Russ Fadel, ThingWorx President

Russ Fadel, ThingWorx President

Updated 1/7/13–Updated ThingWorx information including John Richardson as a co-founder. Missed that the first time around

PTC (Nasdaq: PTC) announced Dec. 30, 2013 it has acquired ThingWorx, creators of an award-winning platform for building and running applications for the Internet of Things (IoT), for approximately $112 million, plus a possible earn-out of up to $18 million. According to the company, the acquisition of ThingWorx positions PTC as a major player in the emerging Internet of Things era.

The spiritual seekers of manufacturing have sought for the nirvana of connected products talking back to their creators. This nirvana would enable improved product development through better information of the product in use. It would also enable a profitable service business where the creator could foretell problems and contact the customer to fix it.

Hugely significant

The first iteration was Machine-to-Machine (M2M) where OEMs could work with their machines at customer plants. This acquisition of ThingWorx by PTC is hugely significant because it extends the vision to the next iteration–products in general connected by the Internet of Things.

Rick Bullotta, ThingWorx CTO

Rick Bullotta, ThingWorx CTO

ThingWorx co-founders Russell Fadel, Rick Bullotta, and John Richardson are serial entrepreneurs who earlier found success with Lighthammer, also a connectivity company, which they sold to SAP. That technology became key to SAP’s ability to move data from manufacturing systems to enterprise systems.

PTC notes that the ThingWorx acquisition extends its strategy by accelerating its ability to support manufacturers seeking competitive advantage as they create and service smart, connected products. As part of PTC, ThingWorx will continue to help customers in a wide range of industries seeking to leverage the IoT, including telecommunications, utilities, medical devices, agriculture, and transportation, as well as an emerging partner network of IoT-enabled service providers.

John Richardson, Co-Founder and COO

John Richardson, Co-Founder and COO

According to a recent research report “Disruptive technologies: Advances that will transform life, business, and the global economy” (May, 2013) from the McKinsey Global Institute, the Internet of Things has the potential to create economic impact of $2.7 trillion to $6.2 trillion annually by 2025. The firm believes perhaps 80 to 100 percent of all manufacturing could be using Internet of Things applications by then, leading to potential economic impact of $900 billion to $2.3 trillion, largely from productivity gains. For example, with increasingly sophisticated Internet of Things technologies becoming available, companies can not only track the flow of products or keep track of physical assets, but they can also manage the performance of individual machines and systems.

Better product development

In the IoT era, PTC’s customers are bringing to market increasingly smart and connected products which can generate value in new ways as streams of real-time operational data are captured, analyzed, and shared to deepen a company’s understanding of its products’ performance, use, and reliability. PTC will use the ThingWorx platform to speed the creation of high value IoT applications that support manufacturers’ service strategies, such as predictive maintenance and system monitoring, in complement to PTC’s existing service lifecycle management (SLM) and extended product lifecycle management (PLM) solution portfolio. With ThingWorx, PTC will also now offer its customers a means to establish a secure, reliable connection to their products as well as a platform to rapidly develop applications for maintaining and operating them – and ultimately for finding ways to create new value from them.

“All aspects of our strategy to date have centered on helping manufacturing companies transform how they create and service smart, connected products,” said PTC president and CEO Jim Heppelmann. “For manufacturers today, it is clear to us that improved service strategies and service delivery is the near-term ‘killer app’ for the Internet of Things and this opportunity has guided our strategy for some time. With this acquisition, PTC now possesses an innovation platform that will allow us to accelerate how we help our customers capitalize on the market opportunity that the IoT presents.”

The opportunity, however, goes well beyond this immediate pragmatic application. Industries of all types are poised to see disruption from the Internet of Things and the expanding networks of connected sensors and devices, and a growing ecosystem of ThingWorx partners is forming to capitalize on this growth. As part of PTC, ThingWorx intends to continue serving this diverse market with senior management continuing to focus on its current path.

“At ThingWorx, we share PTC’s vision for helping organizations fundamentally leverage the connected world,” said Russell Fadel, CEO and co-founder, ThingWorx. “We believe all industries, but especially manufacturing, will be transformed in the Internet of Things era. We are excited to pursue this broad set of opportunities with the resources and proven solution portfolio that PTC provides.”

The acquisition is expected to add more than $10 million of revenue over the next 12 months, with $5 million to $7 million of revenue in FY’14. As a result of cost synergies and investment plans for ThingWorx, PTC still expects FY’14 non-GAAP EPS of $2.00 to $2.10. PTC drew $110 million from its credit facility to finance the transaction.

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