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Parametric Technology Is on a Roll

The software company's recent contracts with some big customers bode well for 2010.

NEEDHAM, Mass. (


) -- It may surprise some to learn that software for product design and manufacturing is one of the largest stand-alone software segments.

And while you may not have heard of

Parametric Technology


, it happens to be the third largest vendor in this category of software, with annual sales approaching $1 billion and a global market share of roughly 18%.

Parametric has been on a roll with its software for product collaboration, which it calls Windchill.

The company's products appeal to a big market. A wide range of electronics, aerospace, heavy machinery, consumer product, automotive and medical device companies spend about $5.5 billion annually on software for product design and manufacturing.

This makes sense, because companies in these industries remain under pressure to speed up the time it takes to get products to market, reduce costs and improve product quality.

Parametric's primary competitors are France-based

Dassault Systemes



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PLM Software division.

In a nutshell, Parametric's Windchill product allows engineers, product designers, and manufacturing personnel to work in teams to create new products and communicate around the globe.

The company's recent Windchill wins at


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, Volvo,

Otis Elevator




(the former PC division of


(IBM) - Get Free Report



Medical Systems division and


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bode well for the company as it enters 2010.

Parametric's product sales growth rebounded very nicely, up 48% year over year in the quarter ended Dec. 31. The company's gross margin rose from 66% a year ago to 71%, attesting to the rebound in product sales.

In particular, the company's Windchill product collaboration suite had a strong quarter, with major victories at GE Medical Systems and Cummins, both of which chose to switch over from existing collaboration systems.

Although the number of $1 million-plus deals rose from nine to 10 in the last quarter, Parametric's average order size for such deals almost doubled from $2.7 million a year ago, to $5.0 million.

Parametric continues to make progress in a series of major accounts that it describes as "dominos." These are large industrial manufacturers who are considered leaders in their industries and remain under pressure to deliver innovative products to their customers.

Having already closed on 11 of the 12 domino accounts that it originally set its sights on for 2010, the company raised the goal to 15 for the year. At the same time, Parametric is in the midst of seeking to unseat its competitors at more than 200 accounts worldwide.

And although


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continue to evaluate their options in the product design software markets, Parametric's global customer base, which is comprised of more than 1 million maintenance-paying users of its software, represents a significant barrier to those who may wish to serve this market.

-- Written by Battle Road Research in Waltham, Mass.

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