PTC Live: CAD, PLM, Services, IoT – lots of IoT

PTC had a tough balancing act last week at its Live Global event: act like a CAD and PLM company for the majority of the attendees, help a smaller but vibrant community of manufacturers develop their services delivery capabilities while also pulling us towards the Internet of Things. If attendees were focused, they got what they came for; if they were willing to look up and around a bit, they got a great deal more.

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To characterize it as a single “PTC Live” isn’t really right, since three events were taking place simultaneously. The main event was PTC Live, fka Planet PTC, in its 25th anniversary incarnation. PTC Live covered all things Creo, Windchill, Mathcad, et al and presented content related to PTC’s more traditional portfolio, end-use cases and end-industries. Alongside that event, like last year, was the Service Exchange, sessions focused on helping customers build a sustainable competitive advantage through services offerings. New this year was the third event, LiveWorx, which presented PTC’s second-to-last acquisition to all attendees and then channeled off for deeper dives into harnessing the value of the Internet of Things.

We started out together for Monday morning’s keynote, headlined by PTC CEO Jim Heppelmann:

Mr. Heppelman sees PTC’s evolution as natural, both a consequence of and a driver for the way our manufactured goods are changing. He told attendees that products that used to be purely mechanical have evolved to contain electrical and, increasingly, intelligent components — and that these products will soon be connected to a support network, perhaps via the Internet of Things (IoT). CAD used to be enough; now it’s essential but no longer all you need to design a modern, competitive product. Collaboration and distributed workers mean you need PLM; add in software, and you need ALM; grow stronger customer relationships and profit centers via a services offering, and you may need SLM. Mr. Heppelmann sees PTC now offering a closed loop: Creo for physical design, Integrity for software design, Atego (see below) for systems engineering, all managed in  Windchill. SLM (Services Lifecycle Management) manages the manufacturer’s relationship with the product and customer after sales, through its services life. All of this is enabled by the technology PTC acquired with ThingWorx, its IoT brand.

It was important that PTC started the three events by bringing everyone together, to make clear that there’s a coherent, overarching strategy — and that PTC is committed to serving its manufacturing constituency from any part of the customer enterprise: design, manufacturing or service. Once past that, though, Mr. Heppelmann’s excitement about the IoT came to the fore. He talked about the potential for the IoT to change the way products are designed, sold and serviced, and told us that

The IoT isn’t really about the Internet, it’s about the things. The things are what’s changing. That’s where the innovation is really happening … There is no Internet of Things without your things.

The keynote session included customer presentations; foreshadowed product release announcements and introduced us to Atego, the latest acquisition.

Atego is a UK company that develops applications for model-based systems and software engineering. PTC paid $50 million in cash for the company, which had revenue of about $20 million in 2013.  Atego’s eponymous solutions connect requirements, architecture, physical product design and system verification to make it easier to standardize processes and common components, combining mechanical, electrical , controls and software. Brian Shepherd, EVP Enterprise Segments, PTC told us that Atego “extends our existing ALM and PLM technologies, and directly supports customers’ needs to integrate multiple systems engineering disciplines.” PTC expects the acquisition to close in FQ4, which ends September 30. Given that timing, PTC expects to realize about $5 million in revenue from Atego and expects it to be neutral to PTC’s non-GAAP EPS.

Many of you want to know what’s coming in Creo and Windchill. Mr. Shepherd and Mike Campbell, EVP CAD Segment, quickly ran through dozens of highlights and showcased customers along the way:

while VP Brian Thompson took a deeper dive into Creo 3.0:

From my conversations with attendees, the most popular coming attraction in Creo 3.0 are

