Autodesk and Discreet Logic announced last month that the two companies have amended for a second time the definitive agreement entered into in August 1998 that provides for the acquisition of the latter by the former. Discreet is the Montreal-headquartered maker of such software tools as Flame, Smoke, Fire and Inferno. Autodesk is a PC software developer headquartered in San Rafael.
Under the amended agreement, Autodesk (NASDAQ: ADSK) will issue 0.33 shares of common stock for each outstanding share of Discreet Logic stock (NASDAQ: DSLGF), which reduces the previously announced exchange ratio of 0.48. The acquisition is expected to close in early March.
Discreet spokesperson Emma Shield said the delay in closing, initially anticipated by the end of 1998, was caused by additional procedural questions posed by the Security Exchange Commission. She reported that the questions have been answered, and she expressed confidence that the merger would soon be completed.
The delay, however, caused the revision of the acquisition terms, while in the meantime Discreet announced Q2 projections. On Jan. 28, Discreet reported results for its fiscal 1999 second quarter. Total revenues for the quarter ended Dec. 31, 1998 were $28.4 million, compared to $37.3 million for the same quarter in fiscal 1998. Net income for the second fiscal quarter was $0.4 million, or $0.01 per share, compared to net income of $6.6 million, or $0.22 per share, for the same period a year ago, excluding a charge against earnings for purchased research and development resulting from the acquisition of Lightscape Technologies.
Richard Szalwinski, Discreet president/CEO, said in a released statement: We believe the principal factors impacting the second quarter performance were: continued effects from the lack of a sales and marketing senior executive during the quarter, combined with several field vacancies; continued slower than expected sales in Europe and slower than expected sales in Asia, due in part to the companys sales personnel issues noted above in these geographic areas, as well as market conditions in these regions, which have affected customer capital expenditures; and a greater number of turnkey systems sales through the indirect channel, which caused a negative effect on margins.
The first steps have already been taken to alter this state of affairs. Discreet hired Mirko Wicha, who joins Discreets executive team as senior VP, sales and marketing. Wicha was most recently general manager of worldwide field operations at Alias|Wavefront, the Toronto-based 2-D and 3-D graphics software subsidiary of Silicon Graphics. His experience includes the integration of the sales and services organizations during the 1994 merger of Silicon Graphics, Alias Research and Wavefront Technologies.
The company has been suffering from the vacancy in this position, Szalwinski commented. I am very pleased to have Mirko on board, a proven manager with a track record of delivering revenue growth. … I remain confident that we are taking the right steps to return to revenue and profitability growth.
Autodesk and Discreet are already scheduled to exhibit in one booth at the NAB convention this April in Las Vegas. Shield said both companies are full steam ahead in preparing products and announcements for the show. Of course, they will be preparing separately until the acquisition is completed.
