Ansoft Corporation: Continuous Innovation

| About: Ansoft Corp. (ANST)

Ansoft (ANST) develops electronic design automation [EDA] software, which is used by product engineers to design electrical devices and systems such as wireless phones, internet networking products, integrated circuits, sensors, and motors.

The company’s software solutions help customers define the architecture of their product, design circuits and components, evaluate the interaction of components, and optimize performance under real world conditions. This allows them to maximize performance through simulation. Using software, an engineer can evaluate a wireless circuit design for possible flaws or test high-speed electronics at different clock speeds without having to build an actual prototype.

High Frequency Simulation Software [HFSS] is ANST’s flagship 3D electromagnetic field simulator for high frequency, radio frequency, and wireless design. Nexxim is an advanced circuit simulator. ANST also offers electromechanical software such as Maxwell 2D and 3D, which are used to solve design problems that require interpretation of electromagnetic field behavior. Simplorer is a multidomain simulation package used to design complex power electronics and drive systems. D

ue to the numerous application possibilities, ANST boasts more than 2,000 customers from various industries including communications, semiconductor, automotive, consumer electronics, industrial, defense, and aerospace. The list includes some of the biggest blue chip names such as Motorola, Ericsson, Intel,Texas Instruments, IBM, General Motors, Ford, Boeing and Lockheed-Martin. Instead of selling the software, ANST licenses it out on a perpetual basis. Licensing fees represented 57.3% of fiscal 2007 revenues. The remainder came from post-contract customer support.

ANST’s software products allow engineers to automate time-consuming design processes that would otherwise be prone to error. This significantly improves productivity and efficiency, and hastens the process of bringing new products to market. It also eliminates many of the costs associated with building prototypes. Technological improvements and advances in recent years, such as the ability to transmit data at Gigabit speeds and greater functionality on a single chip, have dramatically increased the complexity of electronic components and circuits. This complexity increases demand for ANST’s EDA software products, which are specifically designed to cater to the ever increasing operating performance needs of electrical devices.

anst 1 Revenues for fiscal 2007 (ended April 30) climbed 15.4% year-over-year to $89.1 million. Licensing revenues climbed 19.1%. Service and other revenues were up 10.9%. The operating profit margin improved 361 basis points to 29.78%. Operating income jumped 31.4% to $26.5 million. Pro forma net income surged 34.1% to $19.3 million or 74 cents per share. Including certain tax benefits, GAAP net income was $20.2 million or 77 cents per share.

An economic slowdown, especially in the technology sector, could have an adverse impact on ANST’s business. However, the company has a long history of increasing sales by developing new and innovative software. Indeed, revenues have nearly tripled since the start of the new century. Continued demand for smaller, more multifunctional, and more powerful devices should help sustain ANST’s above average growth rates for many years to come.

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