  • The multi-CAD capabilities aka Unite, which will let users open native CATIA, NX, and SolidWorks parts without needing a 3rd party license or converting data. Unite is available in PTC Creo Parametric, Creo Direct, Creo Simulate, and Creo Options Modeler apps. In addition, users can import Solid Edge and Autodesk Inventor files into PTC Creo without the need for additional software (note that the first set of file formats are opened directly; the last are imported). Users will also be able to save changes in native SolidWorks, NX and CATIA formats later in the 3.0 release cycle.
  • The new PTC Creo Design Exploration Extension (DEX), a dedicated environment in Creo Parametric for creating and investigating design alternatives. The designer sets a baseline design and creates branches and checkpoints, can bookmark alternatives.
  • New and improved resources to help Pro/E users (for example) get up to speed more quickly — tools like a command finder, “getting started” tutorials and guides, and a fully searchable help system should increase that productivity curve.
  • Your mileage, of course, may vary so take a look at all of Creo 3.0 here. Also, see more about Creo Elements Direct 19.0 here. Creo Elements Direct 19.0 is out this month; Creo 3.0 is out in July. The Unite enhancements will be phased in between July and the December 2014 maintenance releases

I also spent a bit of time in the Service Exchange. It was a fascinating look at the opposite end of the product creation process. One company after another told of its journey from making air conditioners, electronics, or industrial equipment that was serviced by a contractor, to expanding their services capability for existing products, to fully blended product/services offerings. I learned that there’s a continuum from the “white van” (a van rolls out to investigate a customer report without knowing anything about the service call) to the “outcomes-based service model”, where the focus is on the outcome that results from having the product: air temp between 65  and 75 degrees Fahrenheit with average energy consumption of X watts/hour for an air conditioner, perhaps. How the vendor reaches that target is a combination of product design and service.

PTC’s research shows that 70% of companies are today at the white van end of the continuum, and many want to aggressively move their businesses to include more services. Depending on the situation, motivations are financial (many services offerings are highly profitable), competitive responses, the result of a lack of good services partners — but it’s far from easy. Company cultures often value product design more highly than services; there may be a lack of connection between services, sales and marketing (let alone engineering) to make the necessary changes; too few talented service reps capable of upping their game to a bigger offering; and, music to PTC’s ears, a lack of specialized technology for services. It’s not PLM, it’s not ERP, it’s a distinct set of IT tools that are just now starting to emerge as purpose-built to support a more services-centric go-to-market.

The journeys seem well worth it. I didn’t sit in on any presentations where a speaker said it so boldly as “we went from $XX and profit of $YY to 3*$XX and 5*$YY”, but it was implied again and again: it’s possible to design product/service offerings that increase service revenue and profitability, while building closer customer relationships.

I also tried to get to as many other sessions as possible. Since I’m interested in oil and gas, I attended Petrobras’ session on PROTEUS, a system they developed to gather data from CAD tools (Integraph’s SmartPlant and PDS, AVEVA’s PDMS, and others) and corporate databases to integrate business processes during the design, construction and assembly of production units in Brazil’s Campos Basin. PROTEUS gathers piping, equipment, structural and other discipline-specific data and feeds that to viewers, on-demand. They use it for design reviews, inspection reports, simulations for emergency and planned shutdowns and ergonomic studies. PROTEUS uses Creo View to connect these data sources together, and Arbortext and Creo Illustrate to simplify report generation. On their roadmap: doing materials management with Windchill. There was a mining session, too, though I wasn’t able to attend that one. Today’s PTC is so much more than auto, aero and industrial machinery. And that’s a good thing.

As end-products have grown more complex, so has PTC’s offering. From CAD, to PDM to PLM, to ALM, to SLM, to IoT. The company wants to serve its customers more broadly, moving outward from engineering to manufacturing to controls to service. To be sure, the majority of the customers at PTC Live were CAD/PLM types, many of whom seemed happy in their CAD/PLM worlds. But quite a few were intrigued by the potential of working with their support team to build a more serviceable product, or connecting to the IoT and figuring out how that data could change their businesses. They’ll stick to CAD for now, but are keeping their eye on what PTC does next.

