Bangalore: Cranes Software International Ltd. (CSIL), a global scientific and engineering software solutions provider, has said that it will acquire Sigma product line from SPSS Inc. for $ 13 million.
CSIL's fully owned subsidiary Systat Software Inc. has obtained the exclusive worldwide license to distribute the Sigma-series product line (SPL) from SPSS Inc.
In addition to the distribution license, the agreement involves the acquisition of all related customers, personnel, and fixed assets and comes with the option to purchase all related intellectual property, including brand names and trademarks, after three years. The agreement involves an immediate cash payment of US$ 9 million, followed by staggered payments of US$ 3 million in 2004 and US$ 1 million in 2005.
"With the Sigma-series acquisition, Cranes Software is now a significant global player in the scientific software domain," said Asif Khader, managing director, Cranes Software International. "The Sigma range blends seamlessly with our global growth strategy in proprietary products.
We now have a world-class portfolio that offers scope for significant expansion given the extensive base of existing users, the worldwide sales and marketing network, backed by our in-house offshore R&D capabilities. We are continuing the original vision of SPSS in combining the power of the Sigma-series and SYSTAT offerings and these two product lines will be at the foundation of our commitment to provide high-quality, cutting-edge software to scientific researchers around the world." Product details Sigma-series products are used by scientists and engineers for data presentation and analysis, including the flagship SigmaPlot® Offering, SigmaStat® statistical analysis package, and SigmaScan® image analysis software. In addition, Systat will acquire Kinetics Enzyme, a related life sciences module. These offerings are highly complimentary to CSIL's current portfolio in terms of cross-selling potential within existing users and addressable markets. CSIL's current portfolio of scientific and engineering software products includes such leading products as SYSTAT, TableCurve2D, TableCurve3D and PeakFit.
The Sigma product line is designed specifically to meet the requirements of research scientists and engineers, enabling collection, analysis and presentation of scientific data. The product market includes research professionals in a range of fields including life sciences, environmental sciences, medical research chemistry and engineering.
Recognition The Sigma product suite has won several awards including nine consecutive Scientific Computing and Instrumentation Reader's Choice Awards for presentation graphics software, NASA Tech Briefs Product of the Month and Computers in Physics Product of the Month, signifying its continuing popularity amongst its focused user segments.
The Sigma-series has an established base of over 100,000 users with significant brand awareness in the pharmaceutical / biotechnology marketplace. The desktop product has sold over 4,000 copies to Merck and over 1,000 each to Eli Lilly and Pfizer. NASA currently uses 2,000 copies of the product line. The product has however been peripheral to SPSS' current business growth strategies. The CSIL management believes that there is significant potential to expand Sigma product revenues from the current level of US$ 6.5 million. Previously, CSIL has successfully expanded revenues of its Systat Software products from US$ 2 million to US$ 10 million following its acquisition in early 2003.
Currently, the Sigma product line has an operating margin of 45% and strong positive net cash flows. Minimal current overheads and capital expenditure is required to maintain operations at the current levels. In addition, there are no associated long-term liabilities. The product line is well established and widely recognised among user segments resulting in 30-40 percent repeat sales.
According to estimates, the U.S. market, currently the primary focus area for the Sigma product suite, comprising over 1.5 million engineers, about 200,000 each of science technicians and mathematicians and about 19,000 physicists, all of which are potential users for this product range. In addition, the international markets provide an under-penetrated source of new customers.
The Sigma product line's existing sales organisation has a proven track record within the scientific data software market. U.S. sales are currently handled out of SPSS' office in Chicago while the product line is distributed internationally through SPL's office in Germany that will come to CSIL once the entire acquisition process is completed. At present, 73 percent of SPL sales are in the U.S. and 22 percent in Europe.