PTC Inc (PTC) 2002 Q3 法說會逐字稿

Good morning and welcome to the PTC third quarter 2002 earnings call. All participants will be able to listen only until we open for questions and answers. Also, at the request of Paramedic Technology, the conference call will be recorded. I would now like to introduce you to your speaker for today's call, Mr. Tom Barth, Vice President with Investor Relations. Sir, you may begin.

Thank you operator. Good morning everyone and thank you for joining us today. Participating on the call will be Dick Harrison, the Company's President and Chief Executive Officer, Ed Gillis, our Chief Financial Officer and Jim Heppelmann, the Company's Chief Technology Officer and EVP of software products. Also available for questions will be Barry Cohen, our head of Global Marketing and Human Resources. Before we get started, I would like to remind everyone that during the course of the conference call we will make projections and other forward-looking statements regarding future financial performance, business trends and other future events.

We caution you that such statements are only predictions and that actual results might differ materially from the results projected in their statement. We refer you to the risk detailed in the Company's 2001 annual report on Form 10-K, our fiscal second quarter 10-Q and in the other companies reports filed with the from time to time. A replay will be available until 5 p.m. Friday, July 19, with a dialing number 4022809991. Additionally, this conference call is being web cast and a replay will be available through our website at ptc.com until this Friday at 5 p.m. Dick, would you like to begin.

Thanks Tom. Good morning. I'd like to touch on three themes this morning. The first theme is that we are confident in the business model that we've constructed. We achieved our Q3 revenue and profit objectives in a difficult market. In addition to that, during the quarter we achieved our goals of cost control and the objectives that we set forth there as well. Our products are maturing to the point of outright excitement and I'll let Jim Heppelmann talk a lot more about that in just a few minutes. In addition, in addition, the distribution model continues to evolve to an appropriate focus of direct sales on large accounts and sales to smaller businesses.

Customer satisfaction as a result of lower sales turnover and higher product quality is inching upwards, a very positive movement and cash flow improved during the quarter. The second theme I'd like to talk about for a moment is our staying power as a company, and our strong position as the market rebounds. We continue to have great assets, and in particular a very strong and large customer base and present in manufacturer. The product first focus of manufacturing companies is real. There is a buzz by corporative executives about the importance of products. These are the problems that our software products solve. We have the leadership position in this PLM state, both in product vision, and in actual revenue, and as Jim will talk about, we have some very mature and exciting products. So that leads me to the third scene, and I'll let Jim take over now, our role here with product leadership.

Many thanks Jack. So first of all. PTC is a product first company ourselves, and we believe that product leadership is going to be essential to PTC's business strategy. On that point I am happy to announce that I feel we are making good consistent progress. You might recall from some of our earlier calls that PTC at the product line level has a strategy that we report to as create, collaborate, and control. Well Q-3 has been a busy quarter on all three fronts with the launch of Pro-engineer Wild Fire, which is our primary and collaborate offering. A significant new release of project link which is our primary and collaborate offering. In the introduction of PTM link in the market place, which PTM link, I believe, will become over a period of time our primary control offering. So we have new products in each of these areas of create, collaborate, and control, and I would like to take a few minutes and share with you some insights on each of them. I'll start with the Pro-engineer Wild Fire launch, because that's the biggest note. So Wild Fire is becoming a reality.

I'd like to give you just a bit of a recap at the risk of repeating things I've said earlier on what is Pro-engineer Wild Fire. So first of all Pro-engineer Wild Fire is the largest infusion of new code Pro-engineer, since release one in 1987. In fact customers who received the Pro-engineer Wild Fire CD, of course they won't realize this, but in fact, one third of alliance of code in Pro-engineer Wild Fire are new at this release. So we're definitely refreshing Pro-engineer and keeping it modern and current. There are two major dimensions to the Wild Fire release, which I characterize as being along the dimensions of personal productivity, and process productivity. So I'd like to start by recapping the personal productivity dimension. So Pro-engineer Wild Fire has a significant new series of user interface capabilities. Essentially a new user interface, which has great appeal with users, because on a personal level it makes them much more productive, and we think that this new user interface on Pro-engineer effectively ends the discussion about Pro-engineer usability that's being on for some time.

