Dissecting Dassault's Bid for MatrixOne, Part 1

8 Mar, 2006 By: Kenneth Wong

As PLM consolidates, competitors and analysts put the acquisition under a microscope

Last week, when Dassault Systèmes announced its plan to snatch up MatrixOne for US$408 million, analysts by and large recognized the acquisition as an appropriate strategic move by the global PLM (product lifecycle management) giant. Dassault's two biggest competitors, UGS and PTC, however, were prompted to contact the media to share entirely different perspectives on the acquisition.

In today's edition, we'll look at the industry's reaction to Dassault's move; tomorrow we'll delve into what the future holds for PLM vendors and their customers.

UGS, PTC React Quickly
In a letter distributed to the press the day of the Dassault announcement, UGS argued, "The premium that Dassault is willing to pay for MatrixOne is well beyond the point of MatrixOne's value." To reinforce its statements, UGS points to MatrixOne's financial performance during 16 of the past 17 quarters.

Nicole Rowe, director of PTC corporate communications, explained that PTC decided to reach out to the media immediately to dispel mounting speculation about whether that company would put in a competitive bid. In a separate interview, Jim Heppelmann, PTC chief product officer and executive vice-president of software solutions, said, "We feel that Dassault is being a little disingenuous here, in overstating what MatrixOne is going to bring to them."

What Will MatrixOne Bring Dassault?
In commentary following Dassault's announcement, AMR Research analysts Michael Burkett, Kevin O'Marah and Eric Karofsky observed, "While Dassault has been strong in automotive and aerospace, MatrixOne's Synchronicity product is strong in semiconductor, and the company has seen success in apparel and [consumer packaged goods] as well." They believe that, "with this acquisition, Dassault cements the No. 1 position in total revenue over UGS."

Joe Barkai, program director of PLM strategies at the analytical firm Manufacturing Insights, predicted, "The acquisition of MatrixOne will help Dassault Systèmes target and better address a broader range of industries and business needs. MatrixOne has more than 850 customers, representing more than 100,000 users, in the high-tech, consumer products and medical device industries."

Best Defense is a Good Offense
In its publication "Mechanical PLM Opinion Briefs: Consolidation Continues," researcher Daratech noted, "MatrixOne has been under some financial pressure in recent years, reporting revenue of $124 million for fiscal 2005 (ended July 2, 2005) with a net loss of $20.3 million." The report's authors also record that Dassault "didn't comment on the premium it is paying [for MatrixOne], but did say that it believes that some of [Dassault's] competitors had it 'in the game plan' to acquire MatrixOne."

UGS contradicted this in its letter to the press: "UGS was aware that MatrixOne was considering a sale and determined that the addition of MatrixOne did not offer us a commercial opportunity to extend the breadth or depth of our market-leading portfolio."

When asked if PTC ever considered acquiring MatrixOne, PTC's Heppelmann said, "We look at every potential acquisition candidate. But we want to buy companies that will help us grow. MatrixOne is not growing; they're not even close to profitable."

In Daratech's "Briefs: Consolidation Continues," the firm quotes Dassault CEO Bernard Charles as saying MatrixOne is "almost break-even today, and we believe [it] will be profitable shortly."

Monica Schnitger, Daratech senior vice-president of market analysis, said, "I think this was a defensive move on Dassault's part. UGS and PTC already have offerings along the lines of what the Dassault-MatrixOne combination would present to the market.".

Related Link
Dissecting Dassault's Bid for MatrixOne, Part 2

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