| Abstract: | The CAD and collaboration technology company could be the next domino to fall in the quickly consolidating product lifecycle management market.
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| Keywords: | PTC buyer, PTC sale |
Parametric Technologies Corp., a maker of CAD and process management software, has hung out a $2 billion price tag and is looking for a buyer, a recent Financial Times story reported, citing sources close to the action. A PTC spokeswoman would not comment on the story, but speculation and questions have begun to percolate through the industry, including whether an acquisition would make sense, whether the putative price is right, and who the best bidder might be.
The Financial Times reported on Saturday that PTC has hired Goldman Sachs as an adviser and is in the early stages of identifying potential buyers. When contacted by Managing Automation, PTC declined to discuss the report. “The company does not comment on speculation regarding M&A activity,” said spokeswoman Nicole Rowe. Rowe did say, however, that the company is healthy and stable, having recently raised its guidance for the fourth quarter, which will close Sept. 30. It is also on track to be a $1 billion company in fiscal 2008, she said.
The company has not topped $1 billion in annual sales since 1999. The revenue resurgence is a direct result of some of the growth initiatives the company put in place in 2004. “We basically set a goal of $1 billion as a revenue target, and with that we said we would do a couple of things: First, grow the product portfolio to meet increasing demands on customers; second, focus on indirect revenue through the VAR channel by deploying solutions to the small and medium-sized business market; and third, globalize operations,” Rowe said.
Over the past four years, PTC has acquired 14 companies — 12 of which were technology-focused buys. It has steadily upgraded products and recently won a major account with EADS, the maker of Airbus, to supply an enterprise-wide, cross-divisional PLM program based on PTC’s Windchill content and process management product.
With all of this activity, industry analysts were surprised by the $2 billion asking price reported by the Financial Times — a price that undersells PTC’s current market capitalization of $2.2 billion.
“The price doesn’t seem right to me,” said Ken Amann, director of research at CIMdata Inc, a PLM-focused analyst firm. “When I look at what companies are acquired for, it is generally two-and-a-half to three times the [revenue] value. Given the revenue I think they’ll generate in 2008, [$2 billion] seems a little light.”
And why would the company seek an acquisition? Some speculate that PTC, which a few years ago was the big fish in a small PLM pond, is feeling the pressure of recent market activity, including Oracle’s acquisition of Agile and Siemens’ purchase of UGS.
“Now PTC is the small player in the mix, with the least resources for R&D, and from that standpoint they are likely feeling the pressure that companies like Agile [felt] when they were the small player on the block,” CIMdata’s Amann said. “Over time, we know that PTC would be a potential acquisition target, but it didn’t seem like a high probability until recently. With the change in the landscape, there is more pressure on them. If they [become] part of a larger organization, they will have more resources.
But that begs the question: Who might want to buy PTC, which has both collaborative management technologies and major CAD capabilities?
Amann said he doesn’t foresee a competitor buying PTC, nor an enterprise software company such as SAP, which doesn’t need to be in the CAD business. However, if the digital factory trend jump-started by Siemens’ acquisition of UGS catches on, an automation company may entertain the idea of purchasing PTC, he said.
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