Dassault picks up PLM unit from Big Blue
$600m to control its own future
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Dassault Systemes, which arguably gave IBM a credible toehold in the Unix business in the late 1980s, has bought IBM's PLM software business unit for $600m.
That business unit, tucked within IBM's Software Group, was responsible for selling the CATIA product design software, developed by Dassault. It was the first big application that was tuned to run on IBM's RS/6000 AIX workstations and servers when they were launched two decades ago. The Dassault product line has expended considerably over the decades, and now includes SolidWorks, for 3D mechanical design and a set of related products for realistic simulation, global collaborative design, digital manufacturing and production, and 3D immersion.
In its 2008 year ended in December, the company booked €1,334.8m in revenues and €200.5m in net income, which is a sizeable business and a tidy profit. In the first half of 2009, sales were off only two per cent to €620.6m, but net income did fall 16 per cent to €87.3m. That decline in earnings doesn't make Dassault some kind of pariah among software vendors - or IT vendors in general - but merely one amongst its several thousand peers who have taken a hit, thanks to the economic meltdown that started last summer.
IBM and Dassault have been partners since 1981. IBM is currently looking to beef up its Software Group, whilst Dassault runs a profitable PLM business with 115,000 customers around the globe. If there is a surprise here, it is that Dassault is buying IBM's share of the partnership, rather than IBM announcing that it is buying Dassault.
Unfortunately for Big Blue, it can't afford it. This morning, Dassault's shares were trading on the Euronext Paris exchange at €40.87 a pop, giving the French software company a market capitalization of €4.82bn. At $1.49 per euro, Dassault is currently worth about $7.2bn, without any additional profit for shareholders for doing the deal. It might cost $9bn to do a deal - a lot more than IBM has ever shelled out for anything, and more than IBM was willing to spend to acquire Sun Microsystems, and even then it changed its mind.
And so, Dassault announced that it was shelling out $600m to take on the 700 employees focused on selling the PLM stack within IBM and to become a more loosely coupled software partner of Big Blue's - albeit one with 1,000 more direct customers than it had before the deal.
Not that Dassault or IBM would ever admit there is a more loose coupling between the two, of course. The sales pitch coming from Bernard Charles, president and chief executive officer at Dassault, pitched the deal as a "new global alliance expected to expand PLM in all industries." Maybe something got lost in translation, but it sounds more like Dassault has decided to do its own selling, across a more diverse set of platforms, and had to buy IBM out of the deal to get the freedom to do this.
Dassault is buying the sales, marketing, services, and support operations that IBM has built up to support the PLM tools as part of the deal, and this is the largest financial transaction that Dassault has done in its history. In a conference call with analysts this morning, Charles said that IBM's PLM business "was a well managed business, with a high level of recurring software revenue, and with solid operating profitability," and that it would be accretive to earnings once the deal closes, probably in the second quarter of 2010.
Charles said that IBM would continue to partner in professional services, cloud computing, financing, hardware, and sales and distribution. Dassault is working on cloud-based versions of its PLM software and is working with IBM to create a platform to run these upon. What he did not say - and what is almost certainly true now - is that Dassault now has the freedom to partner with other platform providers, because it will no longer be perceived as being tightly partnered with IBM. And IBM could use the cash to buy back shares to pump up its earnings per share figures. ®
COMMENTS
IBM PC-RT
The 6150 was only marginally underpowered when it was first released, but suffered from lack of upgrade until close to the end of it's life (about 5 years) when the 6150-135 deskside and 6151-115 desktop systems were produced. The product numbers followed the IBM PC line (the original IBM PC was a 5150), and the initial development was for the PC division to produce a RISC based PC.
But without the 801 processor (which has been argued by some as being the first commercially available RISC processor), there would have been no RS/6000, PowerPC, RS64, POWER, or CELL products (or, in fact, the 9371 deskside mainframe, or some of the current crop of zSeries systems that use POWER processor offshoots).
I always thought the the dial and button boxes were quite a neat idea, and I saw them used to great effect with CAD for zoom and pan operations. How well they were used was largely dependent on how much effort was put into installing it into the workstation (desk - not computer).
What you must remember was that this was an 80's designed system that looked its era, and should have been updated more frequently than it was. I can't remember how Sun 2 and 3 boxes looked at the time, but I'm sure that it was much less slick that the Sparc pizza boxes that appeared in the later.
Whilst it was possible to have async terminal and graphics head attached, it was not necessary. I had a 6150-135 fully populated with 24MB of memory (although it was only supposed to support 16) and 930MB of ESDI disk, with a Megapel adapter and 5081 model 1 17" display as my home UNIX system for several years.
The version of AIX sucked more than a bit (it was a non-paging SVR2 port in the days of SVR3 and BSD4.3), and it was built on a hardware abstraction layer called the VRM which isolated AIX from the hardware (for disk and memory allocation [the VRM did the paging providing AIX with a larger address space than the available memory - possibly the first Hypervisor outside of a Mainframe environment] and serial port configuration, anyone else remember the minidisk and devices commands).
Boy, was it noisy, and the 5081 screen was sooooooo heavy (it had a lump of concrete in it to counterbalence the weight of the display tube). I gave it away to a computing museum (complete with a full set of 30ish install floppies and manuals) when I decided that Linux was a better way of having a UNIX-like OS in the house.
Happy days.
Brings Bank Memories
It ran on what was called the RT 6150 - a complete heap of shite. It was a collection of units - two screens - text and graphic, two keyboards and various other units - dials for zooming, mouse, graphic pad. It was underpowered and overpriced. There were much better units available.
Most of these are gone and you can now get a POWER 595 that can run a multi-national.
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