Simulation, Design Software on a Roll
By ANDREW SIMONS
It may not be the sexiest software around, but at least these folks are making money.
Orange County makers of industrial design and simulation software,used to make 3-D models for controlling factory production or modeling products,have seen annual sales grow by 15% on average in the past year.
While the companies have seen growth cool from 2000’s roughly 25% clip, they are notable because other software makers are faring worse. Epicor Software Corp., OC’s second largest software maker, saw its sales growth rate go from 46% to a 16% contraction last year. Costa Mesa-based FileNET Corp., the county’s largest software maker, reported a $4.5 million operating loss for the third quarter and analysts expect more red ink for the fourth quarter.
By comparison, Santa Ana’s MSC.Software Corp., a maker of software for aerospace, auto and other engineers, grew sales by 19% in the past year with healthy profits. Given the economy, MSC.Software’s Chief Executive Frank Perna is unabashed about his company.
“It’s absolutely the best time for us,” Perna said. “We are the best company in Orange County.”
The market for design and simulation software is an anomaly, though. Customers don’t buy simulation or design software all that often. So once a software maker has landed a contract with, say, Boeing Co. or Ingersoll-Rand Co., the deals typically are good for added services,such as installation and training,for years to come.
For MSC, services are an increasing chunk of the company’s revenue, growing from 29% in 1998 to around 40% today.
“That’s where one of the most unbelievable opportunities exist,” Perna said. “Many of our customers are not able to unleash the power of our software.”
The sector has caught the eye of some big names. Last year, Electronic Data Systems Corp. bought back Cypress-based UGS Inc., a developer of computer design, manufacturing and engineering software, three years after spinning it off in an initial public offering. EDS paid $170 million to buy back UGS, also known as Unigraphics.
UGS itself has some acquisitions under its belt, having bought Ames, Iowa-based Engineering Automation Inc. a year ago. In the months leading up to UGS’ reacquisition by EDS, UGS posted quarterly sales growth of 14% year-to-year.
MSC also has been buying. Last year, the company acquired Santa Ana-based Advanced Enterprise Solutions Inc. for about $130 million, as well as a software line from Silicon Graphics Inc. for an undisclosed sum.
Britain’s Invensys PLC, an engineering giant with hands in the industrial design and factory automation markets, has been a big force in the consolidation of OC’s design and simulation sector.
Invensys bought up three of the largest OC industrial simulation software makers in the past several years and folded them into its traditional, bulky European corporate structure.
Wonderware Corp., a Lake Forest-based maker of factory automation software, has had to trim its staff since Invensys acquired it in 1998 in a deal valued at nearly $375 million. Engineers at Wonderware, accustomed to working for a small organization, have had to adjust to life within the Invensys empire.
“It’s not so much that it’s a British company. It’s just a large global culture. Everybody is readjusting how we think,” said John Nichols, vice president and general manager of Wonderware.
Since joining Invensys, Wonderware’s focus has shifted from selling its own branded software to developing a kernel,the most basic software code for an application,for future Invensys software. An Invensys offering based on Wonderware’s kernel is due out later this year.
“We’ve been making active efforts to keep Wonderware dynamic,” Nichols said. “We want to maintain the interest level and motivation.”
The company has met sales targets, according to Nichols. Last year, Wonderware’s sales grew some 49% to $156 million.
“I would say overall it has been a success,” Nichols said.
Brea’s Simulation Sciences Inc., a maker of computer-aided modeling software, has seen its own changes since joining Invensys in 1998. The company has been the exception to the sector’s growth of late, with sales declining as much as 16% last year. Simulation Sciences declined to be interviewed for this story.
In the past three years, the company has turned over its management team, bringing in Invensys veterans Brian Ahern as president, Michael Rowland as business development director and Chris Harding as vice president of research and development.
Simulation Sciences, known as SimSci, makes software that simulates the operations of oil refineries and chemical plants. SimSci also provides some engineering, training and integration services for its products. Founded in 1967 by retired chairman Yui L. Wang, the company is one of OC’s oldest software makers.
Invensys’ other OC company, Irvine-based Triconex Corp., is growing. A year ago, Triconex moved into bigger digs in the Irvine Spectrum. The company pulled 85,000 square feet, up from the 50,000 square feet the company previously had. Triconex employs about 170 people in OC.
The move gave Triconex a 30% growth in manufacturing and warehousing space and a 25% increase in research and development space, including laboratories. Triconex’s customers are industrial companies that use its software to automate plants.
