MSC.Software's Friday the 13th Nightmare

MSC.Software (Nasdaq: MSCS), which develops enterprise software, got very unlucky on Friday the 13th as the stock price got crushed. Ironically, the stock price fell 13% to $13.64.

Isn’t that kind of freaky?

Well, it certainly was for investors. Unfortunately, the company said revenues will be awful for the third quarter. The new guidance is $58 million to $60 million, which is below Wall Street’s expectation of $84 million.

Another big problem: license revenue is forecasted to fall by 15%. This is always a big risk factor for software companies.

MSC.Software has been developing simulation software for over 40 years. The software does things such as help engineers model products, systems and components. MSC.Software’s customers are concentrated in three main sectors: aerospace, autos and heavy machinery.

In the third quarter, MSC.Software suffered from difficulties in closing a variety of million-dollar contracts. It looks like these pending deals will be pushed into the fourth quarter.

MSC.Software did recently strike a strategic alliance with IBM (NYSE: IBM). This deal is apparently resulting in a stronger customer pipeline -- as well as higher-priced contracts.

Basically, for 2006, the company is in a transition. But with its new product launches and relationship with IBM, 2007 could be a year for growth.

Comments

[mikel:]

Msc has survived by assuming that once locked in, its customers will always accept increasingly out of date software and very poor customer service. Their products Patran and nastran are now hopelessly out of date in compariosn to other simulation products. Their entire product line is very poorly integrated and very expensive. Now, they claim they will more than catch up very rapidly with competitors Simulia (formerly ABAQUS now owned by Dassualt) and ANSYS at the same time they are laying people off. Meanwhile, ANSYS continues to grow and its stock soars. And SIMULIA has an entrance through Dassault to all many of MSC's customers. As far as I am concerned, MSC products will be used only in completely stagnant engineering depts. And, if reliable data file translators were on the market; companies would completely abandon MSC for their competitor's products.

2007 Oct 25 04:23 PM