The CAD business is over. The concentration of what used to be the CAD business into an engineering applications business is in full flood. The agreed bid by EDS to create a billion dollar revenue engineering applications business around the UGS management team is not the final step.

When you compare apples with apples, there are now four roughly equal sized players: the expanded UGS unit of EDS; Autodesk; Dassault/IBM; and PTC. The next largest players are about a fifth the size of these giants. They specialise in a niche like Analysis rather than offer a wide range of integrated products. However, typically markets stabilise around three major players. The obvious next step is for two of the four to merge. This would create a two billion dollar company that would dominate the others.

This step would be difficult so we suspect a more viable alternative is the merger of an engineering applications vendor with an enterprise applications vendor. To some extent, organisational changes at IBM already lead in this direction. IBM's PLM business is now closer to the mainstream Industry business unit within Global Services.

Until this deal IBM/Dassault could reasonably claim to be the number one for engineering applications in the automotive industry. Now two of the three US auto-makers are UGS customers. Recently UGS won significant business in Fiat. While in Japan, there is a fascinating struggle between UGS and IBM to win the business at Toyota, the last of the major auto-makers not using a system from one of the big four. The automotive number one title is up for grabs. We live in interesting times!

Author : Mike Evans

Press releases :

From EDS : EDS To Acquire SDRC.

From UGS : EDS Buys SDRC and UGS, Creating a PLM Giant

Conference call : Tony Affuso and EDS executives and financial analysts May 23, 2001 (about one hour).

Industry commentary :

The Financial Times : EDS expands with $950m buy, by Tom Foremski in San Francisco, May 24, 2001.

The Wall Street Journal : EDS to Buy Structural Dynamics and Unigraphics Stake for 1.12 Billion - this marks Dick Brown's (CEO of EDS) third major acquisition, by Elliot Spagat, May 24, 2001.

Reuter's : EDS to Buy Structural Dynamics for $950 Mln, by Marcus Kabel, May 23, 2001.

CADALYST : Merging companies have products that compete head to head, by Sarah Ferris, May 23, 2001.

TenLinks.com : UGS/SDRC Will Pass PTC to Become #2 MCAD Company, May 23, 2001