Moldflow Corporation

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Moldflow Corporation

430 Boston Road
Wayland, Massachusetts 01778
U.S.A.
Telephone: (508) 358-5848
Fax: (508) 358-5868
Web site: http://www.moldflow.com

Public Company
Incorporated: 1978 as Moldflow Pty. Ltd.
Employees: 291
Sales: $48.67 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: MFLO
NAIC: 511210 Software Publishers; 541511 Customer Computer Programming Services

Moldflow Corporation is the leading developer of software solutions that improve the design, analysis, and production of injection-molded plastic parts. Moldflow's products are used by part designers, mold designers, manufacturing engineers, and machine operators, serving as tools used through all phases of the design and production processes for injection-molded plastic parts. Moldflow also is involved in manufacturing the hardware its software helps to perform more effectively, producing equipment-monitoring systems and machine-temperature controls. The company operates globally, maintaining a physical presence in Europe, Asia, and in Australia, where it was originally established.

Origins

Plastic revolutionized manufacturing in the 20th century, becoming the material of choice for innumerable applications. Lightweight, strong, and offering consistent quality, size, shape, and color, plastic afforded many benefits, but producing injection-molded parts could be troublesome, resulting in heavy financial losses if the design of the mold proved flawed. Often, plastic parts were not analyzed before production because of the time and expertise needed to analyze, or simulate, the production of a molded plastic part before it was produced. Consequently, costly re-designs of parts and molds resulted. One manufacturer, in a June 23, 1997 interview with Design News, explained the inherent problem with working with injected-molded plastic parts. "Eighty-five percent of the part designs we receive require design changes to support the manufacturing process. For a $300-million company like ours, verifying part designs up-front would save us about $200,000 per year." The mission of Moldflow was to help manufacturers predict design flaws before the manufacturing process began, offering computer-aided-engineering (CAE) products that reduced the costs and the expertise needed to simulate the intricacies of the flow of plastic into a mold. Moldflow, its name describing its mission, became the leader in its field, increasing the already revolutionary efficacy of plastic in a manufacturing setting.

The company was started in Australia, beginning its corporate life as Moldflow Pty. Ltd. in 1978 when its founder, Colin Austin, turned his attention to resolving the difficulties of working with plastic. The market for simulation software was relatively small, dwarfed by the markets simulation software served. The global market for simulation software did not reach the $100 million mark until 30 years after Austin founded Moldflow, by which time the company had relocated to the United States, establishing its headquarters near Boston. The move occurred in 1996, one year after Ampersand Ventures acquired a substantial stake in the company and before Moldflow significantly expanded its product line, sharpening its assault on the software simulation market.

Moldflow's annual revenue hovered around $10 million when it moved to Boston. The financial total had been built up during the first 20 years of the company's history, a period during which Moldflow relied on a single product line. Known as Moldflow Plastics Insight, the simulation software established the company in its market, but it could only be used by highly specialized engineers conducting in-depth plastics simulation. The expertise required to use Plastics Insight left Moldflow courting only a small customer base in an already small market, holding its financial growth in check. The company did not begin to increase its stature substantially until it developed simulation software that could be navigated by less experienced users, a turning point in Moldflow's history that occurred shortly after it relocated to Boston. The introduction of Plastics Advisors followed by the introduction of Plastics Xpert enabled Moldflow to develop into the dominant player in the global simulation software market.

New Products in the Late 1990s Igniting Growth

Moldflow's Plastics Advisor Series was introduced in 1997, giving participants in all phases of the design and production process for injection-molded plastic parts a software tool they could use. Plastics Advisor simulated the flow of plastic, offering advice to the part designer on what corrective actions needed to be taken to improve the "manufacturability" of a molded part. The software informed the user whether a part would fill properly, it showed the location of weld lines, and it identified whether and where air traps would appear. "Today," Black & Decker's director of engineering services said in a June 23, 1997 interview with Design News, "analysis is done too late, after the part is designed. At that stage, analysis requires 40 to 60 hours of an expert's time, and a fix, which is needed in most cases, is too expensive." Plastics Advisor was a significant product introduction not only because it enabled less experienced users to simulate production but also because it represented the company's attempt to enable what it called "process-wide" plastics simulation. With Plastics Advisor and succeeding products, the company was trying to bridge the gaps between part design, mold design, and part production, offering a comprehensive solution to a number of different disciplines.

