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Altium Pins Hopes on China

By John Blyler

Rumors are flying as to why Altium is relocating its global headquarters from Sydney, Australia to Shanghai, China.  The relocations have already resulted in the loss of a large portion of the company’s development team in Sydney. Key R&D developers will be retained with some moving to Shanghai. The company hopes to combine the key developers with local talent from Shanghai to grow its development, sales and support activates within the Chinese market.

Some have speculated that Altium may be pressured into the move by China in order to commercialize local Chinese IP into its product.

Other observers point to economics as the real reason for the move to Shanghai.  A quick look at the company’s annual reports shows a 3 year decline of roughly 10% per year.

The official word from the company – via a press release – states that the, “primary motivation for the move is … that China represents the best location and opportunity for the execution of Altium’s plan for … (transforming customer) businesses from product-based models to a service-based approach where web-based ecosystems enable direct relationships between device end-users and device manufacturers.”

In a recent interview with Electronic News, Altium’s Head of Corporate Communications, Alan Smith, stated that “China is investing a trillion dollars in building an indigenous design sector so that ‘made in China’ will become ‘designed in China’. The centre of gravity of the electronics industry is moving to the country and we have made a decision to be part of that shift.”

A differing viewpoint on the focus of China’s electronics industry is offered by one of Altium’s competitors. Mentor Graphic’s PAD product line competes with Altium Designer for the lower end products that involve a single user or small group of designers building FPGA-based printed circuit board assembly.

John Isaac, Director of Systems Market Development at Mentor, suggested that today’s China is focusing on high-tech, high performance, large system products. “Some Chinese companies are competing directly with more advanced US companies, such as the way Hauwei (pronounced WAWAY) competes directly with US-based Cisco,” notes Isaac. “There seems to be a real shift in China from designing low end, more simple products to designing really high-end products.”

If this is true, then China may not hold as much potential for Altium as company executive’s hope.

Adventures at DesignCon – Twitter Logs and a Gold Stocking Woman

Happier times for Altium at DesignCon 2009, when they made a big push into the American market.

9 Responses to “Altium Pins Hopes on China”

  1. WK Says:

    It seems like a common sense approach to move to China – all the medium to big companies are doing it these days. The big problem for Alitum will be the risk in the move itself.

    The reality is as you mentioned, their ASX filings for the last 5 years have shown a year on year loss of revenue and sales, coupled together with their weird/strange acquisition of Morfik which is a totally orthogonal piece of web technology that has no relation to EDA or CAD, the issues with protecting IP in the Chinese workforce, convincing people that have a comfortable living in Australia to pack-up and head-off to China, one can’t help but conclude Altium is either circling the drain or is gearing up for some kind of fantastic end-game.

    Either way it should make for some interesting times ahead.

  2. Mojo Says:

    Well… Let’s examine the track record.

    Slashed the price from over $10k by about a third (but maintenance is required), software comes with everything. Shocking the industry. Maintenance is jacked up to compensate, ignoring the fact that many will simply opt out in a bad economy.

    Also caused a $10M loss for the year. Stock is still sinking. Price increases to $4,500 +maintenance.

    Acquires buzz with the Morfik for mysterious cloud (buzz word!) EDA application, stock bumps up a bit for a few weeks. The purchase was in stock which was trading around $.16.

    Half time report, another $3M loss.

    New Product release with the “cloud” IP incorporated. That’s it?

    Now they uproot their “key” programmers to Shanghai, laying off all others. How long to get new staff hired and trained?

    Its all buzz, like its always been. From the guys that thrilled the industry with cut-throat prices, it was their own throat. For the damage to other software vendors, they didn’t gain anywhere near enough ground.

    The stock sank to its all time low of $US.08 after the new release. Then the China (buzz word) announcement to boost it temporarily. Artificial dead cat bounce there.

    Calculated end run? A careful examination reveals flailing, buzz words and never-ending devaluation.

    BTW – that picture is silly. Two guys texting and a woman bored to tears.

