A chemical engineer specializing in process simulation, synthesis, design, optimization, and scheduling, my judgements on SMCI are as follows:
(1). SMCI specializes in developing software for the process industries, i.e., any industries involving the transformation and/or transfer of materials, e.g., processes for producing petroleum, natural gas, chemicals, pharmaceutical, cosmetics, ceramics, metals, paper, food, beverage, and minerals as well as those involved in pollution control; the potential software market is huge, e.g., some $5 billion, while the rate of penetration is low, e.g., some 5-8%.
(2). The major players are AZPN and SMCI. AZPN originated from a huge Dept. of Energy sponsored project in the late 70's (Basically, their original software is still available for every American). The key members of the original research group founded the company in either late 70's or early 80's. On the other hand, SMCI was founded either in the late 60's and 70's. Basically, both companies are well-established and have their very loyal customers which are mostly multi-national petroleum and chemical firms. Other players like Hyprotech and Chemshare are much smaller and serve, more often than not, small companies.
(3). Although the market is huge and there are only quite few players, it's very difficult for a new players to penetrate this market since the development of the pertinent software desires the employment of complicated and specific know-how in chemical, biochemical, materials, and physical knowledge as well as comprehensive data base on various chemicals which are mostly not publicly available. Thus, SMCI is a very attractive acquisition target at the current price.
(4). Both AZPN and SMCI have been pursuing the strategy of acquisition and merging aiming at providing a comprehensive software solution for the process industries recently. Currently, AZPN appears to be leading the game because it started two years earlier and, consequently, it has bought more companies. The products from both firms are solid. Nevertheless, as Sanker stated, SMCI is much better in GUI and its products are normally much user-friendly according to my personal experiences as well as the opinions of some users in America, Europe, and Asia with whom I have personal contact. In fact, AZPN hasn't released its first PC Window version of its flagship product, ASPEN PLUS, up to now; see aspentech.com
Of course, the DOS version is available but it can not be fun to use DOS these days. In contrast, SMCI released the PC Window version of its Flagship product, PRO II, which is comparable to ASPEN PLUS long time ago. Thus, I guess SMCI may be better in in-house development.
(5). In summary, I think SMCI is a solid company and the stock appears to be a good buy.
Regards,
Gangyi
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