Moldflow followed its Plastics Advisor software series with Plastics Xpert, a software package introduced in the fall of 1998. Plastics Xpert attached to injection-molding machines, enabling operators to monitor and to control the manufacturing process. The software tackled problems that typically occurred on the shop floor, giving injection-molding machine operators (individuals generally not trained in plastic part design) the ability to correct design flaws.

The addition of Plastics Advisor and Plastics Xpert to Moldflow's product line ignited financial growth in an expanding market. Sales in 1998 reached $16.3 million, jumping to nearly $28 million the following year. At the time, the market for simulation software was growing by 20 percent annually, demonstrating a level of vitality that prompted industry participants to consolidate with one another in a bid to capture a greater share of a growing market. In 1998, in a move that foreshadowed a pivotal deal in Moldflow's history, the company's main competitor was busy consolidating with other operators, intensifying the competitive race between the two companies. In June, Moldflow's biggest rival, C-Mold, struck an accord with Matra Datavision to acquire its software simulation operations. In December, C-Mold strengthened its market position further, announcing that it had forged an agreement with one of the smaller simulation software operators, Rapra Technology Ltd. Based in Shawbury, England, Rapra decided to exit the simulation software business, transfer its customers to C-Mold, and become a reseller of C-Mold products. At the time the deal with Rapra was announced, Moldflow estimated that it controlled 65 percent of the global market compared with C-Mold's 22 percent share. Officials at C-Mold disagreed with Moldflow's estimate, claiming that the two companies were equals in the U.S. market and closer rivals on the international front, although the company declined to provide any specific figures.

Acquisitions at the Dawn of the 21st Century

Whatever the size of the gap separating Moldflow and C-Mold, the dispute was rendered moot within months of the Rapra deal. The beginning of the 21st century was a time of decisive action for Moldflow, a period that saw the company make its public debut. In early 2000, Moldflow filed with the Securities and Exchange Commission for an initial public offering (IPO) of stock. Ampersand Ventures, which had taken an equity position in the company five years earlier, was set to own 45 percent of Moldflow after its IPO. The IPO was completed at the end of March, when the company sold three million shares at $13 per share, raising, after expenses, approximately $34 million. The funds raised from the IPO were used to complete a significant acquisition, the purchase of C-Mold, which had necessitated the IPO. Moldflow acquired C-Mold in April 2000, paying $11 million to gain control of its primary competitor.

Moldflow's management charged forward after the acquisition of C-Mold, branching beyond its business base into new facets of the plastics industry. In mid-2000, the company turned its attention to injection-molding machines and to developing its e-commerce business. In June, the company signed an agreement with Milacron Inc., a Batavia, Ohio-based manufacturer of machine control systems. Under the terms of the agreement, Moldflow began loading its Parts Advisor software onto Milacron's machine control systems. On the Internet, the company's web site, www.plasticzone.com, was tailored to deliver Moldflow's software simulation packages to customers online. The web site featured an Internet version of Plastics Advisor, enabling a customer to run an analysis of a computer-aided mold design in less than 30 minutes. Also available was an Internet version of Plastics Xpert, which allowed users to monitor injection press operations from a distant site and perform diagnostic tests.

Company Perspectives:

In today's competitive, technology-driven industries, manufacturers of injection-molded plastic products are challenged to operate at increasing efficiency levels to compete in the global marketplace. Moldflow Corporation is the leading global provider of software, hardware and material characterization solutions which optimize injection-molded plastic products in all phases of the product design to manufacture process. Our complete suite of products and services significantly reduces operating costs of the manufacturing process, improves assembly through greater reliability and quality and streamlines the product introduction process. Our continuing collaboration with academia, industry and customers around the world has earned us the reputation as the technology innovator and leader in our industry. Headquartered in Wayland, Massachusetts, Moldflow has customers in over 60 countries and operations in 14 countries from which we support the global plastics industry.

