Orlando, FL. -- Cloud cover in the sunshine state yesterday didn't damper the mood at Parametric Technology Corp.'s PTC/User World Event 2005. The company used the event to announce two acquisitions, two major product upgrades, a strategic partnership with IBM, and to boldly declare it will be a $1 billion company by 2008.
Halfway into its 2005 fiscal year, the Needham, MA maker of product development software is predicting revenue of around $700 million, up slightly from the $660 million reported last year. For the second quarter, ended April 2, PTC reported net income of $20.5 million on revenues of $176.1 million compared with net income of $3.2 million (which included a restructuring charge of $16.7 million) on revenues of $164.7 million in the like period of 2004. PTC's growth has flattened over the last year as it pushes to refresh key components of its product line.
During a press and analyst briefing here, executives pointed to PTC's strengths: the company carries no debt, and has been restructuring its business model to position itself for growth. "The company transformation is around a mindset shift from selling products to understanding customer value," said Barry Cohen, PTC's executive vice president of strategic services and partners, during his presentation.
The company realizes that product lifecycle management -- where its Windchill product plays -- is morphing into a category it calls global product development (GDP). Companies that have been outsourcing manufacturing are now sending engineering offshore as well, which is driving the need for software the supports workgroups engaged in collaborative design. "It is more of a data management problem than a CAD problem," said PTC president and CEO, C. Richard Harrison.
As a result, the company spent the last 18 months reengineering its web-based Windchill architecture around a common data model that "permeates the entire infrastructure," he said. Within the new Windchill 8.0 platform, which will ship later this month, one database manages both mechanical and electronic computer-aided design (MCAD and ECAD) documents, merging its popular Pro/INTRALINK tool used to manage Pro/ENGINEER CAD software into Windchill.
Pro/INTRALINK has been a client/server solution geared for small local workgroups, but the reengineered Web version, called Pro/INTRALINK 8.0, meets the needs of engineering environments that are distributed and increasingly complex.
With the blending of Pro/INTRALINK CAD-based data management capabilities into Windchill, customers gain a single-architecture for managing design data across engineering departments and even into ERP, as the package comes with a built-in enterprise interoperability tool called Windchill Enterprise Systems Integration that bundles TIBCO's EAI technology adapters.
Also, for the first time, PTC users will have the chance to include manufacturing planning into the mix as a result of the company's acquisition of Polyplan Technologies Inc., a small Montreal maker of manufacturing process management software that can maintain dynamic links between engineering and production bill of materials. (Acquisition details were not disclosed.) The software can also track configuration changes to ensure products will be assembled according to engineering specifics and reduce manufacturing ramp-up time by providing shop floor operators with 3-D work instructions.
The Polyplan software is based on J2EE development code, as is Windchill, which will enable easier code synchronization, said company officials. "This is the missing piece of our comprehensive solution," said Jim Heppelmann, PTC's executive vice president and chief product officer.
The second acquisition, however, is just as significant, industry observers said. PTC announced it bought Aptavis Technologies Corp., a PLM solution provider to the retail, footwear and apparel industry based in Nashua, N.H. (Acquisition details were not disclosed).
The two companies have been partners in apparel for a few years, as the Aptavis product is based on Windchill and resold by PTC. Now, it's firmly part of the PTC portfolio.
The move signals PTC's acquisition strategy around key verticals. And apparel is ripe for the picking as "this is an industry that is just now embracing PLM," said Eric Karofsky, senior research analyst for AMR Research in an interview with Managing Automation.
PTC officials said they would consider making more acquisitions if they find companies or technologies that could complement future growth. Until that time, partnerships, like one with IBM to support a hosted Windchill On-Demand solution in which small- and medium-sized manufacturers can tap into a lower cost PLM solution will fill out the company's solution set. PTC's consulting practice will support the new software service.
PTC is also working on packages that will help companies capture Intellectual Property (IP) from around the globe in a knowledge portal, PTC's Cohen said.
Collectively, these initiatives have PTC on track to reach the $1 billion financial mark within three years, the company projected. "I've been at PTC for 18 years," said CEO Harrison, "and the company is at its strongest."
AMR's Karofsky recognizes PTC as a leader in the PLM market, despite its slow growth in recent years. The introduction of a common data model to manage everything from engineering to manufacturing is a clear differentiator, as other PLM vendors' software still works from multiple databases, tying information together via gateways, he noted.
As PTC educates users on its technological direction and ease of integration, the company should be able to boost its profile among new and existing customers, observers said. In retail, for example, where PTC is gaining a foothold, manufacturers are looking for ways to manage unique processses that include producing seasonal products, managing multiple specifications and materials for products distributed around the world, and vendor collaboration.
"Our business environment is changing dramatically, and we are adopting aggressive strategies and infrastructure changes to drive future growth," said John Sullivan, senior vice president, sourcing, service and systems at Liz Claiborne Inc., in a statement. "Our product development processes and technology infrastructure, including PLM, are an integral part of accomplishing our goals. PTC's approach to solving global product development challenges, and the specific capabilities of its retail, footwear and apparel solution, are well aligned with our vision for business transformation."