Sunday, July 3, 2011
Ansys ( Nasdaq - ANSS ) -- Significant Acquisition
Ansys (ANSS $55.00) agreed to acquire privately owned Apache Design Solutions for $310 million in cash. Apache is a leading provider of engineering simulation software that helps designers reduce power consumption in electronic devices. That market is expanding rapidly as greater functionality is built into mobile phones and other electronic devices. Apache generated $44 million in sales last year, charging customers on a subscription basis. That recurring revenue model tends to understate earnings compared to one-time license sales, but it creates greater long term reliability. Ansys won't reveal Apache's profit margins until the transaction is officially completed in Q3. The company did say the deal will be earnings neutral in the short run, and then boost income in future years as volume expands. The relatively high purchase price (6.4x times revenue) reflects Apache's strong competitive position within a fast growing segment of the electronic design automation industry. Cross marketing opportunities promise to reinforce expansion in upcoming periods. Our 2011 earnings estimate is unchanged at $2.35 a share.