In fact we have some data that suggests that Pro-engineer Wild Fire might actually be establishing a new benchmark for usability in the high-end marketplace. On the second front, sort of realizing that product development is a lot more than engineers using systems. There is an ongoing discussion, and a discussion of increasing importance of how to make the overall cross-functional product development process work better. And this is where Pro-engineer Wild Fire has some great new capabilities as well, which is full support for web services, tight integration with capabilities using those web services, interfaces, and inclusion of peer to peer capabilities based on the group technology. And this is a story which really appears to managers into the broader corporate community because it now ties in those engineers with the cross-functional teams as well as suppliers. And customers in the broader extended enterprise such that the overall process is much more productive in addition to the individual users being more productive. So the launch of is well under way but I'd like to remind you that launch of a major product like is really a process not an event and I'd like to give you some visibility to that.

So first of all is fairly sophisticated mission critical software not unlike a new release of Microsoft Windows in terms of how it gets rolled out to a user community. In fact I would characterize a release of having three phases. The first phase we communicate to the customer base about the products available and what it does and the value of it and so forth so the first phase is really communication. A second phase is we begin to engage customers with actual production data to prove out the quality not just in our labs but at the customer site. So I might characterize the second phase as a drive to production level quality. And then the third phase is the period of time which the customer base plans and then executes upgrades to bring this level of or this new software into the production environment, and I might call that the production, implementation and upgrade phase.

So this, these three phases are not unlike any other major release of or quite frankly any other major release of sophisticated enterprise level software. So we've completed the first phase now in this third quarter with major launch event at the PTC user group conferences that have happened in Berlin, Atlanta and most recently Tokyo as well as a product first virtual event that we held in mid June. Now attendance at all of these events has been very high despite the tough economy and the feedback across the board has been great. So the is now in the hands of thousands of customers who attended these or PTC user events. These customers are installing the software and learning about what is all about. The anecdotal evidence from this launch has been pretty exciting. I have in my hands here a survey actually of some 100 customers who attended PTC user. And in this survey 80 percent of the customers report that they've already tried the . And a full 89 percent of the customers surveyed here characterized PTC's product direction as being either exciting or very exciting.

So we've delivered this offer to customers, they're using it and they're reporting great feedback you know based on their actual usage. Now the good news is because the data generated with previous versions is completely compatible with and because the licenses are upward compatible we're now at the point where we can begin to use the in all new related sales activities. So we're sort of beyond the first phase of launching the software and we're beginning the second phase which is the drive to quality. And this is a very important phase because we've made a firm commitment to our customer base that the quality level of will be exceptionally high.

So beginning in mid-August we are going to begin to release new versions to the customer community to a broader community than currently have the software and they'll begin to utilize this application with their production data, their production parts and assemblies and drawings to ensure that the software works like they would expect it to or to report any discrepancies to us. Now we expect that that will run most of the balance of the calendar year and that early in the 2003 calendar year we'll begin the third phase which is where customers begin to upgrade and put this new software into the production environment.

Now it's taken well more than a year to upgrade the majority of the base and with we're going to push aggressively to try and get the customer base upgraded as soon as possible, so I think what we've been able to do with the larger is re-establish with our customer base that PTC has a very strong vision and a very strong commitment to the business with that I would like to move on and talk a little bit about length.

You may recall from the previous conference call that we launched link right at the end of Q2. And really in its first quarter in the market place we've generated a tremendous amount of enthusiasm around this product and a very healthy pipeline of sales activities on a go forward basis. link is a simplified solution it's somewhat of a holy grail in terms of being the first system that has full enterprise capabilities and enterprise scale architecture yet it's very easy to use and very easy and low risk to implement.

