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Technology Stocks : Tecnomatix Technologies Ltd. (TCNOF) - Any comments?
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To: Bennett Zimmerman who wrote (104)9/29/1998 12:48:00 PM
From: growthvalue  Read Replies (1) of 113
 
I think the business is slow due to a capital spending recession compounded by the year 2000 problem. I think that due to compressed profit margins in heavy manufacturing and other industrial sectors, where TCNOF sells its products, there is less demand for CAD software and less demand for CAPE software.

Of course it makes sense to spend money to improve productivity when your margins are compressed, but it doesn't tend to work that way. When things are bad, companies pinch pennies. They are also in a situation where they need to spend a lot of money to rectify Y2K problems.

So I think the market is soft. For a lot of software - not just TCNOF

However, I think that Tecnomatix remains the leader in its market. I think that Deneb (who is apparently their only true competitor) has effectively been relegated to serving Dassault customers by its acquisition.

As far as Engineering Animation, I think the factory layout and factory simulation are slightly different animals. Tecnomatix really is involved more in the latter. To the extent that they overlap, I think the edge might belong to TCNOF, simply because they can simulate the manufacturing process. I don't think EAI really has that capability.

EAI is doing very well, but remember that they have their hand in interactive games and their primary business is distributing information about CAD-based designs throughout the enterprise. So just because they're recent successes probably have little to do with Tecnomatix's slowdown.

I think the value is clearly there. It will just require patience. Tecnomatix has a key technology - it should pick up like wildfire when the international economy stabilizes and it makes more sense to build out new capacity and increase capital spending. During the most recent world-wide boom, TCNOF did extremely well. It will happen, but probably not quickly. At these levels, with the cash they have, I can't believe there is much downside.

GV

p.s. I hold shares at a much higher price than the current price... :( I will probably accumulate some more when and if I see some signs of a turn-around. I would only sell if I saw them losing their leadership position.
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