LAS VEGAS -- Despite persistent profitability problems and platform stability issues that have impacted some customers upgrading to the latest major release of its software, Agile Software Corp. is poised for growth and may consider additional acquisitions, said Jay Fulcher, the company's incoming CEO.
Speaking at Agile's annual Agility customer conference here, Fulcher -- who is president and chief operating officer and will replace current CEO Bryan Stolle on May 1 -- said his near-term goal is to grow Agile's revenues to the $200 million level by pursuing a three-part strategy. Fulcher's strategy includes: Extending Agile's product line into new geographies and new markets; taking advantage of the company's position as one of the few remaining pure-play PLM vendors in the market, and finding other ways to accelerate growth, including acquisitions.
"We are not naïve about the fact that it will take some inorganic growth for us to reach our scale goals," Fulcher stated in an interview with Managing Automation. "We will need to do some bigger, bolder things."
It's important for Agile to rapidly increase its size, Fulcher said, in order to demonstrate to prospective customers that the company is financially stable and will be around to support them into the future. The company reported a fiscal 2005 loss of $7.2 million (compared with the $24.1 million deficit posted in fiscal 2004), on revenues of $117 million, which represented a 21.5% increase from the year-earlier period.
Agile has made five acquisitions in the past two and a half years. Last year the company bought collaborative visualization software provider Cimmetry Systems. Agile customers have taken well to Cimmetry, and the acquisition has boosted the company's financial results, Fulcher said.
The recently announced acquisition of pure-play PLM competitor Matrix One by Dassault Systemes will be a boost for Agile, Fulcher predicted. "We were delighted with the outcome for us," Fulcher said, first because Agile doesn't compete much with Dassault, which focuses on aerospace and defense and automotive markets and second because Matrix One, as part of Dassault, can no longer claim it is agnostic about supporting many different CAD and design-tool product lines.
"We've been given an opportunity now that we are one of the only remaining agnostic, pure-play PLM vendors," Fulcher said.
Fulcher predicted that Agile will return to profitability in the fourth quarter of its fiscal 2006 following three quarters of losses. Fulcher attributed the losses to expected research and development expense increases as Agile earlier this year worked to get a major new release of its core product, Agile 9.0, out the door. The losses continued one quarter longer than expected, Fulcher said, partly because of a drop-off in service revenues in the most recent quarter.
While acknowledging some stability problems with the first release of Agile 9.0, Fulcher said the company's customers are beginning to aggressively migrate to the new release, which represents a major shift from a client/server architecture to a service-oriented architecture. So far, 100 customers have migrated to the new platform, including between 20% and 25% of Agile's high-end enterprise customers, Fulcher said. Another 70 migration projects are underway.
At Agility, the company announced that electronics part manufacturer Foxlink (Taipei, Taiwan) is the latest customer upgrading to the 9.2 version of Agile PLM.
Seventy Agile 9 upgrade projects are currently underway, Fulcher said.
Some customers attending the Agility conference, however, said initial stability problems have caused them to delay upgrading to Agile 9. Adonis Sbrana-Werness, a manager at data storage device maker SanDisk Inc., said the company is holding off migrating to Agile 9.2 until the end of the year, "when stability improves." Another customer, manufacturing manager Cam Bickell of materials testing machine maker Instron Corp., said his company has been evaluating an upgrade to Agile 9 for two years .
Customers said the initial release of Agile 9 came with scores of bugs, including memory leaks and a balky Java-based user interface. Dave Hudgens, a document control manager at Extreme Networks Inc., said the initial release of Agile 9 was "a disaster" when he attempted to deploy it at another company. Hudgens is now deploying the 9.2 version of Agile PLM, which became available in December. He said the stability of 9.2 is much better than 9.0, "although there are still some memory issues and some Java issues."
Fulcher said Agile 9 stability problems have been largely resolved. He called the problems part of the normal maturation process of software developed for a new architecture. "Any time you go from client/server to Java and Web services, you're going to run into some amount of that," Fulcher said.
Agile's search for continuing growth, Fulcher said, will see the company put more resources into new geographies and new markets. Asia -- particularly China -- will be a strong growth engine for Agile, he predicted. Already, the company has 50 customers in mainland China and Taiwan.
Agile also will focus more on what for it are new markets, including consumer packaged goods manufacturing. The company, which has seen its greatest success to date in the high-tech electronics market, has begun to beef up its marketing to CPG companies. Agile's largest customer in the past year, Fulcher said, was Herbalife International of America Inc., a maker of health food products.
In Agile's existing markets, the most significant current driver of PLM demand, according to Fulcher, is the need for manufacturers to comply with regulations such as the RoHS and WEEE environmental rules affecting electronics manufacturers. To help small and medium-sized manufacturers achieve compliance with such regulations, Agile earlier this week disclosed that it is including Product Compliance Management, Standards Compliance Management, and Engineering Data eXchange features in the new 2006 release of Agile Advantage.
At Agility, Agile also announced that Agile 9 will support the Red Hat AS version 4.0 release of the Linux operating system.