I think I outlined on the previous call our idea of a quick start program, which is a fixed price implementation program that is highly repeatable. In the case of link this is a five week implementation program at fixed costs to bring customers into production and as you might expect this is truly generating a lot of interest and enthusiasm amongst customers and we're having pretty good success fine tuning this program and you know putting it into play. So as with all our other link solutions link I believe is well aligned with some of today's economic realities in terms of customers who want to be able to get started with a low risk and quick time to benefit approach. So the quick start program has really opened up an entire new segment of the market to in terms of small and medium size companies who are very excited about the functionality, relieved about the quick low risk implementation and now are in the pipeline where they may have been intimidated by previous solutions from PTC or quite frankly competitors.

So switching gears to Project link, Project link is our premiere collaboration solution and with the release of 6.2, the 6.2 release which we delivered in Q3 we've actually made some significant advancements that now allow us to characterize Project link not just as a project collaboration solution but at a full program management tool. One of the key deliverables in the 6.2 release has been a bi-directional interface with Microsoft Project as well as bi-directional interfaces with CAD tools and embedded visual vision capabilities but the Microsoft project interfaces particularly compelling because it allows an organization to plan a complex project in Microsoft Project.

And then import that plan into Project link which will automatically configure a project collaboration environment to enable effective execution of the plan that was outlined in Microsoft Project. Now at any time as the project is actually being executed our product manager can use project length to automatically regenerate the Microsoft Project plan to compare the product actuals versus the original plan that was generated in Microsoft Project so this gives many customers for the first time visibility not to what was planned to happen but actually visibility to what is happening and this is something that represents tremendous value to customers.

So it's been a great Q3 was a great quarter for Project link sales, overall activity in terms of deals and revenue from Project link was up significantly and our global services organization has had good success with the two week quick start implementation program for Project link and reports that they've completed more than 40 implementations in this two week timeframe. So overall our link solutions are gathering a lot of steam and now accounts for approximately 20 percent of overall revenue. So with that I would like to turn it over to Ed Gillis our Chief Financial Officer.

OK, thank and good morning everyone. I'm going to spend a couple of minutes and go through some of the financial details and outlooks. We reported today revenues of 180...

The conference will continue.

O.K. Good morning everyone it's Ed Gilles, I think there was a technical snap through here, so I'm going to spend a couple of minutes on the financial results and outlook, so we recorded revenues today at $182.5 million for the quarter and lots per share before and non reoccurring charges of two cents, this is in line with endless expectations of one 79 and a last per share of two cents. Revenues are down one percent sequentially and 21 percent year over year. Revenue components are as follows, license revenue was $56.2 million and services were 126.3 from a geography perspective North America was $76 million down five percent sequentially, Europe was 56.6 million down three percent sequentially and Asia at 49.7 was up eight percent sequentially.

Currency had a slight positive effect in Europe to the tune of about $1.6 million and in Japan to the tune of about one million dollars, quarter over quarter basis. revenues where 46.7 million, 18.8 of that was license in the balance with service. revenues where up 17 percent sequentially and license revenues where up nearly 72 percent sequentially. revenues where down six percent at $135.8million, the license component of that was 37.4 and of the balance was services. From an operating perspective we added 31,000 seats, seats to the base in the quarter, average selling prices where 12,200 that compares to 12,400 last quarter, we added 565 new customers, on the wind shield side we added 13,500 seats, 39 new customers and average selling prices approximated $14,000.

If I turn to the spending side of the P and L, gross margins where 71.1 percent, service margins where 61.5 percent. Spending quarter over quarter sequentially is down about six million dollars, head count decreased sequentially by 258 and head count currently stands at 3,908. Our target for the end of the fourth quarter is about 3865 this is consistent with an rate of about $180million per quarter. In the third quarter we took a restructuring charge of $18.4 million associated with our cost reduction efforts. 11.2 of charge we rated to severance and costs associated with the head count reductions. Other head count reductions in the fourth quarter closing the cap between the 3908 and our target of 3865 will be the result of attrition. The remaining 7.2 of the restructuring charge we rated to a associated with excess facilities, primarily in North America.

