Managing embedded software as part of product development continues to be a major trend in PLM.
When John Deere became PTC’s first customer in 1988, nobody was putting software inside products. Today PTC estimates that two-thirds of its customers are developing products that include a software component. With that evolution in product development in mind, PTC today announced the acquisition of MKS of Waterloo, Ontario, a maker of application lifecycle management software. PTC says the acquisition will give its customers a stronger total product development solution in this age of mechatronics.
PTC will acquire the publicly traded MKS of Waterloo, Ontario, Canada, for $292.5 million Canadian ($304.3 million US) in an all-cash offer. PTC will finance the transaction by drawing on a line of credit for approximately $250 million and use approximately $54 million cash on hand. The two companies expect the deal to close by the end of June 2011, subject to the normal process of shareholder and regulator approvals. PTC expects the deal to be revenue neutral in fiscal year 2011, which ends September 30.
MKS says its Integrity product line coordinates and manages all activities and artifacts associated with developing software intensive products, including requirements, models, and code-and-test, to ensure comprehensive lifecycle traceability. PTC says by unifying MKS’s ALM solutions with PTC’s PLM solutions, PTC will enable manufacturers to better align the management of a product’s hardware components and related software.
MKS reported revenue of $62.9 million CDN ($65.4 million USD) for the fiscal year ended April 30, 2010. The analyst consensus is that MKS will report revenue of $75 million CDN ($78 million USD) for the fiscal year ending April 30, 2011.
During a call with analysts to discuss the acquisition, PTC CEO James Heppelmann pointed out two PTC customers who are already using MKS Integrity. In 2010 European automotive components manufacturer Continental standardized on PTC’s Windchill, and also inked a deal for MKS Integrity. The company said at the time that both purchases were strategic to its future in automotive, where hardware and software integration has become a competitive differentiator. Research in Motion (RIM), maker of the legendary Blackberry cell phones, is the epitome of mechatronic product development. The device is externally mechanical but would be nothing without its software. RIM uses both PTC Pro/Engineer (now renamed Creo Elements/Pro) and Windchill and MKS Integrity to manage its complete product development process.
Heppelmann said that when he took over as PTC CEO last year, the company did a strategic inventory of strengths and weaknesses. One key finding was the need to offer software that manages the entire product development process, not just the mechanical aspects. As PTC finalized Windchill 10 (announced last week), it included hooks for third-party ALM tools including Integrity, knowing its customers would need access to such capabilities. Heppelmann says the existence of such hooks will now make it easy to integrate Integrity into Windchill.