Will Autodesk Buy UGS?

CEO Carol Bartz finally does it: Autodesk breaks the $1 billion mark for the first time. During 2004, its revenues increased by 30% to reach $1.234 billion.

Autodesk's recent agreement to cooperate over certain file formats with UGS fuels speculation that the publically-held Autodesk might acquire the privately-held UGS. Here is some of the rationale from readers and me:

Autodesk stock is near its all-time high and overvalued -- a good time to use the high value on a spending spree.

Autodesk has a half-billion (or so) of cash sitting in the bank.

Autodesk has no software at the high-end; UGS has high-end CAD and PLM software.

UGS's private equity investors want to cash out.

UGS gives Autodesk to some of the largest accounts in the world, like General Motors.

Solid Edge has surfacing and industrial design features that Inventor could use.

Together, Autodesk UGS would leap-frog Dassault by becoming the largest, no-questions-asked, CAD company in the world.

Price tag? Between $2 and $4.5 billion. In the meantime, cooperating on file formats could be a test case to see how well the two corporations work together.

Comments

[Dennis Pence]

This sounds very "iffy" for lack of a better term. Overvalued stock (what's new), No "high end" mechanical solution - (not even a good midrange), UGS investors want to "cash out" (where did you get this information?) Surfacing and industrial design features that Inventor could use (if they were going to buy UGS - why keep an inferior product like Inventor> Take what is good in Inventor (if anything) and move it into Solid Edge. PLM and high end CAD are a sandbox Autodesk has never played in. If they pony up that kind of cash (and I don't think they will), it will require a massive change in personnel. I would like to know how you base this conclusion on the agreement to cooperate on certain file formats.

[ralphg]

The editor responds:

Just as you don't find the arguments by my readers convicing, I find yours non-convincing. So, we're even!

[Evan Yares]

Interesting speculation, but knowing the top managers at UGS, the sensitivity of UGS's top customers, and Autodesk's history on acquisitions, I'd say that it would be a disaster if it did happen.

[Michael Wendenburg]

I completely agree with Dennis. Who is not cooperating with UGS on certain file formats - I suppose we are talking about JT? From the UGS investor's point of view the speculation seems unrealistic. They would reasonably expect more than 2,5 billion dollars for their UGS shares, in line with the revenue and profit increase since they bought the company for 2 billion, most of it in cash. I would not bet a dime on the Autodesk share price after the deal because the integration would have a tremendous impact on the business of the two companies. Does nobody remember what happened after the UGS SDRC merger?