Here’s one more video, the IoT keynote which starts at 31:00. Example uses start at 41:00 or so:

* If the embedded videos don’t work, try http://www.ptc.com/events/ptc-live-global-keynotes-2014/.

Note: PTC graciously covered some of the expenses associated with my participation at the event but did not in any way influence the content of this post.

Images courtesy of PTC, videos; Monica Schnitger, top photo.

Hot guitar riffs & cool announcements from PTC Live

PTCLive-Global-300x168PTC has spent the last, well, decade redefining itself. For a long time, it was the feature-based modeling powerhouse in a direct-modeling CAD world. Then it decided CAD was passé and devoted itself to building a PLM platform. Most recently, PTC entered the brave new world of electromechanical systems and moved to take design info into new directions, helping customers unite design, manufacturing and services offerings. We learned just how diverse, and yet focused, the company is at PTCLive Global, the recent user conference in Anaheim, CA. GraphicSpeak, PTC’s own blog and SolidSmack have great recaps, if you want more info.

Ah, guitar riffs. I’m an East Coaster, so 8AM Pacific is no biggie, but I think some people were more than a little startled when guitarist Pat Hennessey took the stage, playing some of the most famous riffs in rock and roll history on a beautiful Aristides guitar. After his mash-up, Mr. Hennessey segued into a Jimi Hendrix-like version of the Star Spangled Banner and, from there, into Black Sabbath’s Iron Man to bring CEO Jim Heppelmann on stage. It’s hard to explain – it was both more elegant and goofy than I can describe. PTC has put a bunch of sessions online — hope this is there somewhere! (But check YouTube, too.)

Mr. Hepplemann’s keynote outlined 7 major trends hitting the manufacturing landscape right now, saying that companies that can’t harness these forces will ultimately lose to those who can. Possibly most important from PTC’s perspective is the blurring of the lines between product and service. Mr. Hepplemann used the term ‘servitization’, the bundling of products and services into one offering that confers more benefit to the customer than either would alone. This requires changes in the way offerings are designed, to include service early in concept development, incorporate not only warranty but spare parts considerations in design, and so on.

This is one area where PTC has a clear edge on its traditional PLM competitors — and an area, too, where it is walking the walk. I had a chance to speak with some of the Global Support organization about how PTC is revamping its services offering and to better understand how the company has transformed “maintenance” into “support”. Like just about every software company, PTC has to make the case over and over that those periodic bills after the initial license purchase offered more than bug reporting and point releases. To build the value proposition of its services offering, PTC looks at how customers want to interact with their solutions, and their vendors, to redefine how PTC can best deliver what they need. There’s a lot more going on here than I realized, both with PTC’s intentions and from a looking/listening/acting perspective, that I need to devote a whole post to it soon.

It’s been interesting to watch PTC’s evolution in services life cycle management (SLM). It started with Arbortext, so that Pro/ENGINEER models could be used in ads, instructions and repair manuals. Add in Servigisitcs, and PTC has the start of a more comprehensive solution for manufacturers who also want to get in on the lucrative after-sales market. Once seen as a non-core function, a cost center or a way of (grudgingly) keeping in touch with customers and hearing their complaints, service is now often seen as a lucrative revenue generator and a way to build closer strategic relationships with end-customers.

Which brings us full-circle to PTC’s own services offering. Mr. Heppelmann said that “the vision seems clearer than ever for us” and that really does ring true. Rather than hunting out new industries to sell to, PTC is looking for ways to deepen its presence in its core manufacturing customers, making its products more functional, easier to use and deploy (hello, virtualization?) and by getting some of the annoying bits out of the way (Windchill is now more integrated and less intrusive for designers).

Oh, and Creo 3.0 will be able to open CAD files from just about any CAD system, pop them into assemblies and onto drawings, and (sit down) changes made in the original file will propagate into Creo. Without creating and intermediate files (in most cases, more work being done). There are some gotchas, such as parts changed in Creo won’t update in SolidWorks, NX or wherever they came from, but that seems reasonable given how most heterogeneous environments work today. The audience in the hall loved it. I can’t wait to see this in action — or to watch you use it and hear your thoughts.

