Barely a month after its acquisition by automation giant Siemens AG was announced, product lifecycle management software provider UGS yesterday reported strong fourth-quarter financial results, with a 76% increase in net income leading the numbers.
UGS, which expects the $3.5 billion acquisition by Siemens to close in the April/May timeframe, said that for the fourth quarter, ended Dec. 31, 2006, revenue grew to $353 million, up 8% compared with $327 million in the year-ago quarter. Net income jumped 76% to $23 million, from $13 million.
Full-year 2006 results, however, showed another annual loss for UGS. The company suffered a $10.3 million loss on a 6% gain in revenues to $1.2 billion. In 2005, UGS lost $10 million.
On a conference call with financial analysts, UGS officials attempted to keep the focus on the quarter's results and upcoming new product launches, including new versions of the company's Teamcenter product data management and NX product development software lines slated for later this year. But the Siemens acquisition was clearly on their minds.
Tony Affuso, UGS chairman, CEO, and president, said the acquisition "sets a new agenda" for the PLM market. "The transaction is great news for UGS," he said. "It accelerates our shared vision of global innovation networks."
Affuso said that UGS employees were "energized" by the acquisition announcement and that customers had positive feelings about it, too. He also said that UGS's current operating management team will remain with the company after the deal is completed. Next week, he noted, the companies will have their first major integration meeting. Once the acquisition is completed, Affuso said, UGS will go to market under the tagline, UGS, a Siemens Company.
In an interview, Charles Foundyller, founder and chief executive of Daratech, Inc., a market research firm, said the acquisition's success will depend upon execution. "The issue is how will Siemens manage it, and how aligned their visions are," Foundyller said.
In announcing its fourth-quarter results, UGS said that software license revenue grew 12% to $128 million, with key product lines scoring double-digit increases. The company's collaborative product development (cPDM) software recorded a 22% gain in license revenue for the quarter. The UGS Velocity Series, a product line for mid-size manufacturers, gained 30% in license revenue year over year.
Software license revenue from digital manufacturing, a key concept that underpins the rationale for the acquisition by Siemens, grew 28%, UGS said.
Foundyller said that Daratech has forecast 8% growth for the PLM market in 2006, which would put UGS's full-year 2006 revenue growth of 6% slightly below the overall market. Foundyller, however, said he believes that UGS maintained its position in the market. "It is unlikely that they lost market share this year," he said. "But they certainly held their own."