ANN ARBOR, Michigan, March 2, 2006 — Earlier today, Dassault Systèmes (DS) announced their intent to acquire MatrixOne for a total of $408 million. They expect to finalize the acquisition in the second quarter of this year. CIMdata is positive on this acquisition and believe that it has the potential to be an excellent move for DS, MatrixOne, and the industry.
MatrixOne is one of the leaders in providing lifecycle management focused PLM solutions. Their revenues in their FY05 (ended in May 2005) were $124 million, and CIMdata recognizes them as one of the six key “PLM Mindshare Leaders.” MatrixOne has a relatively broad suite of applications focused on many major processes within the overall product lifecycle, from requirements management through compliance. They have been a leader in driving integration with heterogeneous design environments, with a special focus on incorporating electronic design processes. MatrixOne has been particularly successful at building and leveraging a wide-ranging global partnership network to expand their footprint in the market; CIMdata estimates that their market presence has been approximately three times the size of their direct revenues.
However, MatrixOne has struggled for a number of years as well. Over the last year, they addressed and resolved a revenue reporting audit. Although the final revenue impact did not have a major impact on their business success, the impact on business operations resulting from executive attention diverted away from business development and management was draining on the organization. Over the past three years, MatrixOne’s revenues have not grown at the rate that they have wanted, and they have lagged behind the growth rates of major competitors such as DS. As a result of these struggles, MatrixOne has been a continuous target of acquisition rumors in the industry, most likely negatively impacting their reputation and sales success. One result of this acquisition will be to provide MatrixOne’s customers with more confidence in the long-term stability of their technology suite.
DS has positioned the acquisition as a mechanism to expand their offerings to better address the PLM market. Specifically, they have positioned MatrixOne to address the high-end of the market for large- scale customer implementations, especially those focused on collaborative business processes requiring document and workflow management. In addition, MatrixOne provides DS a clear means to address the High-Tech Electronics industries with their focus, customer base, and solution offerings. At the same time, SMARTEAM has been positioned toward mid-range lifecycle management solutions, creating a potential issue due to previous positioning of SMARTEAM and some overlaps in solution offerings between the two programs.
This acquisition will close a chapter on the history of MatrixOne as one of the last “independent” PLM suppliers is merged into one of the major suppliers to the industry, and further reinforces the maturing of the PLM industry. MatrixOne has been a leader in the delivery of application solutions focused on specific business processes. For MatrixOne, this announcement is positive. It provides the opportunity to invest substantially in further development of their offerings and provides an organization and channel operation that can take them to market much more broadly. MatrixOne’s suite of offerings now has a much better potential for long-term market success.
CIMdata believes that this acquisition has the potential to be very good for DS and provides them with solutions that have not been effectively addressed in the DS suite. It provides them with lifecycle- focused PLM solution offerings that address large-scale customer implementations in heterogeneous CAD environments. It also provides them with well developed solutions, customers, and services skills in industries that DS would like to attack more effectively, especially High-Tech Electronics. The MatrixOne technology suite was praised by DS in their announcement teleconference, and has the potential to provide capabilities that can be further leveraged within the overall DS technology suites.
DS’ challenge will be to define and execute on a technology and business integration plan that will enable them to achieve the potential benefits from this acquisition. Full plans have not yet been completed; that should be done over the next several months as the acquisition is finalized. In their announcement, DS stated that they expect to gain approximately $25M in operational synergies in 2007. These saving are substantial, and may be a challenge to achieve while keeping MatrixOne’s core knowledge base and expertise intact. MatrixOne has developed a substantial channel operation, and a challenge for DS will be to work effectively with this group to transition them to DS’ channel relationship model. Some of these partners may have some reluctance to continue working with them due to DS’ very close IBM relationship.
DS will now have three major PLM management-focused technology suites: ENOVIA, SMARTEAM, and the new one from MatrixOne. DS’ strategy and roadmap for integrating the technology platforms and positioning these programs must be clearly defined and communicated to their internal organization, the market, their customers, and their various channels. This will not be a trivial exercise. The initial positioning communicated in the announcement earlier today was sufficient for now, but much more clarity is necessary before the acquisition becomes final in the second quarter.
As stated earlier in this commentary, CIMdata is positive about this announcement, and believe that it has the potential to be an excellent move for DS, MatrixOne, and the industry – one of the major PLM suppliers has expanded their suite of offerings to address a broader range of customers and industries, and the technology suite from one of the leading independent suppliers has been given longer-term stability. If successful, this acquisition can put additional competitive pressure on DS’ major competitors who will need to evaluate their potential response. We look forward to seeing this acquisition proceed over the coming months and hope that the potential benefits become reality.
