Kevin Hamm, a former computer manager with Lockheed Martin's government electronics group, sure took quite a chance and is now "sub-bing" windchill to small companies. Ready to explode!
Smashing article! PMTC will hit $ 50, as earnings and profits increase!
Parametric Resets Design Software
To Match Engineers' Internet Needs
By WILLIAM M. BULKELEY
Staff Reporter of THE WALL STREET JOURNAL
WALTHAM, Mass. -- Parametric Technology Inc.'s customers use its mechanical-engineering software to design Audi roadsters and Atlas rockets.
But for the past 18 months, it has been working on a problem its Ph.D. mathematical modelers couldn't handle: redesigning itself for the Internet. "We were mentally prepared to bet the whole company," says Steven Walske, chairman and chief executive, who has run Parametric since it started selling software in 1988.
The transition has been painful, involving costly acquisitions and reduced earnings and sales from 1996 to 1998, as well as an 18-month slide in its once highflying stock to the low teens for most of the year from $33.75 in April 1998.
New Internet Product
Now the company's moves are starting to pay off. Customers are raving about its new Windchill software, which uses the Internet to link computerized design with purchasing, outsourcing, manufacturing and long-term maintenance. They say it puts Parametric at the heart of manufacturing companies' strategy for rapid change and "mass customization" in the next decade.
Some say Parametric could capture a role as fundamental as that of SAP AG, the German company whose enterprise resource-planning software remade the way many companies track their costs and internal operations in the past 10 years.
"Windchill lets us manage the most important asset we have -- it takes all the intellectual property from design inception to the launch of a rocket," says Curt Bigelow, program manager at Lockheed Martin Corp.'s Astronautics unit, which makes satellites in Denver. Fifty Astronautics employees use the system, and that number is expected to jump to more than 2,000 by March, after which the company will encourage lead suppliers to buy it, Mr. Bigelow says.
Windchill "is a prime-time product, and they've captured first-mover advantage," says David Burdick, an analyst with the technology-research firm Gartner Group Inc., who predicts "collaborative product commerce" will characterize the way companies work together. "Their market has the potential to be five times bigger than what they do now."
Shares Increase
Wall Street is starting to believe. Since September, Parametric's stock has roughly doubled. According to First Call/Thomson Financial, analysts expect per-share earnings to rise 34% in the fiscal year ending Sept. 30 and 25% the next year. Jay Vleeschhouwer, a Merrill Lynch & Co. analyst, says, "We're beginning to see Windchill take shape as a complete solution, and that is manifesting itself in a growing pipeline of sales opportunities."
Mr. Walske says Windchill sales are rising even faster than Wall Street expects. "I think we'll exceed $300 million" in the current fiscal year, up from $80 million last year, he says. That would far exceed the $230 million Mr. Vleeschhouwer "conservatively" forecasts.
Like most CAD/CAM (it stands for computer-aided design/computer-aided manufacturing) software makers, Parametric focused on making design engineers more productive. From its start in 1988, it became the market leader in eight years, thanks in part to its technology for automatically resizing products when one dimension was changed.
Then, with $800 million in annual sales, Parametric decided it needed to reconsider its business. "Once you become the market leader, you can only grow as fast as the market," Mr. Walske says. And Parametric wasn't having much success in dislodging entrenched rivals Dassault Systemes SA, Structural Dynamics Research Corp. and Computervision Corp. from engineering departments at major auto makers and aircraft firms, the two oldest and biggest markets for CAD/CAM.
Worse, "the market for design workstations has slowed down considerably, and it's become a commodity," says Charles Foundyller, president of Daratech Inc., a Cambridge, Mass., market-research firm. Mr. Foundyller says that in the mid-1990s, SolidWorks Corp., Concord, Mass., which has since been acquired by Dassault, started selling $4,000 workstations with about 80% of the capability for three-dimensional modeling that Parametric's $20,000 ProEngineer offered.
'Lucky' Acquisition
At the end of 1997, Parametric agreed to acquire Computervision, the debt-ridden industry pioneer, in a bid to expand its customer base. The deal added $237 million in debt to cash-rich Parametric's balance sheet, but it brought a host of new customers. And unexpectedly, it brought Windchill. "It's in the category of 'it's better to be lucky than smart,' " Mr. Walske says of the unplanned acquisition of the Internet product.
Parametric's new technology opens the door for customers to order customized parts from suppliers by getting into their design libraries with an Internet browser. Using Windchill, the customer can make the design changes and the suppliers' software will automatically generate the blueprints and instructions for suppliers' machine tools. Windchill can track parts even if they are recorded in different databases in different ways. It can synchronize bills of material generated by the engineers with the ones that are used on the manufacturing floor.
"It's not just for engineering," says James Baum, executive vice president of Parametric. "It's for the complete life cycle." For example, Caterpillar Inc.'s Solar Turbines, the world's biggest maker of gas turbines, needs to keep track of the machines during their 30-year life. If a customer on a North Sea oil platform orders a replacement compressor, Solar needs to know where to drill the bolt-holes for attaching it to the deck. "If you're off half an inch in the connection, you have a week of retrofitting," says Paul Lewis, a Solar manager.
Kevin Hamm, a former computer manager with Lockheed Martin's government electronics group, says that Windchill's Web-connection enabled Lockheed to speed up Naval design reviews by 35% to 40%, saving $73,500 in four months. Instead of sending voluminous paper reports to Pentagon contract reviewers, "we eliminated paper and sent an e-mail with a Web link," so the reviewers could directly access Lockheed's database to check parts costs. Avoiding sending hard copy of blueprints to Navy bases saved $35,000 in nine months, he adds.
He likes Windchill so much he has left Lockheed to start a new company that will host Windchill software under contract from small companies that want to use it by tapping into a central computer.
Write to William M. Bulkeley at william.bulkeley@wsj.com
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