Tax rate for the quarter was 25 percent. Expected rate for the full year is 24 percent. This is pre consistent with what we had described last quarter. Cash was 204 million up from 196 in that prior quarter. Receivables, day sales outstanding at 78 are flat with last quarter. The third revenue is $190 million relatively flat with the last quarter, and really reflects the lack of big deals.

Share count for the quarter is 261 million shares. We expect to previously announce plan to sell the business to close in the fourth quarter although the closing is subject to a number of contingencies including financing. At this point we continue to manage the business as a separate product line inside of PTC.

From an outlook prospective let me first begin by reminding you that our comments regarding outlook and guidance constitute forward-looking statements, which involve assumptions about the future, which might be wrong. The risks and uncertainties associated with these assumptions are outlined in our public filings with the FTC, and should be referred to in order to evaluate the reasonableness of our prospective on the future.

WE continue as Dick kind of highlighted and as Jim got into some detail we continue to focus on our key initiatives to help position us for the future. These initiatives include distribution especially when our systems integrators and value added resellers, product and technology especially around create, control, and collaboration related solutions, customer satisfaction, and driving our product first message about the importance of product life cycle management into the market place.

Despite the work we're doing around these initiatives spending at least a sector of the economy is weak, and in our view is likely to continue at these existing levels for the next several quarters. This weakness in spending continues to impact big deal spending, new category spending, and the technology vertical spending dis-proportionally. So until the economy improves we are unlikely to see significant revenue or profit growth or for that matter significantly improved predictability.

Although activity levels measured in terms of sales leagues, and sales opportunities in the pipeline continue to improve at this point these are not resulting in growing revenues. Currently we do not know whether or when revenue is likely to result from this growing activity. Accordingly we are forecasting approximately flat revenues at a $180 million for the next two quarters. As I indicated we've adjusted our cost structure to break even from operations at these revenue levels. If we do better in revenue we'll do better in profit.

We continue to be convinced in any event that the product development category is under penetrated, and an under invested opportunity, and we strongly believe that if we continue to work hard at improving our execution around the major initiatives and distribution, in product, in marketing, and in operations we'll be strongly positioned to capitalize on the opportunity when customers begin to spend money again.

Finally before I turn the call over to Q and A I want to announce Thomas Barth our Vice President of Investor Relations whom you all know well is moving into a operational roll within PTC and program. Thomas will be responsible for helping to develop our internationally. I am also please to announce that Meredith Mendola who many of you have worked with has being promoted to Director of Investor Relations, we look forward to Meredith continuing her high level of responsiveness in our investor program.

So at that I am going to turn the who will open it up for Q & A. Thanks .

Thank you at this time if anyone would like to ask a question or have a comment please press *1 on your phone, if your questions has being answered please press *2, to withdraw it. And now at this time we will go with our first quarter from , please state your company.

Merril Lynch, good morning. could you just remind us of where you are in the transitioning terms of continuing to grow your major accounts sales force with the composition of the sales force as major account and where you are the SME and the stagier address that as well and then some follow ups from on ?

Yes we without getting into too much detail I think we have said in the past that we have sort of evaluation of in terms of margins our direct sales force out of small and medium sized accounts where they have being for year into large accounts. And we started that most aggressively in the Far East about almost two years ago now. And sort of the movement because there is a impact when you move people out of the small and medium size accounts where there are generating revenue and turn that over to the resellers then there is sort of a gap where as they are focused on the large account they need to built the work in process.

So we rolled that out in the Far East about two years ago it was the beginning of this year that we sort of did the big plunge in the US it was in October with the beginning of this fiscal year and in Europe we really sort of rolled that on out in April just at the begging of this quarter we have being doing it over the last few years but we made the final push along those time frames that I just described and we feel good about the fact that the direct sales force is now prudently focused on these large and major accounts.

