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GIS Monitor May 3, 2001 CONTENTS - Leica Acquires ERDAS, LH Systems Departments: Points of Interest, Week in Review, Back Issues, Advertise, This issue sponsored by: ***** Swiss Leica GeoSystems announced Friday April 27, 2001 that it had purchased ERDAS, Inc (image analysis software) and obtained the remaining 50% of shares in LH Systems (aerial photography) from joint owner, BAE Systems. Leica will pay about US$30 million plus stock for ERDAS and about US$15 million for the remainder of LH Systems. Leica has been growing its GIS and Mapping Division since last year's IPO, which yielded enough cash to purchase US-based Cyra Technologies Inc. (3D scanning company focusing on engineering clients), US-based Laser Alignment, Inc. (high-precision 3D guidance and automated machine control systems producer) and increase holdings in AED Graphics AG (Germany-based GIS software). In a conference call for investors on Monday April 30, Hans Hess, Leica’s CEO explained that he wants a strong foothold in the "emerging" GIS/RS marketplace. He quoted statistics estimating the current market at US$2 billion, with an expected 20% increase in the coming years to top out at about US$5 billion in 2005. This total includes hardware, software and services. Leica eventually hopes to hold 10% of the entire marketplace. Leica reasons that each of the new acquisitions now owns 45% of its respective market, giving Leica an immediate and significant market share. Leica described its competitors this way: Z/I Imaging, a company 60% owned by Intergraph, and LH Systems together own 80-90% of the photogrammetry market. ERDAS' main competitor is Canada-based PCI with about 20% of the market, followed by Earth Resource Mapping with about 15%. Leica has given ERDAS' and LH Systems' management teams incentives to stay on and has committed to giving the two companies reasonable freedom to develop their brands. At the same time, Leica will try to integrate all of their GIS/RS offerings. Leica is taking on no debt in the acquisitions. ERDAS had US$23.5 million in sales last year with about US$3 million in profit. LH Systems had $US35 million in sales with about US$5 million in profit. The ERDAS acquisition is anticipated to close in May with LH Systems to follow in June of 2001. The acquisitions will definitely give Leica a large part of the GIS/RS market. Leica will have a strong imagery data capture side (LH Systems), analysis (ERDAS) as well as GIS and surveying hardware and software. With the ERDAS acquisition, Leica draws itself even closer to ESRI, a long time ERDAS partner. This relationship alone will help open up new markets. The challenge for Leica will be to integrate the offerings carefully. Leica's largest clients, government mapping agencies, utilities, telcos and environmental firms can surely use all of these products and services - and the company hopes that is exactly what they will choose to do. ====== a message from our sponsor =============== ERDAS is pleased to announce the all-new, easier-to-use ERDAS.COM! Visit the newly improved and re-designed Web site today for your chance to win great prizes, and for the latest information on ERDAS and our technology partners. ERDAS has your solution! http://www.erdas.com/gm ***** Intergraph has always been a tough company to track since the company supports products and services outside of the GIS market. But now Intergraph has set up each division as a business segment and reports earnings by segment. Also, in the conference call, CEO Jim Taylor spoke about each segment individually. Here are some of the highlights with respect to GIS. IPS (Intergraph Public Service) includes software and services aimed at utilities, telecommunications, and public safety. The division was about $2 million under planned revenue for the quarter. The segment did achieve just over $1 million in operating income. Taylor suggested that IPS would not be impacted directly by the general economic slowdown. He did say that telecommunications would be impacted by dotcom demises and lower priced bandwidth. Still, he feels that Intergraph customers tend to be large players who should weather the storm. IMGS (Mapping and GIS, including GIS products and services) had a “great Q1” with over $3 million in operating income on $24 million in revenues. Taylor did describe IMGS as the most challenging business in 2001. The segment is still restructuring in the US and overseas as a vertical business and will host their first User Conference in June. The highlight of the quarter in terms of contracts was a pair of LARIS contracts (Land information systems for Russia) which involve both software and services. Two issues will lower Q2 expectations – late payments from the US government from Q4 2001 and early delivery of software for LARIS. There were many other topics covered that provide further insight into Intergraph’s overall direction. Hardware maintenance is now under Intergraph Government Solutions (IGS), and will continue to support other non-Intergraph hardware, too. The group is looking to do more outsourced work, especially for government clients. The lawsuit continues with Intel. Intergraph is hesitant to say how much income this may produce, but is optimistic. Intergraph has closed on its sale of several products to Bentley. Intergraph currently owns 33% of that company. Taylor suggests that he expects -- and encourages -- Bentley to try an IPO to increase shareholder value. Taylor explained that the three engineering/imaging products sold were not part of Intergraph’s core business. Bentley had competitive products, but with the purchase, now owns all of that space. Taylor went on to say that without competition, Bentley should bring in more profits. This, Taylor thinks/hopes, might encourage Bentley to move forward with an IPO. Intergraph was questioned on the competitive situation in GIS/Mapping. In response, Taylor says the company is focusing on high end mapping (production, government mapping agencies); and on the lower end (municipal, commercial), they are more services-oriented (client/server enterprise work). Taylor suggests that Intergraph is a more a service-oriented company rather than a product oriented company like ESRI. On Smallworld, he claims, “they’ve become invisible” and notes Intergraph has “seen less of it” which he explains in part as being due to the changes under new owner, GE. In recent bids, he notes, Intergraph has come out strong against Smallworld. All VPs are on incentives tied to profitability. The conference call is available on the Web until the end of May. ***** Vicinity Corporation, best known for its MapBlast mapping and directions site, laid of 40 employees this week – a reduction of 25%, citing a reduction in ad revenue. MapBlast, in my mind, is second only to AOL’s MapQuest in this space. Vicinity also private labels their data and services. The layoffs, says the company, are more about setting their technology focus than improving the bottom line. Vicinity laid off 20% of its workers back in February. The challenge for Vicinity, as well as for the other players in online mapping, is transitioning from merely providing Web maps to the new world of location-based services and wireless distribution of that data. The tightening economy is likely to weed out some of the “old-style” players in the coming months. ***** In a rather low key announcement a few weeks ago, ESRI and the Associated Press (AP) revealed a mapping solution for AP member papers. AP CEO Louis D. Boccardi touted MapShop - among other new services – noting in particular that these services will allow newspeople to do more with less. MapShop, which allows the creation of maps from tabular data, is now in use at 10 papers with 100 others testing the service. MapShop also works with AP Census 2000, their census data service. The latest census data is a hot topic for papers nationwide as they try to describe and explain changing population and political patterns and deal with redistricting. ***** -Sysdeco, a Norweigen GIS company merged with XCON Data a longtime partner, late last year. XCON was fundamentally a services company while Sysdeco provided software and customization. The new company will provide a single range of products and be called Sysdeco Mapmill. Their focus will be business and Internet solutions.
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