Schnitger Corporation

Updated: MSC interim CEO definitely in charge

MSC Software announced this afternoon that its results were within guidance and that it is seeing the same declines in new license revenue shown by other PLM suppliers. MSC reported total revenue for the first quarter to $53.6 million, down 12% from last year, led by a 21% decline in software revenue to $17.4 million. Maintenance revenue was down 6% to $31.0 million and services revenue declined 16% to $5.2 million.

Revenue was down in all geos. Total revenue in the Americas was down almost 9% to $16.9 million; EMEA declined 22% to $18.3 million including a $2.7 million decline due to foreign exchange. The company’s Asia region was positively affected by changes in the Yen, with an overall revenue decline of nearly 4% to $18.4 million.

MSC reported a profit for the quarter of $147,000, compared to a net loss of $2.2 million in Q1 a year ago.

The results were … not good. But Ashfaq Munshi, interim CEO and president of MSC.Software, for the first time publicly said that he intends to use his tenure to address many of MSC’s core challenges. He has already instituted a number of changes in response to what he has heard over the last two months from customers and employees: That customers remain very loyal in spite of the fact that MSC has been difficult to work with, that products are not easy enough to use and that the company’s market-leading position has been challenged by competitors who have been out-executing MSC.

Paraphrasing, Mr. Munshi said that “results over last 2 years clearly indicate that MSC is falling behind — and we need to reverse this trend. Our competitors have consistently deployed more technical resources in the field to support customers — we need to reverse this, too. We are re-examining packaging, pricing and licensing; hiring additional AEs and addressing ease of use. We have removed layers of sales management to make available more customer-facing resources.” Asked more about ease of use, Mr. Munshi said “We expect to field a competitive solution in the not-to-distant future.:

Finally, Mr. Munshi is also aware of the need for employees need to have stability; he acknowledged their important to MSC’s innovation and mentioned their eagerness to re-establish MSC as a market leader. Mr. Munshi mentioned “rewarding talent, nurturing its growth and supporting staff around the world — making palpable change in the company.”

[Side note: I did notice a completely different vibe among employees at the MSC user conference a few weeks ago. There was uncertainty, yes, but optimism and a willingness to go where Mr. Munshi leads. Unfortunately, it’s not clear how long he will be in a direct leadership role at MSC. CFO Sam Auriemma opened the call by introducing Mr.Munshi and saying that MSC’s board of directors’ search for a permanent CEO is going well. I guess that’s good — but Mr. Munshi gave a strong, credible performance today that I guess all we can do is hope his hat is in the ring.]

The company offered guidance for Q2, saying that revenue would be in the “low $50 million range”; for the second half Auriemma sees a slight improvement, with a revenue decline mitigating to 12% to 15%. It will take time for Mr. Munshi’s changes to influence customer buying, but today’s statements should definitely ramp up interest.

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