The beginning of the 21st century witnessed Moldflow's evolution into an integrated company, as it became increasingly involved in aspects of the plastics industry beyond its core simulation software business. As the company carved a new position in the hardware sector, it did so under the guidance of a new leader. A. Roland Thomas was appointed president and chief executive officer in June 2002, a promotion that arrived during his twentieth year of service with Moldflow. Australia-born Thomas served in various management positions related to product development, operations, and general management before being selected as the company's vicepresident of research and development, the post he held before becoming its principal executive.

Under Thomas's rule, Moldflow furthered its development into an integrated company. Not long after moving into his new office, Thomas looked overseas to bolster the company's operations. In January 2003, Moldflow acquired a French company named Controle Processus Industriels (CPI) that made production-monitoring systems. Based in Dampart, CPI served roughly 100 customers in French-speaking countries. Commenting on the $800,000 deal in a January 13, 2003 interview with Plastics News, Moldflow's executive vice-president for marketing and field services, Ken Welch, explained: "We already are doing a lot of business in Europe. This helps us grow that European base and puts our products in the French market."

Thomas continued to look for other acquisition targets in the wake of the CPI purchase, suggesting, perhaps, that the 25-year-old Moldflow would assume a more aggressive acquisitive stance in its next quarter-century of business. Thomas completed another deal a year after purchasing CPI, acquiring Moorpark, California-based American MSI Corporation, a maker of hot-runner temperature controls. The acquisition represented another move toward building a comprehensive product offering; or, as one analyst put it in a February 2, 2004 interview with Plastics News: "I think they're basically getting down, further and further, into the tool." The transaction, a $7.2 million deal, was completed in January 2004, prompting a reorganization of Moldflow into two business units. Tim Triplett, who had been chairman and chief executive officer of American MSI, was appointed executive vice-president and general manager of Moldflow's Manufacturing Solutions segment. Ken Welch was promoted to the posts of executive vicepresident and general manager of the company's Design Analysis Solutions unit.

As Moldflow prepared for the future, the company held sway in its market, defining what a well-equipped, comprehensive simulation software firm should look like. Its dominance in software had engendered a move into hardware, making it a total solutions provider to the plastics industry. By acquiring American MSI, a hardware maker, the company could begin to operate all of its products off a single platform, giving its customers a seamless, sophisticated answer to design and production problems. In November 2004, when the absorption of American MSI into the Moldflow fold was still underway, Thomas was awarded the added title of chairman, giving him resolute control over the company. Looking ahead, the company planned to begin hardware manufacturing in Cork, Ireland, by mid-2005. Beyond that date, the company planned to strengthen its already formidable market position, promising to play a prominent role in the plastics manufacturing industry for years to come.

Principal Subsidiaries

Moldflow Scandinavia (Sweden); Moldflow International Pty. Ltd. (Australia); Moldflow Pty. Ltd. (Australia); Moldflow Italia S.R.L. (Italy); Moldflow Korea Limited; Moldflow (Europe) Ltd. (U.K.); Moldflow Vertriebs GmbH (Germany); Moldflow Japan KK; Moldflow Singapore Pte. Ltd.; Moldflow France; Moldflow B.V. (Netherlands); Moldflow Taiwan, Inc.; Moldflow Ireland, Ltd.; Moldflow Iberia s.l. (Spain); Advanced CAE Technology, Inc.; Branden Technologies, Inc.; Moldflow Merger Corporation; Moldflow (Guangzhou) Ltd. (China); Moldflow Mauritius Pty. Ltd.; Moldflow Securities Corporation; American MSI Corporation.

Principal Divisions

Manufacturing Solutions; Design Analysis Solutions.

Principal Competitors

Autodesk, Inc.; Dassault Systemes S.A.; Electronic Data Systems Corporation.

Key Dates:

1978:: Moldflow is established.
1996:: Moldflow moves from Australia to the Boston area.
1997:: Plastics Advisor is introduced.
1998:: Plastics Xpert is introduced.
2000:: Moldflow completes its initial public offering of stock and acquires C-Mold.
2002:: A. Roland Thomas is appointed president and chief executive officer.
2003:: Moldflow acquires Controle Processus Industriels.
2004:: Moldflow acquires American MSI Corp.