They are focused along vertical markets, which we have described before such as and a few others and I think that plan is working well. When we look at sort of the working process we have in place and the pipe line it is actually pretty encouraging to us right knowing the Far East including Japan and in the US where we had some reasonable momentum at the end of last quarter those two geographies you know in the context of the economy here cause we are not happy about the result but in the context of the economy we had a little bit of momentum a little bit of bounce actually in the sales force in those geographies. And I think we can built on that going forward.

Europe is a little slow for us promptly because it was the last geography we undertook to raise that line. So that line of annual revenue for the end user you know we have being consistently being raising that line with cannot sell and with exclusive so we have now sort of finished that off in Europe and I think the results will be that during the next three or four quarters the working process in Europe will build again, much like we've seen in the other geographies. On the side, you know, we continue to have a contract in place with , so their portion of the reseller business is declining and I think that in general we're pretty happy with the momentum that's occurring in the reseller program.

It's been difficult for us to really generate a reseller program when we had our direct people inside the same accounts, so the thing we've done actually is taking a lot of our direct people out and move them upstream. Those that we, we also though left some number of the direct people in place in the small and medium size accounts and they only get paid commission if the orders are "filled to the ", so those reps are in place for a transition period to make sure that the resellers are learning the products and the customers and the transition of those accounts, so the resellers has a smooth one.

Dick, on the last call you quantified what you believed your pipeline value to be in terms of number of transactions or the value of those transactions - you've an update on that.

Well, I think, I'm not so sure we get it in terms of the number of transactions during the last call, I and I don't, I don't have an update, 'cause I didn't check before, but the up-working process, we actually have put in a people system for a, for a sort of sales force automation and we're much better able to track now the accounts by the verticals, by the geographies, the history of the account, the competitor and so forth, but the overall working process we do have the data on transactions, but by sort of the different solutions create collaborate control and the working process is actually very encouraging for us.

OK. For Jim ...

I'll try to get those numbers for you for another call and ..

OK. That's fine. Jim, a couple of questions for you on . At your customer forum in San Francisco, a couple of months back, you talked about a couple of things, one of which was the metrics, the rationales for investment in , you talked about it in two dimensions, cost reduction as a rational, the other being product development or revenue growth as a result of product development - what do you see now in terms of customer adoption along those two dimensions when you business today, is it predominantly as a result of customer's motivation for cost reduction or you see the longer term of rational of product development and revenue growth also being a driver?

Well, I think we actually have some statistical data on this and what is says basically is that customers, by enlarge, go into an initiative with the intent of focusing primarily on revenue growth, I mean they are, they are fundamentally trying to improve their product development process as a means to improve their product line ultimately and improve revenue based on that. What we still find though, is that a fair number of people revert to cost justification models based on cost avoidance and that's simply because that's more tangible and in today's pretty conservative economic client a typical Chief Financial Officer is more swayed, more easily swayed by cost avoidance than by, you know, promises of increased revenue.

So I think thought that their heart and mind and spirit is all about improving the product development process and then they may in many cases revert to showing some cost avoidance benefit and I would point out that these things aren't mutual exclusives, you know, some things you do can help on both fronts and then I think you might remember we outlined nine initiatives, some applied both to revenue generation and cost avoidance some were a little bit more exclusively in either bracket, but I wanted to outline you know PTC has developed a much improved point of view.

And what it really takes for companies to become product first companies, and thinking in terms of cost avoidance, revenue generation, different initiatives and strategies to go execute those, and then ultimately the kind of technological infrastructure that you'd need to put in place in terms of products like pro engineering in to allow those initiatives to be successful.

All right, and then lastly with respect with the Wild Fire at least do you have any particular model or expectation as to the degree to which this release perhaps more so than previous releases in the last few years will help to do several things. One stabilize or improve your repeat business, stabilize or improve your ASP' which have been declining so much faster than we had thought, and then thirdly in do same complimentary sales.

