MSC Cuts 140 Workers as Legal Bills Take Toll
By ANDREW SIMONS
MSC.Software Corp. has laid off about 8% of its staff amid an earnings shortfall and a federal probe into two acquisitions.
The cuts amount to 140 workers, with about 90 coming from MSC.Software’s Santa Ana headquarters, according to a company spokesman.
“We cut across all types of jobs, from sales to engineering,” spokesman Todd Evans said.
MSC shares slumped 40% in April after the company reported an operating loss of $3.9 million in the first quarter, compared to a profit of $3.7 million a year earlier.
Shareholders were shaken by the loss after the company,which had expected a profit for the quarter,blamed the red ink on slow global sales and mounting legal costs from a Federal Trade Commission probe into acquisitions MSC made two years ago.
Two brokerages downgraded MSC from “strong buy” to “hold” recommendations after the earnings release.
“Clearly, we are disappointed with the results in the first quarter,” MSC Chief Executive Frank Perna said in a statement.
The commission’s case against MSC’s 2000 buy of Torrance’s Universal Analytics Inc. and Costa Mesa’s Computerized Structural Analysis & Research Corp. is set to go to trial in July, according to Evans. The case had a preliminary hearing this month.
In a federal probe of the acquisitions, which started in October, regulators claim they stunted competition for a certain type of software code used in testing product designs. MSC argues that a niche product line is too narrow for antitrust laws to apply. The government could force MSC to sell off the acquired companies if it prevails.
The case is critical for MSC, which has an aggressive acquisition record and plans to continue buying in the future.
When the commission requested in its initial filing that MSC turn over documents dating back to 1995, the company said the request was too broad for a case focusing on deals made in 2000.
That led the commission to deliver a scathing response in January, saying MSC has demonstrated “a disturbing habit of reneging on promises” to disclose documents.
The commission then sent investigators to MSC headquarters to remove materials.
The inquiry grew increasingly acrimonious in recent months, with attorneys for MSC charging that the commission has no evidence of wrongdoing while the commission argues MSC has been stalling in providing documents for its investigation.
The company in January asked for help from the administrative law judge handling the case in getting documents from rival ANSYS Inc. of Canonsburg, Penn. MSC, which still is trying to get the documents, hopes to the product-related material will show it didn’t eliminate competition.
MSC’s buy of another company,Ann Arbor, Mich.-based Mechanical Dynamics,went much more smoothly. That deal closed three weeks ago.