So all that stuff, about no longer being a CAD company — doesn’t seem so true any more, does it?

More soon.

Image credit: Monica Schnitger

Note: PTC graciously covered some of the expenses associated with my participation at the event but did not in any way influence the content of this post.

CAE competence management: are we ready?

AUS1-CFD-cone, courtesy of NASAThere’s an apocryphal story in CAE: A number of years ago, an auto company decided to see how consistently CAE was applied across its organization. Management asked a number of individual analysts to solve the same problem using the same code. Lo and behold, many different approaches and answers emerged. The conclusion: we’re at risk of having CAE give incorrect or contradictory results because expertise and approach vary from person to person. So we’ll have methods departments create protocols and insist that analysts follow them to ensure repeatable outcomes.

That’s a great approach at the company or divisional level, but what about the individuals themselves? How can a company be sure that the analysts they’re hiring are not only academically credentialed but adept at the codes being used? As CAE spreads to more, different types of users, how can a company be sure that the SolidWorks gurus they rely on are also using simulation correctly? Or Inventor or Solid Edge or Creo or, or …?

Effective use of CAE requires understanding the physics of the system being modeled as well as the peculiarities of the software being used. Modern user interfaces and pre-processing can help, but correctly setting up the problem is still the analyst’s responsibility.

In a project funded by the European Union, NAFEMS (the International Association of the Engineering Modelling, Analysis and Simulation), large user enterprises like EADS, Renault and Nokia, and vendors like EnginSoft last year completed a project that created a framework within which individuals could log and track their skills and courses completed — a step on the road to NAFEMS’ Professional Qualification certification.

Creating a directory of qualified CAE professionals would enable enterprises to ensure that they have the correct skill set in place to meet their business objectives while enabling individuals to create training plans and improve their mobility within their existing organization and in the hunt for that next job.

On the downside, such directories are only as good as the most recent entry. My college days are long behind me, yet back then I was a pretty decent analyst. If that’s listed in a directory somewhere, we’d all be in trouble if I were hired on as a CAE jockey. Too, there are degrees of expertise –say basic, capable, expert– and the path from one to another is not easy to define since it’s a combination of certificate-granting training and on-the-job learning. How can we quantify someone’s ability in the face of so many variables?

Many companies maintain a Competence Management Systems (or Competency Management Systems, aka CMS) that may be connected to a Learning Management System that provides access to online courses, perhaps a Wiki, and other resources. Learners are tracked and how they score on tests is entered into the CMS. Periodically, the CMS is interrogated to identify skills gaps and help plan career paths and successions to meet their employer’s projected needs.

CAE vendors, too, are in the game, offering certifications for people who take training classes. MSC Software and its partners, for example, offer in-person and online certification programs that validate analysts’ capabilities in Nastran, Adams and other offerings. Students who pass an exam covering the linear statics, normal modes and buckling analysis covered in the basic MSC Nastran training course earn an MSC Nastran Level I Certification. The company even partnered with UNED, Spain’s largest online university to offer advanced degree in Finite Element Method and CAE Simulation. SolidWorks, as we learned last month, offers users the opportunity to earn the CSWSP-FEA designation after passing an exam that tests “understanding of SolidWorks Simulation tools and simulation in general”. Just about every CAE/FEA/CFD vendor offers similar certifications, though there doesn’t seem to be any sort of standard about how rigorous the classes or tests should be.

What we need is a central directory, along the lines of what NAFEMS is proposing, that incorporates information from companies’ CMSes (only if the individual wants to be included, of course), databases like those maintained by SolidWorks and all of the individual certificates out there that have been earned but aren’t in a formal database. Then we can start getting a handle on the overall level of expertise in CAE across competency types. I doubt we’ll ever get to a standardized-test-type of measurement, since CAE has so many different applications, but a central registry like NAFEMS’ is a good and necessary start.

