MSC.Software Third Quarter was One to Forget

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Randall S. Newton, December 14, 2006

MSC.Software Corporation (NASDAQ: MSCS) reported a depressing third quarter, but says the worst is over. Total revenue for the three months ending September 30, 2006 was $58.4 million compared to $75.6 million for the same period in 2005, a decline of 23%. MSC CEO Bill Weyand attributes the poor numbers to the company's transition to selling enterprise software platform applications and a resulting increase in the sales cycle. Since announcing these results, MSC has launched a new software line and reinvigorated a sales partnership.

The GAAP loss was $0.04 a share, compared with GAAP earnings of $0.14 a share a year ago. Software revenue for the period were $22.7 million compared with $36.8 million year-over, a decline of 39%. MSC advises the steep decline can be partially attributed to a net restatement adjustment in the third quarter of 2005 for $7 million. Maintenance revenue in the third quarter totaled $28.9 million and services revenue totaled $6.8 million, compared to $28.2 million of maintenance revenue and $10.5 million of services revenue for the same period in 2005.

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MSC has announced an expanded partnership with INCAT, a reseller of MCAD and PLM products and services. The new relationship targets the same SMB ambitions as MCAD and PLM vendors, except that MSC and INCAT are focusing on the simulation market. With the exception of MSC, the simulation market is booming as it becomes more affordable—and more necessary—to run multiple simulations for all the various parts in an assembly. In July Weyand told CADCAMnet that MSC doesn’t intend to focus solely on large customers; he also plans to beef up the company’s lower-cost point solutions to sell through a future network of independent dealers.

Breaking the quarter down by geographic units, total revenue in the Americas was $17.1 million, a decrease of 15.8% compared to $20.3 million last year. Total revenue in EMEA was $23.1 million, a decrease of 13.4% compared to $26.7 million last year. In Asia Pacific total revenue was $18.2 million, a decrease of 36.5% compared to $28.6 million last year.

The full article is available for a fee at CADCAMNet.