Saturday, April 19, 2014
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Internet of Things: Exton's ThingWorks sold for $112M+

Safeguard-backed firm now part of PTC

Internet of Things: Exton's ThingWorks sold for $112M+

ThingWorx, a not-yet-profitable Exton software firm that helps companies exploit the user data that "smart connected products" like cars, farm tractors, washing machines and other manufactured goods are starting to send to each other (e.g. via wi-fi and Bluetooth) -- so their makers, owners and servicing companies can create an "Internet of things," and sell users more and better services -- has been sold to publicly-traded industrial software-maker PTC, of Needham, Mass., by owners including Safeguard Scientifics of Wayne and founders John Richardson, Russ Fadel and Rick Bullotta, for $112 million, plus an extra $18 million to the company's founders and other owners if sales rise as expected over the next two years. The company employs around 50, who expect to become part of PTC.

ThingWorx, which expects annualized revenues of over $10 million next year, based on licensing sales for connected sensors on MRI scanners and other machines, claims manufacturers like General Electric, software firms like Oracle, Google, Twitter and Salesforce, and integrators like CSC and Saberpoint among those who have used its software "to connect and collect streams of data coming from online products" and "to build business aplications that listen to and analyze those data streams" and "process service events," PTC chief executive James E. Heppelman told analysts in a conference call this morning.

PTC has promising products but has reported flat sales in the past year and expects only "lackluster" growth in the near future, wrote analyst Yun Kim in a report to clients at Janney Capital Markets. Kim endorsed Heppelman's view that machine connectivity "will be the single most significant, disruptive forcein the marketplace... as products become smarter," but pointed out that doesn't guarantee profits; he also noted the buyer doesn't expect ThingWorx to boost earnings soon.

In the conference call, Heppelman said ThingWorx hopes to sell into "the rapid evolution toward smart connected products" linking manufacturers, servicers and users via sensors and microprocessors, and to track products and users: "There's an explosion of possibilities." PTC was developing similar software, but found that ThingWorx was "years ahead of everybody," Heppelman added.  Heppelman said Russ Fadel will remain ThingWorx president.

Fadel told investors ThingWorx will serve, not only factories, but also "smart agriculture, smart buildings..." to which Heppelman added, "everything from smart minds, smart cities, and so much more." 

Fadel and ThingWorx chief technology officer Rick Bullotta  previously founded LIghthammer Software Development Corp., also in Exton,  and sold it to SAP AG, whose US headquarters is in Newtown Square, in 2005. As Philly Tech News operator Tom Paine points out, the pair then left to start ThingWorx. They joined with partner John Richardson, the firm's chief operating officer.

Will Fadel and Bullotta stick around to help PTC? The $18 milllion "earnout" that is part of PTC's purchase price includes incentives designed to make it worth their while to stay at least two years, the buyer hopes. Heppelman told investors he plans to integrate ThingWorx and its search capabilities into its existing products, while Fadel and his team continue to develop new markets. 

Wayne-based  Safeguard Scientifics, which led a $5 million investment in the firm in 2011 and another $8 million investment last year, said in a statement that it expects to collect $40.5 million in gross income from the sale, plus $6.5 million from the earnout, or 4X to 4.7X its part of the original investments, depending on whether the full earnout comes through, managing director Erik B. Rasmussen said in a statement.  Safeguard shares rose nearly $1 a share in Tuesday morning trading to nearly $20, a two-year high.

"Safeguard is on track to achieve its goals," another Janney analyst, Paul Knight, wrote in a report applauding the company's return to profitable asset sales after a two-year lull.

In Safeguard's statement, ThingWorks cofounder Fadel said Safeguard had made ThingWorks possible, and added, "This is just the beginning."

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

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