Feb 28

Written by: Russ Henke
2/28/2009 10:09 AM 

In recent blog entries in this space, the impacts of the general US and worldwide economic collapse on Electronics IP Providers were discussed. For example, on January 22 and 30, 2009, recent financials were presented for a small EDA IP supplier (Virage Logic) located in Silicon Valley.

Then on February 20, 2009, Internet access was published here to the latest overall financial reports & commentary on seven key Electronics IP Providers, just posted that day in EDAcafe.com:

http://www10.edacafe.com/nbc/articles/view_article.php?articleid=656383

Electronics IP Providers form a subset of the overall Electronics Design Automation (EDA) software & services industry, the “CAD” of modern electronics devices and chips. The detailed saga of one of the BIG 3 EDA vendors (Cadence Design Systems) over the last six months was also updated here in a blog entry on February 22, 2009.

But the worlds of MCAD and MCAE are also of interest to COFES aficionados. Recently (February 26, 2009), the financial performances for Q4 2008 and the full year 2008 were published for two rivals in the MCAE arena: ANSYS, Inc. and MSC.Software Corporation. The rivalry is long-lived: ANSYS was founded in 1970, and MSC in 1963.

To add emphasis to the severity of deteriorating economic environment in which these and all US companies are operating, we all found out on February 27, 2009 that the US economy at the end of last year actually contracted at a far faster rate than initially estimated, according to a US Bureau of Economic Analysis report. The decline in the country's gross domestic product in Q4 2008 was the worst since the 1982 recession. Output fell 6.2% at an annualized rate in the fourth quarter of 2008, revised downward from a previous estimate of a 3.8% decline.

So how did ANSYS and MSC.Software fair during these tough times?

It appears that ANSYS defied the Q4 and 2008 economic environment! ANSYS delivered revenue of $135.3 million in the fourth quarter of 2008 as compared to revenue of $111.2 million in the fourth quarter of 2007. ANSYS also earned net income of $31.9 million in Q4 2008 as compared to net income of $29.3 million in Q4 2007. For all of 2008, ANSYS reported revenue of $478.3 million in 2008 as compared to $385.3 million in 2007. Total 2008 net income of $111.7 million compared to net income of $82.4 million in 2007.

For its part, MSC.Software did not fair as well. MSC reported total revenue for the fourth quarter ended December 31, 2008 at $65.0 million, compared to $71.1 million for the fourth quarter in 2007. For the fourth quarter, loss from continuing operations totaled $22.5 million or ($0.50) per diluted share, and included a net tax charge of $17.3 million, resulting primarily from establishing a valuation allowance totaling $22.9 million. For the fourth quarter last year, net income from continuing operations totaled $2.3 million or $0.05 per diluted share. Total MSC.Software revenue for the year ended December 31, 2008 was $254.4 million or only 53% of the 2008 revenue for ANSYS, and compared to $246.7 million for MSC last year. Whereas ANSYS operated in the black, for the year MSC’s loss from continuing operations totaled $21.3 million or ($0.47) per diluted share, compared to a loss from continuing operations of $2.6 million or ($0.06) per diluted share for FY 2007.

Notwithstanding their actual financial performances, both ANSYS and MSC.Software suffered declines in their stock prices during 2008, closing 2008 at $27.89 per share, down 33% for the year for ANSYS; and closing at $6.68 per share, or down 49% for the year for MSC.

As of Friday February 27, 2009, ANSYS stock closed at $20.17 and MSC closed at $4.62, down another 28 % and 31% just since December 31, 2008, respectively.

However, ANSYS Market Cap as of yesterday was still $1.81 billion, whereas MSC.Software Market Cap stood at only $209 million.