  3. jblyler Says:

    Hi Mojo. Forgot to clarify the picture. It was a joke, exactly as you indicated. Jim Harrison (Electronics Product) and I were trying to appear more engrossed in our technology than in the beautiful woman.

    That shot required several retakes to pull it off. :)

  4. Mojo Says:

    Yeah, I considered working the word “trophy wife” but that’s a good way to make enemies.

    I realize my comments are one sided, certainly, but I sell for a living and selling off of price is huge mistake that rookie sales people understandably can get sucked into.

    There is a way to reduce your price if you have the volume or a new production method. Slashing it by a third is a mad man’s gamble in EDA Software. It’s like selling capital equipment or than it is selling iPhones. It’s a long sale, people hang onto it for 5-10 years or more. They evaluate for months and haggle internally to justify it. Even if the answer is “no”, it could become a “yes” in 6 or 18 months because they decided to do nothing.

    If you slash a pick and place machine price, assemblers will not dive in and buy at 3x the normal rate. Some will cash in, but not enough to recoup the loss. Capital equipment is the a bedrock of the business, if your slashing your price by 1/3 are you viable? Is the equipment proving unreliable?

  5. lipn Says:

    They can’t (or don’t want to) fix tens of serious bugs in their SW so they run away. ALU will go bust soon. Mr market gave the last exit opportunity a few days ago when peice spiked in a few days 100% to near $0.16 but now happily going down. down … the drain

  6. Mojo Says:

    US$.10 this morning, aproaching last months all time low of US$.08.

  7. Matthew Says:

    Going private is not easy for Altium, as ASX rules require +90% ownership of the company to force a payout on the remaining shareholders, which btw are suppa-funds and the alike that got screwed on or near the IPO price and have been bitter ever since (btw by last accounts they cumulatively own roughly 13%).

    To go private, Altium would need to purchase stock in itself to meet this +90% requirement, the problem is that the people they will have to buy from will probably try and get a price as close to the original they paid for, the next problem with that is the current liquidity situation at Altium (~$7M AUD) would not even come close to the funds required, remembering back to the IPO days Altium was valued at around $350M AUD.

    It is important to realize that companies list so that from time to time they can raise capital by selling stock (aka debt) on the markets, and in good times buy those debts back, the problem however is that for the last 8 years due to the falling share price, Altium hasn’t been able to raise capital from the markets – in fact they’ve lost value. The other option is that Altium could file for bankruptcy, the problem there is that Altium doesn’t actually own anything. They don’t own any bricks-n-mortar (real-estate), they don’t own any hardware (everything is leased), the one patent they have seems to be pie-in-the-sky stuff, and the codebase which makes Altium what it is, is really useless without the developers that developed it. That means if a receiver comes in, there’s very little they could sell off to pay out shareholders, hence this particular option should really only be a last/inevitable option.

    However not going private has its own problems, every year Altium has to fork out money to be listed on the ASX (~250K AUD or about 40 designer licenses worth), they have to pay for independent accountants to come annually and produce the required documents for ASX listing, furthermore they are forced, like in this situation, to make all major decisions public, which causes problems for them from a PR pov. So in short they’re trying a final move to China, perhaps it may work, or most likely it wont and this time next year we’ll all be commenting on this site about its demise – who knows.

  8. Mike Says:

    They blew it when they retired PCAD 2006. I would never upgrade to a inferior product that is loaded with bugs that will never get fixed. They should bring back the PCAD that most users are still using and being forced out of the business due to it’s retirement.

  9. Colin MacKenzie Says:

    Not sure what people are talking about with bugs. I use the software *a lot* and rarely hit any bugs, and very rarely does the bug cause a total software crash which is better than I can say for most programs. (So I have a chance to save, close and reopen.) My last attempt at Mentor was horid, though that was 6 years ago. I have altium running for days at a time without an issue.
    I will miss Altium big time if they fail. I am not happy about the move from Australia to China though…so I guess I can look forward to all those bugs you guys are talking about when that happens.

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