-based Dassault, MatrixOne customers should be assured of a long-term product roadmap and improved financial stability, analysts said.
For Dassault, which has built up a formidable customer base in aerospace and defense, automotive, and shipbuilding, the MatrixOne acquisition expands its play into new markets such as apparel, high-tech and electronics, consumer packaged goods, and life sciences. In addition, Dassault's 3D and engineering-oriented application suite -- in particular, its Enovia Product Data Management (PDM) platform -- was lacking in the area of business process workflows and templates across the full spectrum of a product's lifecycle.
"MatrixOne fills in a hole for them that's good sized," said Ed Miller, president of market researcher CIMdata Inc., (Ann Arbor, MI), in an interview with Managing Automation. "It provides the technology they need, the scalability they need, and a packaged application flavor to extend their footprint. In addition to the technology, MatrixOne has a pretty good service organization that understands these areas."
Bolstering its service organization could be a good defensive move considering that Dassault's long-time exclusive partner in this space, IBM, recently struck a deal with PTC. The arrangement lets IBM sell PTC's products along with Dassault's line through its global sales and service network.
Dassault's efforts to broaden into new industries via MatrixOne present a great opportunity, providing the company makes the commitment to invest in training, marketing, and customer advisory boards to build up its domain expertise, noted Kevin O'Marah, vice president of research at AMR Research Inc. (Boston), in an interview with Managing Automation. "Just because you now have a few clients in the CPG market doesn't mean Dassault has fully baked credibility in CPG -- they have to make something of it," O'Marah said.
Dassault's key PLM competitors put their spin on the acquisition. UGS officials called the move an acknowledgement that Dassault's collaborative PDM capabilities were lacking, and they and officials from Agile Software Corp. (San Jose, CA) said it was also an endorsement of CAD-agnostic, open PLM. "UGS recognized the value of having a common, integrated and open cPDM platform long ago and has been delivering on this vision for several years," said UGS officials in a statement. "Dassault's acquisition of MatrixOne further validates the CAD-agnostic, enterprise PLM category," said Agile President and COO Jay Fulcher.
PLM experts say the acquisition is an indicator that the PLM industry is strong and maturing. Said O'Marah: "The PLM market has gone beyond the formative stages to a degree of structural maturity and that's probably good. It takes some uncertainty out of the industry and adds some long-term stability to the market."