PDA Foresees Good Prospects for Sales Abroad : Technology: PDA Engineering is aiming to capitalize in a big way on the coming economic changes in Europe and the East Bloc.
In an effort to double its international sales, PDA Engineering has created an international division that will aggressively sell its software program abroad to capitalize on the economic changes in the European Economic Community and Eastern Europe.
PDA software is widely used by U.S. aerospace, automotive and consumer manufacturing industries to create models on computers. With the software, designers can see a breakdown of a model’s components and quickly analyze the overall response to stress.
Although the small company, which is based here, already has an international presence, its officials think that markets abroad offer the best opportunities for growth. To that end, it recently created the post of international operations manager, filled by Rick Caselli.
“We’re presently doing 30% of our business in international markets, and we’re out to raise that to 55% to 60% of overall business,” Caselli said. The company derives its revenue, he said, from licensing software programs to manufacturers on a yearly basis, at an average rate of $15,000 per user.
PDA’s total sales for the year ended June 30 were $27.3 million, up 17% from the total for the year before. Net income for the fiscal 1990 second quarter, ended Dec. 31, was $511,000, up 15% from that for the period the year before. Net income for the first half was $890,000, contrasted with $850,000 for the period the year before.
Until recently, PDA sold the licenses to its software through distributors in East Asia and Western Europe. “Now we want to go into these countries to do marketing and consulting work with their computer and software manufacturers,” Caselli said.
The company has upgraded its sales offices in Turin, Italy, and in The Hague in the Netherlands, turning both into full-service subsidiaries with their own sales forces and engineers to train customers. PDA now has subsidiaries in five of the 12 countries in the EEC.
It also has signed distribution agreements with Korea Technologies Co. Ltd. of Seoul, Korea, and with Itoh Techno-Science Co. Ltd. of Tokyo. Caselli said PDA has similar agreements with distributors in Taiwan, Hong Kong and Australia.
Jim Kerrigan, PDA chief financial officer, said the company’s top priority is to open subsidiaries in other industrial countries such as Spain and the Scandinavian countries, where there are no restrictions on high-tech trade.
Caselli says he is optimistic that international sales will shoot up in the next two years, spurred by the EEC countries’ plan to integrate their economies by 1992 and, to a lesser extent, by the opening of the Eastern Europe economies to the West.
The potential for growth can be seen in the company’s balance sheet, said Laura Conigliaro, high-tech analyst for Prudential-Bache Research, New York.
“PDA is a very small company, but they’ve got $6 million in cash to play with,” Conigliaro said. “They certainly should be able to continue to expand their international base more rapidly than the other divisions of the company.”
Although analysts agree with the prediction that PDA’s foreign sales will grow rapidly, they said a goal to double sales may be overly ambitious. One reason is that there is certain to be lots of competition.
Other computer companies are looking to do the same thing, said Marc Halpern, computer engineering analyst at D.H. Brown of Tarrytown, N.Y., which does market research for high-tech industries. This includes Structural Dynamics Research Group in Milford, Ohio, and the MacNeal-Schwendler Corp. in Los Angeles.
“There will be growth for them (PDA) in the European Community definitely, maybe a potential growth of 30% in sales over the next two to three years,” Halpern said. “I know that when Eastern Europe opens up, there will be hunger for products like those made by PDA.”
To grow aggressively abroad, small companies such as PDA will need to borrow to finance their marketing efforts, analysts said.
PDA management, however, has a history of trying to keep the company’s debt low, they said, and Caselli may find it tough to persuade management to take on additional debt in the effort to expand sales abroad.
Further, the hopes of PDA and others to capitalize on Eastern Europe’s rapidly changing economy will hinge on whether Washington decides to allow high-technology products to be sold to the East Bloc.
The Export Administration Act, which sets the rules for all export activities by U.S. companies, will come up for renewal Sept. 30. It has been the subject of subcommittee hearings in Congress over the past few months.
