Parametric Technology Corp. (PTC) today announced it will acquire Arbortext Inc., a privately-held maker of dynamic enterprise publishing applications for $190 million in cash.
The deal, to be complete by the end of this month pending regulatory approval, adds two elements to PTC's existing product lifecycle management (PLM) footprint: XML authoring and enterprise publishing. It also pushes the $660 million company one step closer to its goal of being a $1 billion company by 2008.
Arbortext, based in Ann Arbor, MI, reported approximately $40 million in revenue during the past 12 months, has 1,700 customers and is used by 30% of the Fortune 500 companies. The company caters to discrete manufacturers, sharing some key client accounts with PTC including Boeing, Deere & Co., and Toyota. But Arbortext also plays in areas outside of PTC's domain, such as life sciences, financial services, insurance, publishing and government -- market opportunities that will add new revenue streams.
The revenue-generating potential is enormous, according to industry observers. The dynamic enterprise publishing market segment, in which Arbortext is a leading player, will grow more than 25% annually, according to market research firm IDC. A recent IDC report said that dynamic publishing -- defined as using content components to automatically publish customized documents on-demand -- will grow from $249.3 million in 2003 to over $1 billion by 2009.
PTC has built a strong business around its mechanical CAD products, such as Pro/ENGINEER and Pro/INTRALINK, as well as enterprise PLM and data management, through its Windchill architecture. "What we didn't have was a way to author all the textual components that need to come together with graphical components and all the service documentation," said Jim Heppelmann, PTC's executive vice president and chief product officer, in an analyst conference call this morning. "We needed a way in an XML offering to create and manage [a document] ... and publish it."
Coupling publishing with engineering data completes the PLM story, Heppelmann said. Toyota, for example is both PTC's and Arbortext's largest customer. "They use PTC to develop the core information about engines and use Arbortext to configure service information for the mechanics to work on the engine," Heppelmann said. "It's a great example of the synergy. Services need to draw on product data of engineers. By connecting the two worlds together, the service person has access to rich information ... on how the engine is supposed to work ... dynamically configured and published to him."
PTC and Arbortext were in discussions for six months and were brought together by Solar Turbines Inc., a mutual customer seeking a way to align design and data control with after-market service, PTC said.
The proposed acquisition is PTC's third takeover in less than two months. Last month, it announced agreements to buy Aptavis Technologies Corp., a PLM player in the apparel industry, and Polyplan Technologies Inc., a maker of manufacturing planning tools.
"The difference in this one versus the other acquisitions is that this adds a significant revenue base, whereas the others were functional purchases," said Eric Karofsky, senior research analyst at AMR Research in Boston. The caveat, however, is that PTC purchased Arbortext for almost five times its revenue, and only 50% of Arbortext's business is in discrete manufacturing, PTC's sweet spot, Karofksy said in an interview with Managing Automation.
"There is an opportunity in there for PTC to go after those [other] companies all of which could use and benefit from PTC products, but they need to make a decision on where to focus," he explained.
If PTC becomes too diversified, however, the company runs the risk of neglecting its PLM roots. "The path they are going down now provides well needed niche functionality, they just have to be careful not to get distracted by becoming a content management vendor," Karofsky said.
PTC declined to offer any specifics on how and when it will integrate Arbortext technology into its PLM solution. The company said the acquisition is expected to be accretive to earnings in fiscal 2006.
"This will be the industry's first turnkey solution for creating product information and dynamically publishing that in a PLM environment," said PTC president and CEO Dick Harrison during the analyst call. "We are exited about the opportunity for customers, employees and both companies."