Yeah. I certainly think that the first and third items are pretty much no . I think that customers who have seen and have had a chance to play with wild fire get pretty excited and you know to the extent they might have been thinking about going elsewhere with income purchases of CAD technology. I think we're pretty much shutting that right down. They like you know the improvements in usability, and new features, and so forth that the individual productivity level, and I mean we have defined a whole new discussion around process productivity that I think our competitors are really not yet even able to participate in. So I think in terms of repeat sales, and let's just call it customer loyalty I think this makes a dramatic impact. Customers feel like there's no question PTC is back in the CAD business if they ever question whether or not we were committed to it.

I'm jump to the third point which was you know as a platform to sell , and this is what really gets me excited because with Wild Fire we've created a gas system were collaboration and control solutions don't seem so foreign, and you know intrusive. Actual extension of what your doing so while I'm using the CAD tool I'm also able very seamlessly to participate in this broader product development process and to engage with cross functional teams, and you know participate in or formalized processing in the enterprise and extended enterprise.

So I think you know the entire world has always viewed CAD and let's just call it PDM for simplicity her as two different things, and I'm a CAD user or not but you know people never saw a seamless offering that put these things together beginning to end, and I think with Wild Fire we've done that, and what it really does is warms up a pro engineer user to you know really become a strong champion for the adoption of because is now very seamless and unobtrusive were as in the alternative kind of PDM or PLM type offerings you know its simply not going to offer that same level of integration and productivity.

Now getting back to the third point the ASP point I'm not sure I immediately see any reason to expect a dramatic change in ASP based on Wild Fire. I think that to some extent it's a maturing market and the fall in ASP's overtime is you know fairly predictable. I don't know Ed if you have any comments on what we would expect as a result of Wild Fire to the ASP's.

No I mean I think it's going to be neutral to positive. Certainly not negative so I think that you know were we are in the product cycle is you know from a leverage prospective is only going to improve, and I think that prior that improvement should be on ASP's but this is relative. This is relative to ASP's decline so you know declining at five percent instead of eight or none percent. I don't think we're going to see them go up actual terms. Thank you operator next question.

Yes sir, our next one is coming from please state your company.

Hi guys , in terms of this raw space, I know you've had a lot of competition in terms of the express product and solid work, can you talk about how that shows the product impact or your expectations fort he general design space for the revenue in the out quarters.

So you're asking specifically about ?

Yeah, , and also this from a competitive stand point, you know inventor, and Solid works is running a, kind of a two for one right now, are you seeing that impact or are you seeing any sort of general erosion in terms of that business or what should our, more importantly our expectations be in that business going forward?

Yeah, I mean, I think we've all outlined our overall expectations but I feel like as a very much low end tool or depending on how you define it lets call it mid range of CAD but end of 3D modelling, is a nice complement to wildfire as a more professional tool but offering geometric compatibility the tool that's really a pretty strong one two punch and a little bit, you know we can out do as the requirements become more intense for modelling or sheet metal or any advanced capabilities pro-engineer wildfire just really establishes a bench mark that doesn't look very good against and then on the other hand when you get down into, well we want to the entire enterprise with a very simple low end tool so that product managers or service people or whatever tool they can use to create some simple geometry and discuss with people, you know, now we've positioned down there.

So I think a little bit we have boxed in and it'll be interesting to see what happens to you know your mention of a two for one deal is probably evidence that something's not going right, but I think we're feeling pretty good, there are some thins happening in the market around maturation that aren't just going to stop happening but we feel like we can improve our relative position in this market with this one two punch up for and Wildfire.

And a little bit too in terms of changing the bind patterns by showing this new version of Pro-engineer which is in a web services environment so that you know, as Jim described earlier it's not just building the models that become important but it kind of like connects with the OEM or the supplier or a customer to build a better product so as we begin to do demonstrations, even for small and medium sized companies with our resellers, they're starting to show a Wild fire version with an easy kind activity with project link or PDM link and it changes the dynamic of the discussion with customer, and for us I think it can keep the prices a little bit higher.

in the help of the parametric franchise, is there any sort of metrics you can give us in terms of revenue per customer beyond, you have ex-demonic customers, but is that going up down or flat on a kind of a basis?

