MCAD Tech News #105 (September 3, 2003)

2 Sep, 2003 By: Joe Greco

IMSI (International Microcomputer Software Inc.,, the makers of TurboCAD, one of the most renowned low-cost products (priced under $1,000), recently made two big purchases, both of which left some people scratching their heads. First, on July 30th, it purchased several product lines from a competitor, Upperspace (, known for DesignCAD and other design-related products. Then, on August 25th, in a more surprising move, IMSI announced its plans to purchase CADKEY Corp. (, the developers of CADKEY Workshop and other related products.

Instant Outcome of the First Purchase

Let's start with a look at IMSI's first purchase. IMSI itself was in a financial mess between 1999 and 2000. Things started to turn around for the company a few years ago. Earlier this year IMSI sold its Web site for $13 million. Subsequently IMSI used an undetermined amount of the cash from this sale to acquire Upperspace's DesignCAD and many others products in the Instant series.

So what did it do for IMSI? The purchase added to the company's portfolio a few more packages, but they may only confuse perspective buyers. It now has another general-purpose CAD tool (DesignCAD, which competes with TurboCAD) and some process-specific CAD tools (such as Instant Engineer and Instant Estimator). However, to add to the confusion, Upperspace is still selling the same exact two products on its Web site, but is now calling them Quickie Engineer and Quickie Estimator, for $40 each (that's $10 more than what IMSI charges). And Upperspace continues to sell DesignCAD on its Web site as well.

Furthermore, there is no mention of the product acquisitions on Upperspace's Web site. Only on IMSI's site is there an announcement of the deal, informing Upperspace users of the future of the product, where to obtain technical support, and so on. IMSI's Web site also says that Upperspace will continue to develop and market software and training products, and IMSI will be releasing Version 14 of DesignCAD within a month. IMSI also mentions that it will support the former Upperspace products at no charge.

The Key to the Second Purchase

About the same time the IMSI was finalizing its deal with Upperspace, IMSI and CADKEY Corp. were in discussion--not about a buyout, but about selling each other's products on both companies' Web sites. Then, just last week, IMSI announced that it was planning to purchase CADKEY for U.S. $2.5 million. Before we get into how low of a price that is, let's take a look at some of the recent happenings at CADKEY.

In June of this year, when the U.S. Supreme Court denied its request to hear its case involving HLB Technologies, Inc., CADKEY had exhausted all of its appeals. The details of this case are quite lengthy (this has been going on for 12 years), but the end result is that CADKEY is going to have to come up with $5 million for HLB as a result of the settlement. So on August 22nd, just three days before the IMSI announced its intention to purchase CADKEY, the latter filed for bankruptcy protection.

Bankruptcy law in Massachusetts requires that CADKEY allow bids from other companies interested in purchasing it, and such bids will certainly raise the price of the sale. However, even if the price goes up and even with that settlement hanging over their heads, the final price (probably about $3 million) will still end up being a good deal for IMSI--in spite of what's in the next section.

CADKEY's Status

CADKEY Corp. is a privately held company and does not release financial statements to the public on a regular basis. Regardless, I did dig up an old press release from late 1999 that stated the company had seen its third consecutive year of increasing sales; however, its earnings were down. Keep in mind that this was during a period when the CAD industry and manufacturing sector were both doing a lot better than they are today. The general consensus in the industry is that the company has been struggling for a few years, and scaling back operations.

Recently, CADKEY stated that it was a company with $4 million in annual revenue. If this number is correct, then CADKEY's claim that it shipped 300,000 copies of software worldwide doesn't add up, because the maintenance revenues alone would far exceed this amount (for instance, $600 a year for CADKEY Workshop, less for other products). It is my feeling that the number of active users is a lot less, probably closer to 25,000, because so many have migrated to other systems over the years. So if 50 percent of these 25,000 are paying maintenance (the industry average), that would mean 12,500 people are shelling out (let's guesstimate) an average of $400 a year in maintenance. That's $6 million a year in revenues, just from maintenance, but we have to consider that probably half of this amount goes to the resellers, so that's $3 million a year left for CADKEY. So with the revenues from sales of new products, we wind up somewhere in the neighborhood of the $4 million. Now there are many ways to work these numbers, but the conclusion will still be the same: the number of CADKEY users may be a lot less than the number of copies of software sold.

Regardless of how many active users are really out there, the purchase is still a good deal for IMSI. It will add a new customer-base and a selection of new technologies. In addition, the synergy of the products should work out well for IMSI. For starters, both IMSI and CADKEY products run on the ACIS kernel. In addition, CADKEY Workshop contains many advanced surfacing and solid modeling features that TurboCAD doesn't offer. However, each user interface works differently, so a user moving up from TurboCAD would have to learn an entirely new product. It will be interesting to see if IMSI puts any resources into this area.

There is also some product overlap. Both CADKEY and IMSI have low-end CAM products (KEYMILL and Turbo CAD/CAM, respectively), however, neither is setting the manufacturing world on fire, so maybe merging the products can help IMSI compete.


About five years ago, I was talking to an IMSI representative who said he would like to send me the company's current line of software products to look over. A few days later, a rather large box arrived and my first thought was, "I didn't know IMSI had gone into the small appliances business" (I expected to find a small fridge in the box). There was no fridge, just scores of programs: several low-end CAD applications that competed against one another, and many other consumer programs for everything from multimedia design to accounting. About a year later, when the company announced it was having financial problems, I couldn't help but think about that box and wondered if IMSI had spread itself too thin.

IMSI still has some consumer products, but the company's renaissance can, in part, be traced back to when it began scaling back its product line and eliminating similar products. While I feel it has purchased a set of high-value products from Upperspace and will get value from its purchase of CADKEY, once the acquisition is finalized, I hope these deals don't end up hurting IMSI in the long run.

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