MuM starts earnings with a bang

It’s going to be a busy week, with earnings news coming from Mensch und Maschine (MuM), PTC, Dassault Systemes, Hexagon and Nemetschek. Let’s get right to it, with good news from MuM. You probably recall that MuM is reinventing itself, buying up VARs and selling its distribution business in order to increase the value it provides to clients and build up a more profitable services-oriented business. One risk in so much change, of course, is that management takes its eye off the routine business of serving customers but MuM’s results appear to indicate that this is not the case. Total revenue in Q3 was €47 million, up 4% over a year ago; for the first nine months, revenue was €155 million, an increase of 9%. For the first nine months of the year, MuM’s software segment reported revenue of €21 million in Q3, up 17% over last year; the distribution segment (still included for this quarter since the sale to Tech Data won’t close until the end of October, assuming regulatory approval) reported revenue of €85 million, up 2% while the VAR business was up 19% to €49 million. MuM says that it accounts for about 7% of the overall CAD/CAM market in Europe, and about 20% to 25% of Autodesk’s sales there through both the distribution and VAR channels. MuM is an Autodesk Platinum Partner, one of only four in all of Europe. The company says that this gives it better dealer discounts and closer cooperation for major accounts. Clearly, the sale of the distribution business will cause total reported revenue to decline starting in Q4. The company now forecasts revenue of around €180 million for 2011, and expects to return to 2010’s level of €200 million in revenue in 2014. The point of the whole transition at MuM has been to focus on higher margin businesses, software and VAR. MuM believes that gross margins, which were 25% in 2008, will double to about 50% “as early as 2012”. CEO Adi Drossler characterized the business environment in Q3 as “quite orderly, in spite of all the negative comments around on economic development”. He continued, “[W]e still are expecting a strong closing quarter, the business in the continued segments Software and VAR D/A/CH should come in as targeted.” A side note: the positive comments on the business environment in Europe bodes well for Autodesk, which is still in its third quarter and won’t announce results for another month.