Let’s talk about this. Does your company maintain a CMS? Is that good or bad, from your perspective? Would you want your expertise to be known by the larger CAE community? Would you apply for a NAFEMS certification or stick with what you’ve got? If you’re a boss, do you look at certifications — and if you do, where do you find out about them?

For PTC, “interesting” = “good”

A couple of months ago, I wrote that “PTC is such an interesting company. A bunch of really smart people who … get too far ahead of their customers (remember “CAD is dead”?), alienate those who sign the checks while retaining intense loyalty among the user base, or move too fast to make too many operational changes all at once.” That was about their revenue miss in Q1. Now, after spending time with the PTC faithful at Planet PTC Live, I’m convinced it’s even more interesting than I realized.

A quick recap for those who haven’t been following as closely as I have. PTC recently reorganized itself along product lines, to give more focus to each of its initiatives. The thinking is that, under the old scheme, a central R&D organization was pulled into too many directions to build out the Windchill and Arbortext offerings while continuing to enhance Pro/Engineer — perhaps sacrificing the competitive standing of Pro/E. Under the new scheme, each of PTC’s 5 product areas has its own, dedicated, resources which should be able focus more intently on just one set of products that meet a specific set of customer needs. These 5 areas include MCAD, PLM, Application Lifecycle Market (ALM, for software systems lifecycle management and systems engineering), Supply Chain Management (SCM, for supply chain risk and compliance, component/material/supplier management, sourcing & cost management and manufacturing planning — but not supplier contracting and so on), and Service Lifecycle Management (SLM, for requirements management, service information, service parts, warranty management, call center and field service). So: MCAD, PLM, ALM, SCM and SLM.

How, you may rightly ask, does all of this fit together? Why would PTC want to be in all of these businesses, many of which require selling outside its traditional engineering/design group base? Are there customers for these new, distinct segments? And, finally, what does PTC have to for these new acronyms?

PlanetPTC Live was the first shot at answering these questions. Using Whirlpool’s new Maxima washers and dryers as examples, PTC’s business unit managers walked us through where each offering would be applied. Most people are familiar with Creo (design and simulation) and Windchill (xBOM, project and process management), and enhancements are coming there, but a lot of the content was focused on the other 3 areas. For example, the Maxima washer/dryers are equal parts mechanical, electrical, and software, with a million lines of code (in an appliance!! — yow). Designing and managing these complex systems, and innovating with all three areas in mind, is hard yet necessary for Whirlpool to meet the needs of its customers. The company understands that its old ways did not adequately interconnect these disciplines, so Whirlpool is in the middle of an innovation redesign program to figure out how to do it better.

Whirlpool also faces the reality that these appliances need to be serviced and includes people from its services organization in product design teams. PTC’s SLM offering enables companies to manage service BOMs (or SBOMs) to manage service parts, but also much more, depending upon how an OEM wants to manage its services operations. And, as you probably know, PTC’s Integrity forms the cornerstone of its ALM solution, connecting requirements, codes and test to ensure that the software driving the control and display systems on the appliances. You can learn much more by catching a replay of the technology keynote here: http://www.ptc.com/events/planetptc-keynotes-2012/ptc-technology-roadmap-keynote-day-1.htm

It’s worth watching, if you’re interested in how PTC connects the dots for its manufacturing customers, and includes many vignettes from Whirlpool about its vision for design, manufacturing and service.

I was fortunate enough to have meetings, both planned and chance, with many of the leaders of the 5 businesses. To say that they are focused is a total understatement — passionate advocates all, who realize that customers may not know how to embrace some of the solutions PTC is working on, but have long-term plans to for world domination. PTC’s current trend seems to be to roll out solutions that fix specific problems, such as ensuring that field service teams have the most up-to-date product information. Once that is showing positive results, perhaps with improved customer satisfaction or fewer repeat calls, they can help the customer move on to warranty management or another area within SLM. Rather than going with the whole thing, all at once, and demanding huge investment and commitment, this incremental approach will let PTC learn from its customers and prove incremental benefit.

