Moldflow Inc. plans to go public on Nasdaq to raise money for research and development, expansion, and potential acquisitions. The Lexington, Mass., supplier of software for injection molding design and manufacturing filed a preliminary prospectus for an initial public offering worth about $46 million.
Moldflow reported sales of about $11.5 million for the six months ended Jan. 1, up 24.2 percent compared with the year-earlier period. Net profit was $433,000, up from $73,000.
The firm established itself in the market with its Moldflow Plastics Insight simulation software for mold design. In fiscal 1997 it added Plastics Advisers software for part design and high-level mold design. In fiscal 1999 it introduced its Plastics Xpert software for production setup and monitoring.
"[Moldflow's IPO] is good for the industry because it brings attention to the importance of this specific technology," said Peter Medina, chief operating officer of Ithaca, N.Y.-based C-Mold, Moldflow's main competitor.
Paul Gramann, co-owner of Polymer Processing Research Corp., said the IPO could benefit computer simulation in molding if it brings more notice of such technology to the industry.
In an interview from his Madison, Wis., office, Gramann said Moldflow and competitors such as C-Mold, have indirectly benefited his company by spearheading acceptance of computer simulation of molding. Polymer Processing works with thermoset resin simulations, unlike Moldflow's thermoplastics orientation.
Once companies in automotive and other industries get experience in thermoplastics simulation software, they become more comfortable with thermoset computer programs, Gramann said. Although thermoplastic and thermoset simulations began about the same time several years ago, thermoplastics have gained the lion's share of attention because thermoplastics are more widely used, and thermoset simulations can be more complex.
Moldflow indicated in fall 1996, soon after Marc Dulude joined as new president and chief executive officer, that it eventually planned to go public. Its current majority shareholder, venture capital firm Ampersand Ventures, took equity in the company in 1998, and as of Jan. 20, held 66.7 percent of the common stock.
Other major investors include Australian bank JTC Investment Management Pty. Ltd. with 12.4 percent, director Julian H. Beale with 12.4 percent and Dulude with 6.7 percent.
Dulude said in a telephone interview that his firm needs to go through a series of steps to finalize the IPO, and he could not predict when it would be final. He said he could not comment beyond what was stated in Moldflow's S-1 filing with the Securities and Exchange Commission.
One analyst viewed the IPO with caution.
"The overall market of technology stocks is very healthy, although the market for mechanical design automation software seems to be somewhat weaker," said David Weisberg, publisher of the "Engineering Automation Report," an Englewood, Colo., newsletter
Stock prices of Parametric Technology Corp. and Structural Dynamics Research Corp., two public firms in computer-aided-design software, have been languishing for the last three or four years, Weisberg noted.
"The revenue growth is not living up to expectations because of price pressures," Weisberg explained. But long term, he is bullish on CAD and computer-aided engineering in the injection molding industry.
"The fact that fairly powerful [personal computers] are now available on a pretty economic basis makes it a lot more feasible for people to use Moldflow's type of software," Weisberg said. "Smaller companies that just didn't have that type of horsepower in the past to do this type of computing can get that power fairly economically today."
The market size and potential of the CAD/CAE market for injection molding is tough to estimate. Moldflow calculated that up to 750,000 injection molding machines around the world are not equipped with integrated software that can analyze molding and improve efficiency.
Most of Moldflow's recent growth has been in the United States and Europe. For the year ended June 30, U.S. sales were about $7 million, while those in Europe and Asia were about $8 million and $5 million, respectively.
Moldflow's prospectus painted its market as competitive. According to the prospectus, the company recently won a round in court in its legal battle with a competitor.
The U.S. District Court in Syracuse, N.Y., upheld an injunction precluding competitor C-Mold and former Moldflow employee Leonid Antanovskii from using or disclosing Moldflow trade secrets, according to the prospectus.
The Jan. 11 ruling upheld a Feb. 28 injunction, and also cited C-Mold and Antanovskii in contempt of court for their motion to vacate the injunction. The court ordered sanctions, including the award of lawyers' fees related to the motion.
C-Mold's Medina said his firm still believes in the merit of its motion, and the company will continue to defend its position. C-Mold also countersued Moldflow last March, alleging anti-competitive practices.
Medina said that suit is "still alive" and in the hands of the court.
Moldflow claims that more than 2,200 customers use its software. The firm employs about 44 in the United States and about 160 total. Its head office in Lexington is leased. It owns a larger building in Melbourne, Australia, where it does most of its research and development.
Underwriters for Moldflow's IPO include Adams, Harkness & Hill Inc., and A.G. Edwards & Sons Inc.
Senior reporter Bill Bregar contributed to this story.