 | | EDS to Sell Part of PLM Solutionsreprinted by permission of Ralph Grabowski, editor
October 14, 2003EDS plans to sell a minority (less than 50%) portion of PLM Solutions, its CAD division that develops and markets NX, Solid Edge, and other software related to CAD. The sale is expected to be completed in the first half of 2004 as an private offering or as an IPO (initial public offering). The move is part of new CEO Michael Jordan's plan for turning around the financially troubled services corporation. The goal is to sharpen EDS's focus on its core business of being "the premier global outsourcing services company." The sale is a means for EDS to generate cash, along with the possibility of selling off the division in its entirety. The return to independence is hinted at by PLM Solutions' president Tony Affuso's statement: "We expect this alternative would enable PLM Solutions to be more agile in the market, make decisions more quickly, and more effectively leverage our roots as an independent software company on behalf of our customers." Because EDS needs cash, I am guessing they will sell 49% of PLM. Another possibility is to sell 25% now, and hope the price rises before selling the other 24%. PLM Solutions has 41,000 customers, and in 2002 generated revenues of $879 million, representing 4% of EDS's total revenue. The selling price of companies typically ranges from one to three times its annual revenues. I am not surprised at the announcement from EDS, because its ownership of Unigraphics (relabeled as "PLM Solutions") never made sense to me. The financial problems of EDS made the partial spin-off inevitable. The sole link between the EDS and PLM is services: EDS sells computer services, and CAD software sales have the possibility of generating after-sales services. Who might buy it? Management buy-outs are popular these days, meaning the management of PLM Solutions could buy their own company. IMSI is on a buying spree, but doesn't have the cash for something this big (perhaps $430 million or more). I doubt that EDS's competitors Dassault, Autodesk, or PTC would be interested in partial ownership, but I do expect some rivals to send out FUD*-sprinkled press releases in the coming months. In related news, EDS PLM Solutions announces that its PLM product, Teamcenter, has one million users, and claims it is the first PLM product to reach that size. * [Editor's note: FUD stands for Fear, Uncertainty, Doubt and is a marketing technique used to cast doubt over a competitor's offerings to make people think twice before buying it.] More Select PLM Articles |