Since many of you are Pro/E or Wildfire users, this link will get you to PTC’s Creo roadmap presentation: http://www.ptc.com/events/planetptc-keynotes-2012/ptc-technology-roadmap-keynote-day-1.htm

I found it very interesting that PTC, all along, downplayed release 1.0 (out a year ago) and expected the vast majority of users to start evaluating Creo 2.0. Creo 1.0 was intended to prove that there really was a product there and that it was more than just slide-ware. Since most people don’t bother with the 1.0 release of anything, says Michael Campbell, Division VP, MCAD, PTC concentrated its resources on improving quality and adding significantly more modeling functionality to the 2.0 release. Cool in 2.0: Creo Layout and Freestyle are intended as early-stage, conceptual tools that feed model info into the parametric model.

For you Windchill folks, here’s that product keynote: http://pi27t.rmxpres.com/webcast/data/planetptc06042012bo1/main.htm. One thing to mention to everyone: Brian Shepherd, Executive Vice President, PLM & SCM Segments, spoke of a preconfigured Windchill for small deployments that will come out in early 2013. We didn’t get specifics, but it sounds as though it is limited only to the extent that the out-of-the-box configuration may not interface to everything — but check with PTC to learn the details.

So much more to say — look for more blog posts about PlanetPTC Live — but one thing that was completely absent was anything to do with the cloud. That’s a buzzword PTC appears happy to leave to others. Mr. Heppelmann said that PTC tried a version of Windchill for the cloud three years ago; its reception was lukewarm. “When our customers are ready for the cloud, we’ll be waiting.”

Note: PTC graciously covered expenses and registration for the event but did not in any way influence the content of this post.

PTC: Pothole repair underway

PTC today gave more details on its financial performance in the March quarter (its fiscal Q2) and a glimpse into the year ahead. The high points: a positive spin on the revenue miss in FQ1, much more cautious outlook for the rest of the year (but the potential for significant positive surprises) and solid performance in Asia.

PTC is such an interesting company. A bunch of really smart people who shoot themselves in the foot every couple of years, either by getting too far ahead of their customers (remember “CAD is dead”?), alienating those who sign the checks while retaining intense loyalty among the user base, or moving too fast to make too many operational changes all at once. It really does sound as though the Q1 miss blindsided the company, with a wave of coincidentally timed events washing away what could otherwise have been an OK quarter. Enough editorializing, here’s what they said:

  • The Q1 miss was all in license revenue. As announced earlier, a mega deal in Europe failed to close because that company was going through a potential merger, placing everything on hold; and a number of smaller transactions in North America that also didn’t close. CEO Jim Heppelmann said again that the North American issues were due to poor forecasting, planning and execution and that analysis of the deals that missed showed no real pattern in terms of end user industry, economic factors or competition.
  • What did happen? Mr. Hepplemann said that the deals that didn’t close in North America were, for example, a defense deal that was “intercepted” by another defense program; several deals where a large upfront purchases were divided into a number of smaller phases; and a sizable expansion order that was “interrupted” by a scenario similar to what happened with the big Europe account. My interpretation: overzealous sales people thinking that deals would close earlier and larger than they really did.
  • How is PTC fixing this? The company has carefully “scrubbed” its large deal pipeline, presumably scaling back expectations on size and timing where appropriate. PTC has also changed its method for providing outlook to Wall Street and is no longer including mega deals in the totals it provides. This means that there’s a substantial potential for positive earnings surprises, since a $10 million deal could, as Mr. Heppelmann said in answer to another question, affect license revenue growth by 3%.
  • Could PTC have prevented the Q1 miss? Clearly, customers do what customers do, so a lot of this was outside PTC’s control. Yes, the forecasting methodology wasn’t optimal, and the company is putting in place a much more rigorous process for FQ3 and beyond. But Mr. Heppelmann believes that the changes that were made in the sales force prior to and during FQ2 (adding 75 new sales reps, redefining sales territories, moving some accounts from the VAR channel to the direct) position the company well for the future and needed to be done.

