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Ansys (ANSS) Teams Up With BAE Systems to Boost MBSE Adoption

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Ansys (ANSS - Free Report) recently announced a collaboration with BAE Systems, Inc. to boost the uptake of digital and model-based systems engineering (MBSE) across Department of Defense (DoD).

The companies will be working together to develop a critical digital and MBSE approach for security and defense applications. Ansys will aid clients of BAE Systems to overhaul system design, delivery and operation through an MBSE approach in alignment with DoD guideline 5000.97.

Both the companies are focused on designing robust simulation processes and data management solutions through BAE’s Mission Advantage Technology partnership program. These solutions will then be utilized for the system development, testing, assessment and sustenance of DoD programs.

By utilizing these simulation solutions, defense agencies will be able to execute important programs and save significant time and resources, and reduce costs.

This collaboration will also evaluate interoperability and new technology capabilities across fast evolving technological areas of AI and autonomy, integrated sensing, integrated network system-of-systems and human-machine interfaces, highlighted ANSS.

Canonsburg, PA-based ANSS develops and globally markets engineering simulation software and services widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia.

Ansys is gaining strong momentum from healthy demand across most of the sectors. In the automotive sector, healthy traction for electric vehicles and advanced driver assistance systems solutions is driving growth. Rapid growth in the high-tech industry, led by ongoing development in AI, bodes well.

Continued momentum in subscription lease licenses is a tailwind. For the fourth quarter, subscription lease revenues (49.6% of non-GAAP revenues) were up 23.1% year over year.

In January 2024, Ansys and Synopsys (SNPS - Free Report) officially announced their entry into a definitive agreement, paving the way for the latter to acquire ANSS. This deal, valued at approximately $35 billion, is anticipated to close in the first half of 2025.

Synopsys is a vendor of electronic design automation software to the semiconductor and electronics industries. The merger is anticipated to strengthen SNPS' financial profile, with expectations of industry-leading, double-digit growth. Cost synergies of approximately $400 million are expected within three years post-closing and revenue synergies of around $400 million within four years. SNPS also anticipates revenue synergies to reach approximately $1 billion in the long run.

Significant international market exposure and stiff competition in the software space from the likes of Cadence Design Systems (CDNS - Free Report) and PTC Inc (PTC - Free Report) remain concerns for ANSS.

A Look at the Performance of Peers

Cadence’s performance is gaining from robust customer demand. The company ended 2023 with a backlog of $6 billion and current remaining performance obligations of $3.2 billion. Accelerated design activity owing to transformative generational trends such as generative AI, hyperscale computing, 5G and autonomous driving is likely to boost the top line going ahead.

Momentum in 3D-IC and chiplet designs bodes well. Expansion of its well-established partnerships with strategic partners like NVIDIA, Arm and Intel is a tailwind. Revenues for 2024 are now projected in the range of $4.55-$4.61 billion. 

However, for the first quarter, revenues are estimated in the $990 million-$1.01 billion band, which is lower than $1.022 billion reported in the year-ago quarter. Higher costs, stiff competition and weak global macroeconomic conditions are concerns.

PTC’s performance is driven by strength across the product lifecycle management or PLM and computer-aided design or CAD business segments. The SaaS transition is being bolstered by Creo and Windchill plus. The acquisition of pure-systems (especially pure::variants solutions) complements Codebeamer and strengthens the company’s position in the rapidly growing application lifecycle management market.

Frequent product launches and strategic collaboration bode well. Cash flow is being driven by the resilience of subscription license business model and operational discipline.

However, sluggish sales market is likely to weigh on the company’s performance. Foreign exchange fluctuations and an uncertain global macroeconomic environment constantly pose challenges for PTC.

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