Well certainly from a basis meeting, I'd say it's been relatively flat, flat to slightly up, you know which reflects largely the maintenance obviously if you I would guess that the total revenue per customer has been declining, again a big part of our objective is with the emphasis on the new product cycle to improve both, both improve the renewal waste side in the maintenance as well as the upgrade opportunity and the new opportunity on this software.

OK one final question just in terms of cash flow from operations, expectations for this current quarter?

It should be, we should see tax grow again this quarter, I'm forecasting cash to be somewhere around 210 net of the cash cost of the restructuring.

Thank you.

Thank you, our next question is coming from please state your company.

A.G. Edwards good morning, couple broad market questions and then some specifics. From a market standpoint any comments on competition and from a vertical standpoint any verticals that were particularly strong or weak in the quarter, then on a more detailed level Jim you were talking about it sounds like you guys are looking for the uptake really to start take hold in calendar '03 any feel for kind of how that's going to look across the year there and kind of uptake you anticipate in the installed base, and finally regarding you guys have backed off some of the follow-on link solutions, was just curious if there's an update on when we're going to see some the new link solutions coming out.

Yeah, OK. Boy starting to compete with on this. I just in terms of I'm not quite sure what to say about sort of competition I guess lets see what Gillis here is with his you know, he's got my arm behind my back he doesn't like to say anything about the competition. But I think that you know I think that we feel good as I said earlier about the work that we've been doing in the last couple of years. I actually think I've said it to our own people here, we've had a little bit you know we sort of bill ourselves as the product development company and we talk about product first.

I think we had a little warp here first of all that the economy is shaky which you all know about it but in addition to that had gotten a little bit it's look and feel and ease of use had gotten a little bit long in the tooth and at the same time while it was exciting and compelling and based on the Internet and it's really going to be large it was green it was immature and you know for a big enterprise series of solutions it wasn't quite ready to be sort of adopted by the masses. And I think we're in that little bit of a warp during the last couple of years from that standpoint. You know we've continued on these initiatives that we've described and the latest sort of during this past year the release of the next version of which continues to make that easier and easier to use and deploy, link, project link, parts link, which brings everything together as well as architects the industry's first CAD system in a web services environment.

I really think our competitors have to look at us and be nervous. I think we're going to use this, this sort of proliferation of new product ideas to change the landscape about the buying patterns for some of these create, collaborate and control solutions. I would think that our competitors are a little bit nervous about that you know sort of broadly speaking.

With respect to verticals and which one might have done better I think it's been pretty consistent for us except with the one that we're probably getting stronger and stronger aerospace and defense, and Federal Government. For example, was used on, and the future combat system was chosen for that, which was a 60 billion, essentially 60 billion dollar contract award that Boeing won on the next, sort of, army tank. A lot of anecdotes were doing well in aerospace and defense. I think that we're having a little bit of difficulty in high tech which has been our largest market sector, historically, only because, its not a loyalty issue, I just don't think they're buying anything there because they're all having such difficulties, and even in high tech we've made some good progress on sort of the working process, more on the side.

Jim will talk a bit more, I think also, about Wild Fire, but, you know, a couple of other sort of anecdotes about Wild Fire, we had one , tell you who they were necessarily, but they had about 200 seats at Pro-engineer, Happy User in the semi-conductor manufacturing business, hadn't been using maintenance or paying maintenance or the last two years. Went to the User Group meeting down in Atlanta, saw Wild Fire, came back, and in the next week, placed an order to put everybody back on maintenance, so they retroactively paid maintenance, and in addition bought a whole bunch of modules, and a first pilot with project length.