But there was lots of other news, too. Remember that PTC reorganized itself from 2 major product lines (CAD and PLM) sold through 2 channels (direct and indirect) into 5 buckets/segments: PLM, MCAD, ALM, SCM and SLM.

  • Total non-GAAP revenue for FQ2 was $302 million, up 12% year, including $23 million from MKS and 4CS. Excluding MKS and 4CS, total organic revenue growth was 4%.
  • Non-GAAP license revenue was $75 million, up 1% year/year as reported but down 10% on an organic basis. The missed deals caused European license revenue to decline 6% year/year and Americas license revenue to decline 4%. Japan and Pacific Rim license revenue, in contrast, were up 17% and 9%, respectively.
  • Non-GAAP maintenance revenue was $151 million, up 15% as reported and up 7% on an organic basis. Services revenue was $76 million, up 20% as reported and up 12% on an organic basis.
  • By geo, revenue from the Americas was $110 million, up 16% year/year but down 7% sequentially, driven by a 36% sequential decrease in license revenue. Performance was characterized as “solid” in MCAD and ALM, with “lower than expected” performance in PLM.
  • Revenue from Europe was $116 million, up 9% year/year but down 13% sequentially.
  • Revenue from Japan was $39 million, up 18% year/year and up 27% sequentially.
  • Revenue from the rest of the Pacific Rim was $37 million, up 3% year/year and flat sequentially.
  • Revenue from China was down 10% year/year. Mr. Heppelmann said that the “Q3, Q4 pipeline looks pretty good. We feel reasonably confident of our business in China, don’t see signs of any [economic] meltdown. We added resources, put in really good talent for the longterm and see China as a solid business opportunity.”
  • The company reported 25 large (>$1million) deals that contributed $56 million, essentially flat with last year. Nine of these wins were in North America; 11 were in Europe and 5 in Asia.
  • Using PTC’s former quadrant approach, direct sales of desktop products were down 11% (not surprising, since that’s were the bulk of the miss occurred). Indirect sales of desktop products actually were up 5%, while channel sales of the PLM products were up 54%, leading Mr. Heppelmann to conclude that the channel “did really well” in FQ2.
  • Total revenue from desktop products were $148 million, down 5%, even as maintenance revenue was up 4%.
  • Total revenue from PLM/enterprise products was $154 million, up 36%, including the acquired revenue from MKS and 4CS.

PTC’s guidance for FQ3 and F2012 ratchets back expectations with respect to mega deals, removing them completely from FQ3 but “assuming some contribution” from mega deals in the full-year targets. The “large European transaction that did not close in Q2” is not included in either total. For FQ3, PTC expects total revenue of $300 million to $315 million; for F12, it expects $1,265 million to $1,285 million, including about $90 million from MKS and 4CS. For the year, license revenue is expected to increase 5%l services, 14% and maintenance, 9%.

Mr. Heppelmann said on the earnings preannouncement conference call that PTC had hit a substantial pothole in FQ1. He was equally clear today: The changes in the sales organization “were right to make, and were done before this mess. The question is how to manage the pipeline and forecast. We need to transition to a “best in class” systematic approach, and we’re doing that starting now. We need to assess the impact of the new sales [people and territory changes]. If it settles into place and creates the productivity we anticipate it will, we will feel good about out long term targets.”

PTC bit the bullet early, carved an outline around the FQ2 miss that showed that the problem was of its own making (and not a competitive or economic issue) and outlined a plan to fix it. Can’t do better than that — at least until next earnings season, when we see if the plan worked. Investors like, and sent the share up 10% at 11:30 ET.