Friday, March 03, 2006

Mathsoft sales and finances news

There is an interesting press release from Mathsoft today. On first inspection, it is a simple piece of cheerleading about how successful they have been but on closer inspection it is a little less clear.

First I wondered what the central premise meant: "[Mathsoft] has sold its 5,000th managed installation of Mathcad®, the world's most widely used engineering calculation tool. "Managed installation" refers to a team of users in industry, research or academia ranging from small workgroups to large engineering organizations with thousands of seats under management"

I searched their website for information on "Managed installation" and there is no reference to any product or scheme. It could mean "any quantity of licenses greater than one". Perhaps it refers to maintenance contracts, or volume schemes that need only 5 licenses. Lets suppose maintenance is 25% of a license fee (they don't list this), and volume discount means, say, 25%. Then a Managed installation, might be less than $1000 per year. That might mean this press release could represent as little as $5M per year. Not nearly enough to run a business on.

As I was musing on how this release was not as impressive as it first appeared, I noticed the most interesting fact. Towards the bottom was a reference to $3M in "follow on funding" from venture capitalists. So the funding that separated Mathsoft from Insightful five years ago is spent, and the company is still spending more than it is earning. This is normal for a start-up but for a mature company, this isn't healthy.

So how does a company close a deficit? Cut costs? No, Mathsoft is opening new offices not closing any. Sell more? Of course, if possible, though as we have seen from this release the number of customers isn't that large after 15+ years of trading. Make more out of existing customers? Here is where the excitement of having moved your revenues from 25% to 75% "managed licenses" becomes more clear. It looks like the strategy is based around growing the regular revenue from their regular customer base.

The only question left is- will this by getting them to use more of their products, or by charging them more for the ones that they have?

1 comment:

mjc said...

The problem with MathCad, Mathematica, Maple, and MatLab is that they are too expensive for casual individual users. MathCad is the cheapest (at US $1,200), but that is too much for me.