So, that was one anecdote, there was another, we got a pretty good deal on one of our solutions, this dynamic design over in the Far East, and really is actually a pretty nice order and a commitment from another customer in the semiconductor manufacturing business, not using our cad tools at all, they have thousand seats of basically low end to the cad, and in the context of the order we started a benchmark about moving them to Pro-engineer because of their ability now to access the solutions directly from the Cad environment. So I think that Wild Fire has the potential to give us even more loyalty in the installed base, and hopefully start to generate some new Pro-E seats because of its productivity with the other length solutions.

Do you want to talk about?

Yeah, so, on the Wild Fire update questions. So again the software in the hands of the customers is broadly distributed throughout our employees in the field right now. So in terms of new sales opportunities, it's inconceivable that we would engage in a new sales opportunity today without showing the Wild Fire Software. So, for purposes of new sales, I feel like, we're pretty much ready to begin new sales, using the Wild Fire software, either by itself, or you know, just sort of to compliment showing of production level, software capabilities in the current release. In terms of, you know, like leveraging the Pro-engineer base group for sales, of course that gets a lot easier once the customer has actually done the upgrade, so like I said, those upgrades will begin fairly early in 2003, and I think, you know, we will end 2003 with the majority of the customer base on the Wild Fire release, you know in the production environment.

So I think you could pretty much chart, you know, our ability to leverage the Pro-engineer base, as being parallel to, you know, the update, the movement into production of the Wild Fire software in those accounts, and like I said, I feel like I'm going to end the year with the majority of the base on 2003, which is slightly more aggressive than historically, but not dramatically different. With respect to the questions about the links plans, we had outlined a strategy to deliver six so-called link solutions.

We did deliver four of them, that's fire parts link, dynamic design link, project link, and link, and then we announced we were going to back off a little bit, you know in light of what was going on in the economy, and so fourth. We have continued forward with the supply length solution and so we anticipate that we launched at probably 2003 I mean the software will be ready kind of around the end of this quarter. Will probably be launched in the new fiscal year, just because we don't like launching new products at the end of the quarter.

So October 10th.

yeah Octoberish kind of time. So final I am not ready to commit a date yet date to deliver of the sixth solution which was the so call service link solution but this is some thing we have done quite a bit of work on and it continue to move along or be it at a slow pace. In fact I did ask about it yesterday just sort of he was in here and I said what about the after markets service solution, lets start thinking about that again, you know you asked a couple of good questions it was a long one but we are trying to give you a sense for what is happening in the .

I think that during the last couple of years as our as we had this sort of product gap that I describe this sort of warp I think that our customers where missing a scene of vision that we might have had that would have given them a better sense of about in terms of pride in working with a vender that was going to have this kind of long term solutions for as well as the ongoing corporation and control.

I was at the user group meeting and you can and check for yourselves out there is a lot of excitement, and I think certain level of pride now in the installe about the kinds of products we are bring to market. And there ability to impact there business and help them solve problems. So it's pretty exciting and I also think next to that point that it is going to be, I think in the last couple of years we have had some our base sort of on the PDM side I think it's going to be very difficult for those to work in our installed base with wildfire out there because some of the of the control solutions are right inside that browsers.

And I think that it is going to give us a much more secure lock on our installed base and it is going to free up energy and resources to go after new accounts and large accounts (inaudible. Where our big story will be is integration creating, corporate and control. So I think the economy is tough I think that we have to do a better job of executing, but there is a little bit of bounce in our step believe it or not about the products and about the distribution model as we go forward.

Great thank you.

Our next question is coming from , please state your company.

I apologies I have a little but I will try to make this brief then. Regards to your guidance basically expecting it broader the next few quarters, and presumably there is a delay in terms of where you will see some thing from wildfire, but doesn't that mean that over the next few quarters improvement that while you are not getting any benefit from wild fire while alternatively that things are getting worse from prospective?

Well so a big part of what is in the guidance is this causations around predictability I mean in this environment which I think has been pretty company that is depend on IT spending you know we are very reluctant to do any thing, but we can control is the spending. We are controlling spending $180 million per quarter.

... time and imput today, and we're out there working hard. Thank you.