Altium deal. Could be big.
Further to our recent blog post on Altium Limited (ASX:ALU), Altium has today announced that it has signed an OEM agreement with Dassault Systèmes to introduce a new SOLIDWORKS Electronic Computer – Aided Design (ECAD) product based on Altium’s Printed Circuit Board (PCB) software technology.
This looks to be quite a large deal for Altium, from their perspective: “Dassault Systèmes’ selection of Altium’s PCB software technology is the most powerful endorsement of Altium’s bid for market leadership and is a clear indication that Altium is seen by industry leaders as the future of PCB design software”.
So why the strong wording?
Well firstly, Altium’s software will now collaborate seamlessly with Solidworks software. Solidworks focuses on Mechanical design whilst Altium is obviously electronically focused. This results in one complete package, marrying up the building of a vehicle for example with integrated electronics design – rather than running two pieces of software separately.
Secondly, Altium becomes completely embedded into Solidworks and sold as 1 package so their addressable market just got a lot bigger. According to Wikipedia, Solidworks had over 2.0 million engineers and designers at more than 165,000 companies using their product in 2013. Further to this, Solidworks has a 300 strong reseller network which compares to Altium’s network which from our understanding currently consists of just 27 after significant restructuring in recent times.
Unfortunately no terms or pricing of the agreement have been released and we will need to talk to the company here to get further insight here, but we note that Altiums ECAD solution for the mechanical design market was a potential ~$10-$15m revenue product. This announcement probably sees that grow to a multiple of this given their immediate reach uplift.
Further, we reviewed Dassault’s annual report which can be found here.
We note that segmented revenue for Solidworks is ~$450m Euros or closer to $700m AUD. When one compares this to Altium’s revenue of sub ~$80m USD, it gives us a good feel for the potential scale and importance of this deal. Especially when one considers that should the integration be successful for both companies, Dassaults growth profile also includes numerous acquisitions, particularly since 2007.
Russell Muldoon is the Portfolio Manager of The Montgomery [Private] Fund. To invest with Montgomery domestically and globally, find out more.
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